S-1 1 a2221503zs-1.htm S-1

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As filed with the Securities and Exchange Commission on September 22, 2014

Registration No. 333-            


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549



Form S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933



PES Logistics Partners, L.P.
(Exact name of Registrant as Specified in Its Charter)



Delaware
(State or Other Jurisdiction of
Incorporation or Organization)
  4610
(Primary Standard Industrial
Classification Code Number)
  30-0831288
(I.R.S. Employer
Identification Number)

1735 Market Street, 10th Floor
Philadelphia, Pennsylvania 19103
(215) 339-1200

(Address, Including Zip Code, and Telephone Number, including
Area Code, of Registrant's Principal Executive Offices)



John McShane
Secretary and General Counsel
1735 Market Street, 10th Floor
Philadelphia, Pennsylvania 19103
(215) 339-1200

(Name, Address, Including Zip Code, and Telephone Number, Including Area Code, of Agent for Service)



Copies to:

Charles E. Carpenter
William N. Finnegan IV
Latham & Watkins LLP
811 Main Street, Suite 3700
Houston, Texas 77002
(713) 546-5400

 

Mike Rosenwasser
Michael Swidler
Vinson & Elkins L.L.P.
666 Fifth Avenue, 26th Floor
New York, New York 10103
(212) 237-0000



Approximate date of commencement of proposed sale to the public:
As soon as practicable after this Registration Statement becomes effective.

                  If any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. o

                  If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

                  If this form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

                  If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

                  Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o   Accelerated filer o   Non-accelerated filer ý
(Do not check if a
smaller reporting company)
  Smaller reporting company o



CALCULATION OF REGISTRATION FEE

       
 
Title of Each Class of Securities
to be Registered

  Proposed Maximum
Aggregate Offering
Price(1)(2)

  Amount of
Registration Fee

 

Common units representing limited partner interests

  $250,000,000   $32,200

 

(1)
Includes common units issuable upon exercise of the underwriters' option to purchase additional common units.

(2)
Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(o).

                  The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

   


Table of Contents

The information in this preliminary prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities, and it is not soliciting an offer to buy these securities in any state or jurisdiction where the offer or sale is not permitted.

Subject to Completion
Preliminary Prospectus dated September 22, 2014

PROSPECTUS

             Common Units
Representing Limited Partner Interests

PES Logistics Partners, L.P.



                  This is an initial public offering of common units representing limited partner interests of PES Logistics Partners, L.P. We are offering                 common units in this offering. We expect that the initial public offering price will be between $        and $        per common unit. We were recently formed by PES Holdings, LLC ("our parent"), a wholly owned subsidiary of Philadelphia Energy Solutions LLC, and no public market currently exists for our common units. We intend to apply to list our common units on the New York Stock Exchange under the symbol "PESL." We are an "emerging growth company" as that term is defined in the Jumpstart Our Business Startups Act.

                  Investing in our common units involves a high degree of risk. Before buying any common units, you should carefully read the discussion of risks of investing in our common units in "Risk Factors" beginning on page 20.

                  These risks include the following:

      We may not have sufficient cash from operations following the establishment of cash reserves and payment of fees and expenses, including cost reimbursements to our general partner and its affiliates, to enable us to pay the minimum quarterly distribution to our unitholders.

      Our pro forma financial data are not necessarily representative of the results of what we would have achieved and may not be a reliable indicator of our future results.

      The assumptions underlying the forecast of distributable cash flow that we include in "Our Cash Distribution Policy and Restrictions on Distributions" are inherently uncertain and are subject to significant business, economic, financial, regulatory and competitive risks and uncertainties that could cause actual results to differ materially from those forecasted.

      All of our revenue and cash flow will be initially derived from our equity ownership in North Yard Logistics, L.P. (the "operating partnership"), and Philadelphia Energy Solutions Refining and Marketing LLC ("Refining") will initially account for all of the operating partnership's revenues. Therefore, we and the operating partnership will be subject to the business risks of Refining. If Refining is unable to satisfy its obligations under the commercial agreement with the operating partnership for any reason, our revenues would decline and our financial condition, results of operations, cash flows and ability to make distributions to our unitholders would be adversely affected.

      Refining is a privately owned company that does not disclose financial or operating results to the public, limiting the ability of our unitholders to assess the performance or financial outlook of the operating partnership's only customer.

      Our business is difficult to evaluate because we have a limited operating history and do not have historical financial information upon which our performance may be evaluated.

      The rail unloading terminal, which will be the operating partnership's only operating asset, did not commence operations until October 23, 2013, and the expansion of the terminal is not expected to be completed until mid-October 2014. The terminal may fail to operate efficiently or reliably, which could adversely affect our financial condition, results of operations, cash flows and ability to make distributions to our unitholders.

      Refining may suspend, reduce or terminate its obligations under the commercial agreement with the operating partnership in certain circumstances, which could have a material adverse effect on our financial condition, results of operations, cash flows and ability to make distributions to our unitholders.

      Our parent will own and control our general partner, which has sole responsibility for conducting our business and managing our operations. Our general partner and its affiliates, including our parent and Refining, have conflicts of interest with us and limited duties to us and may favor their own interests to your detriment.

      Our partnership agreement restricts the remedies available to holders of our units for actions taken by our general partner that might otherwise constitute breaches of fiduciary duty.

      Holders of our common units have limited voting rights and are not entitled to elect our general partner or the board of directors of our general partner, which could reduce the price at which our common units will trade.

      Immediately effective upon closing, you will experience substantial dilution of $        in tangible net book value per common unit.

      Our tax treatment depends on our status as a partnership for federal income tax purposes. If the Internal Revenue Service were to treat us as a corporation for federal income tax purposes, which would subject us to entity-level taxation, or if we were otherwise subjected to a material amount of additional entity-level taxation, then our distributable cash flow to you would be substantially reduced.

      Even if you do not receive any cash distributions from us, you will be required to pay taxes on your share of our taxable income.



 
 
Per Common Unit
 
Total
 

Initial public offering price

  $     $    

Underwriting discounts and commissions

  $     $    

Proceeds to PES Logistics Partners, L.P., before expenses

  $     $    

                  The underwriters may also purchase up to an additional                common units from us at the public offering price, less the underwriting discounts and commissions, within 30 days from the date of this prospectus.

                  Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

                  Delivery of the common units is expected to be made on or about                        , 2014.



BofA Merrill Lynch   Credit Suisse



   

The date of this prospectus is                        , 2014


Table of Contents

GRAPHIC


TABLE OF CONTENTS

 
  Page  

PROSPECTUS SUMMARY

    1  

Overview

   
1
 

Competitive Strengths

    2  

Strategies

    4  

Growth Opportunities

    4  

About North Yard Logistics L.P. 

    5  

Our Relationship with Refining

    6  

Commercial Agreement with Refining

    7  

Other Agreements with Our Parent and Refining

    7  

Our Emerging Growth Company Status

    8  

Risk Factors

    8  

Our Formation and Other Related Transactions

    10  

Organizational Structure After Our Formation and Other Related Transactions

    10  

Management of PES Logistics Partners, L.P. 

    12  

Principal Executive Offices and Internet Address

    12  

Conflicts of Interest and Duties

    12  

The Offering

    14  

SUMMARY UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET

   
19
 

RISK FACTORS

   
20
 

Risks Related to Our Business

    20  

Risks Related to an Investment in Us

    43  

Tax Risks to Our Common Unitholders

    53  

USE OF PROCEEDS

   
58
 

CAPITALIZATION

   
59
 

DILUTION

   
60
 

OUR CASH DISTRIBUTION POLICY AND RESTRICTIONS ON DISTRIBUTIONS

   
62
 

General

   
62
 

Our Minimum Quarterly Distribution

    64  

Estimated Distributable Cash Flow for the Twelve Months Ending September 30, 2015

    66  

Significant Forecast Assumptions

    68  

PROVISIONS OF OUR PARTNERSHIP AGREEMENT RELATING TO CASH DISTRIBUTIONS

   
72
 

Distributions of Available Cash

   
72
 

Operating Surplus and Capital Surplus

    73  

Capital Expenditures

    75  

Subordinated Units and Subordination Period

    76  

Distributions of Available Cash from Operating Surplus During the Subordination Period

    78  

Distributions of Available Cash from Operating Surplus After the Subordination Period

    78  

General Partner Interest

    78  

Incentive Distribution Rights

    78  

Percentage Allocations of Available Cash from Operating Surplus

    79  

General Partner's Right to Reset Incentive Distribution Levels

    79  

Distributions from Capital Surplus

    82  

i


 
  Page  

Adjustment to the Minimum Quarterly Distribution and Target Distribution Levels

    83  

Distributions of Cash Upon Liquidation

    84  

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

   
87
 

Overview

   
87
 

How We Generate Revenue

    87  

How We Evaluate Our Results of Operations

    88  

Other Factors That Will Significantly Affect Our Results

    89  

Capital Resources and Liquidity

    92  

Critical Accounting Policies

    94  

Qualitative and Quantitative Disclosures About Market Risk

    96  

New Accounting Pronouncement

    96  

BUSINESS

   
97
 

Overview

   
97
 

Competitive Strengths

    97  

Strategies

    100  

Growth Opportunities

    100  

Industry Overview

    101  

About North Yard Logistics, L.P. 

    102  

Our Relationship with Refining

    103  

Refining's Operations

    104  

Refining's Summary Financial and Operating Information

    107  

Commercial Agreement with Refining

    109  

Other Agreements with Our Parent and Refining

    113  

Competition

    113  

Seasonality

    114  

Employees

    114  

Safety and Maintenance Regulation

    114  

Environmental Regulation

    114  

Insurance

    121  

Legal Proceedings

    121  

MANAGEMENT

   
122
 

Management of PES Logistics Partners, L.P. 

   
122
 

Directors and Executive Officers of PES Logistics GP, LLC

    123  

Board Leadership Structure

    125  

Board Role in Risk Oversight

    125  

Compensation of Our Officers and Directors

    125  

SECURITY OWNERSHIP AND CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

   
129
 

CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

   
130
 

Distributions and Payments to Our General Partner and Its Affiliates

   
130
 

Agreements Governing the Transactions

    131  

Procedures for Review, Approval and Ratification of Related Person Transactions

    138  

CONFLICTS OF INTEREST AND DUTIES

   
139
 

Conflicts of Interest

   
139
 

Duties of the General Partner

    146  

ii


 
  Page  

DESCRIPTION OF THE COMMON UNITS

    149  

The Units

   
149
 

Transfer Agent and Registrar

    149  

Transfer of Common Units

    149  

OUR PARTNERSHIP AGREEMENT

   
151
 

Organization and Duration

   
151
 

Purpose

    151  

Cash Distributions

    151  

Capital Contributions

    151  

Voting Rights

    152  

Limited Liability

    153  

Issuance of Additional Securities

    154  

Amendment of Our Partnership Agreement

    154  

Merger, Consolidation, Conversion, Sale or Other Disposition of Assets

    156  

Termination and Dissolution

    157  

Liquidation and Distribution of Proceeds

    157  

Withdrawal or Removal of Our General Partner

    158  

Transfer of General Partner Interest

    159  

Transfer of Ownership Interests in Our General Partner

    159  

Transfer of Incentive Distribution Rights

    159  

Change of Management Provisions

    159  

Limited Call Right

    160  

Non-Taxpaying Holders; Redemption

    160  

Non-Citizen Assignees; Redemption

    160  

Meetings; Voting

    161  

Status as Limited Partner

    161  

Indemnification

    162  

Reimbursement of Expenses

    162  

Books and Reports

    162  

Right to Inspect Our Books and Records

    163  

Registration Rights

    163  

Exclusive Forum

    164  

UNITS ELIGIBLE FOR FUTURE SALE

   
165
 

Rule 144

   
165
 

Our Partnership Agreement and Registration Rights

    165  

Registration Rights Agreement

    166  

Lock-up Agreements

    166  

Registration Statement on Form S-8

    166  

MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES

   
167
 

Partnership Status

   
168
 

Limited Partner Status

    169  

Tax Consequences of Unit Ownership

    169  

Tax Treatment of Operations

    176  

Disposition of Common Units

    177  

Uniformity of Units

    179  

Tax-Exempt Organizations and Other Investors

    180  

iii


 
  Page  

Administrative Matters

    181  

Recent Legislative Developments

    184  

State, Local, Foreign and Other Tax Considerations

    184  

INVESTMENT IN PES LOGISTICS PARTNERS, L.P. BY EMPLOYEE BENEFIT PLANS

   
186
 

UNDERWRITING

   
188
 

Commissions and Discounts

    188  

Option to Purchase Additional Common Units

    189  

Directed Unit Program

    189  

No Sale of Similar Securities

    189  

NYSE Listing

    189  

Price Stabilization, Short Positions and Penalty Bids

    190  

Electronic Distribution

    191  

FINRA

    191  

Relationships

    191  

Sales Outside of the United States

    191  

VALIDITY OF THE COMMON UNITS

   
195
 

EXPERTS

   
195
 

WHERE YOU CAN FIND ADDITIONAL INFORMATION

   
195
 

FORWARD-LOOKING STATEMENTS

   
195
 

INDEX TO FINANCIAL STATEMENTS

   
F-1
 

APPENDIX A Form of First Amended and Restated Agreement of Limited Partnership of PES Logistics Partners, L.P. 

   
A-1
 

APPENDIX B Glossary of Terms

   
B-1
 

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              You should rely only on the information contained in this prospectus or in any free writing prospectus we may authorize to be delivered to you. We have not, and the underwriters have not, authorized any other person to provide you with information different from that contained in this prospectus and any free writing prospectus. If anyone provides you with different or inconsistent information, you should not rely on it. We are not, and the underwriters are not, making an offer to sell these securities in any jurisdiction where an offer or sale is not permitted.

              Through and including                        , 2014 (the 25th day after the date of this prospectus), federal securities laws may require all dealers that effect transactions in these securities, whether or not participating in this offering, to deliver a prospectus. This requirement is in addition to a dealer's obligation to deliver a prospectus when acting as an underwriter and with respect to an unsold allotment or subscription.

              This prospectus contains forward-looking statements that are subject to a number of risks and uncertainties, many of which are beyond our control. Please read "Risk Factors" and "Forward-Looking Statements."


Industry and Market Data

              The market data and certain other statistical information used throughout this prospectus are based on independent industry publications, government publications or other published independent sources. Some data are also based on our good faith estimates.

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PROSPECTUS SUMMARY

              This summary highlights selected information contained elsewhere in this prospectus. You should carefully read the entire prospectus, including "Risk Factors" and the unaudited pro forma consolidated balance sheet and related notes included elsewhere in this prospectus before making an investment decision. Unless otherwise indicated, the information in this prospectus assumes (1) an initial public offering price of $            per common unit (the midpoint of the price range set forth on the cover page of this prospectus) and (2) that the underwriters do not exercise their option to purchase additional common units. You should read "Risk Factors" beginning on page 20 for more information about important factors that you should consider before purchasing our common units.

              Unless the context otherwise requires, references in this prospectus to "our partnership," "we," "our," "us" or like terms refer to PES Logistics Partners, L.P. and its subsidiaries, including the operating partnership. References to (i) "our general partner" and "PES Logistics GP" refer to PES Logistics GP, LLC; (ii) "our parent" refer to PES Holdings, LLC and, as the context may require, PES Holdings, LLC and its subsidiaries, other than us, our subsidiaries and our general partner; (iii) "PES" refer to Philadelphia Energy Solutions LLC, the owner of our parent; (iv) "the operating partnership" refer to North Yard Logistics, L.P.; (v) "North Yard GP" refer to North Yard GP, LLC, the general partner of the operating partnership; and (vi) "Refining" refer to Philadelphia Energy Solutions Refining and Marketing LLC. We have provided definitions for some of the terms we use to describe our business and industry and other terms used in this prospectus in the "Glossary of Terms" beginning on page B-1 of this prospectus.


PES Logistics Partners, L.P.

Overview

              We are a fee-based, growth oriented traditional master limited partnership recently formed by our parent to own, operate, develop and acquire crude oil, refined product and other logistics assets. Upon the consummation of this offering, we will own the general partner interest and a 45% limited partner interest in the operating partnership, which will own and operate a crude oil rail unloading terminal located at our parent's Philadelphia refinery complex. We refer to this terminal as "our rail unloading terminal" or "our terminal." We have no ownership interest in Refining or the Philadelphia refinery complex. We will generate revenue by charging fees for receiving, handling and transferring crude oil. We will not take ownership of, or receive any payments based on the value of, the crude oil we handle, and as a result, we will not have any direct exposure to the fluctuations in commodity prices.

              All of our revenue and cash flow will be initially derived from our equity ownership in the operating partnership and its ten-year, fee-based commercial agreement with Refining, a wholly owned subsidiary of our parent. This commercial agreement with Refining will be supported by quarterly minimum volume commitments and inflation escalators. We believe that the nature of this arrangement will enhance the stability and predictability of our cash flow over time.

              We intend to seek opportunities to grow our business by acquiring additional limited partner interests in the operating partnership from our parent and additional assets from Refining and third parties and through organic growth projects, including our terminal expansion project described below. We believe that the opportunity to acquire additional limited partner interests in the operating partnership will provide us with significant near-term growth. Our parent, through Refining, is an independent petroleum refiner and supplier of unbranded transportation fuels, petrochemical feedstocks and other petroleum products, and we were formed by our parent to be the primary vehicle to expand the logistics assets supporting Refining's business. Refining owns and operates the Philadelphia refinery complex, which is the largest refining complex on the East Coast, as well as a portfolio of associated logistics assets supporting its refineries. We expect that our parent and Refining

 

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will serve as critical sources of our future growth by providing us with various acquisition opportunities. Upon consummation of this offering, we will enter into an omnibus agreement with our parent and Refining, pursuant to which our parent will grant us a right of first offer on the limited partner interests that it owns in the operating partnership and Refining will grant us an option to acquire an NGL rail terminal (the "NGL rail terminal") currently under construction at Refining's Philadelphia refinery complex and a right of first offer to purchase from Refining other logistics assets that it will retain or that it may acquire or construct in the future. Please read "Certain Relationships and Related Party Transactions—Agreements Governing the Transactions—Omnibus Agreement."

              Our rail unloading terminal has the capacity to unload two crude oil unit trains, or 140,000 bpd, based on the industry-standard 104-car unit train configuration. Refining has commenced an expansion project, expected to be completed in mid-October 2014, to increase the unloading capacity of our terminal to three unit trains, or 210,000 bpd. Our rail unloading terminal was designed to unload 120-car unit trains and, if the rail industry moves to these more efficient trains, then the expanded capacity of our rail unloading terminal will improve to 240,000 bpd.


Competitive Strengths

              We believe that the following competitive strengths position us to successfully execute our business strategies:

              Our Rail Unloading Terminal is Integral to Refining's Domestic Light Crude Strategy.    Refining has embarked on a strategy by which it seeks to purchase an increasing amount of domestic crude oil that currently trades at a discount to foreign crude oil in order to lower the overall cost of the feedstock for its refinery operations. Because our rail unloading terminal is located onsite at the Philadelphia refinery complex and has direct access to a Class I railroad mainline, it offers a dedicated, economic means by which Refining can source light, sweet domestic crude oil.

              Newly Constructed, World-Class Facility.    Our rail unloading terminal is a purpose-built, recently completed facility within Refining's complex, with 140,000 bpd of unloading capacity. Upon the completion of Refining's expansion project in mid-October 2014, the terminal will be able to unload 63% of Refining's overall capacity, and will be the largest crude oil rail terminal on the East Coast.

              Ten-Year, Fee-Based Contract with Minimum Volume Commitments.    All of our revenue and cash flow will be initially derived from our equity ownership in the operating partnership and its ten-year, fee-based commercial agreement with Refining, which will be supported by minimum quarterly volume commitments and inflation escalators. We believe this agreement with Refining will generate stable and predictable cash flows.

              Relationship with Our Parent.    We will serve as our parent's primary vehicle to expand its logistics business supporting Refining and third parties. As the owner of our general partner interest, all of our incentive distribution rights and a        % limited interest in us, we believe that our parent will be incentivized to grow our business.

              Relationship with Our Parent and Refining.    We believe that our parent will be incentivized to grow our business as a result of Refining's stated strategies of increasing its access to domestic crude oil and growing its logistics capabilities. In particular, we expect to benefit from the following aspects of our relationship with our parent and Refining:

    Option to acquire NGL rail terminal.  Pursuant to the omnibus agreement that we will enter into at the closing of this offering, we will have an option to acquire from Refining the NGL rail terminal that is currently under construction by a third party at Refining's Philadelphia refinery complex and the associated real estate rights. The NGL rail terminal will include 13 railroad sidings, 36 loading/unloading racks and 100 rail car storage spots.

 

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    Acquisition opportunities.  Under the omnibus agreement, Refining will grant us a right of first offer to acquire certain logistics assets that it will retain or that it may acquire or construct in its existing area of operation in the future. We also may have the opportunity to jointly pursue strategic acquisitions with Refining that complement and grow our asset base. We believe that opportunities for us to acquire assets under the omnibus agreement or participate in strategic acquisitions with Refining will result from Refining's current crude oil sourcing strategy, as well as its opportunity to source natural gas and NGLs in the future, and Refining's downstream activities.

      Domestic crude oil sourcing strategy.  Refining has made significant progress in executing its strategy of transitioning its feedstock slate from foreign crude oil to less expensive domestic crude oil. Because Refining operates the largest refining complex on the East Coast, with combined crude oil throughput capacity of 335,000 bpd, it is a significant player in the evolving domestic crude oil supply chain. We have the potential opportunity to construct or acquire assets that will advance Refining's domestic crude oil sourcing strategy. Given our relationship with Refining, we would expect to operate these assets under long-term, fee-based agreements.

      Domestic natural gas and NGL sourcing strategy.  Increasing production of natural gas and associated NGLs from the Marcellus shale formation in Pennsylvania has the potential to create opportunities for the development of additional logistics and manufacturing assets to bring these resources to market. Refining's complex is well situated to build complementary businesses that utilize natural gas and NGLs as feedstocks and that are synergistic with its refining operations. Should these opportunities develop, we expect to facilitate this growth by constructing or acquiring logistics assets that provide access to these feedstocks and delivery of the resultant products to end-markets.

      Downstream activities.  Refining benefits from its location in PADD I, which is the largest refined products market in the United States. Downstream of the refinery complex we may have opportunities to participate in Refining's marketing strategy by buying or building midstream logistics assets that handle refined products such as marine vessels, storage and blending terminals and wholesale truck racks.

    Access to operational and industry expertise.  We expect to benefit from Refining's extensive operational, commercial and technical expertise, as well as its industry relationships, as we seek to optimize and expand our existing asset base.

              Experienced Management Team.    Our management team is experienced in the operation of refining logistics assets and the execution of organic growth and acquisition strategies. Our management team averages more than 20 years of industry experience and includes some of the most senior officers of our parent.

              Financial Flexibility.    At the closing of this offering, we expect to enter into a    -year $             million revolving credit facility, which will remain undrawn at closing. We believe we will have the financial flexibility to execute our growth strategy through the available borrowing capacity under our revolving credit facility and our ability to access the debt and equity capital markets.

              We cannot assure you, however, that we will be able to utilize our strengths to successfully execute our business strategies described below. For further discussion of the risks that we face, please read "Risk Factors."

 

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Strategies

              Our primary business objectives are to maintain stable and predictable cash flows and to increase our quarterly cash distribution per unit over time. We intend to accomplish these objectives by executing the following business strategies:

              Generate Stable, Fee-Based Cash Flow.    All of our revenue and cash flow will be initially derived from our equity ownership in the operating partnership and its ten-year, fee-based agreement with Refining, which will be supported by minimum quarterly volume commitments and inflation escalators. Pursuant to this agreement, we will not have direct exposure to the fluctuations in commodity prices. As we grow our business beyond our current facilities, we will seek to enter into similar fee-based contracts with third parties that generate stable and predictable cash flows.

              Pursue Accretive Acquisitions from Our Parent and Refining.    In connection with this offering, we will enter into an omnibus agreement, pursuant to which our parent and Refining will grant us rights of first offer on several sets of assets as described below that we expect to drive our growth strategy.

              Pursue Attractive Organic Growth Opportunities.    We intend to pursue organic growth projects that complement our terminal's existing capacity and our own operational footprint, including extending our reach upstream and downstream of Refining.

              Third-Party Acquisitions.    We intend to analyze and expect to pursue acquisitions of complementary assets owned by third parties. In addition, in conjunction with Refining, we expect to monitor the marketplace to identify and pursue asset acquisitions from third parties that complement or diversify our existing operations.

              Maintain Safe, Reliable and Efficient Operations.    We are committed to maintaining and improving the safety, reliability, environmental compliance and efficiency of our operations. We will seek to improve our operating performance through our commitment to our preventive maintenance program and to employee training and development programs.

              We cannot assure you, however, that we will be able to implement our business strategies described above. For further discussion of the risks that we face, please read "Risk Factors."


Growth Opportunities

              We believe that our relationship with our parent will provide us with substantial future growth opportunities. Upon the consummation of this offering, our parent will own a 55% limited partner interest in the operating partnership and will grant us a right of first offer to purchase all or a portion of this ownership interest in one or more transactions.

              Our relationship with Refining should also provide us with a number of potential future growth opportunities. Pursuant to the omnibus agreement that we will enter into at the closing of this offering, we will have an option to acquire the NGL rail terminal and associated real estate rights from Refining at their net book value as of the closing date of the acquisition. In addition, Refining will grant us a right of first offer to acquire the following assets for a period of 10 years after the closing of this offering, as well as any additional assets that it may construct or acquire in the future:

    Point Breeze Refinery Terminal and Barge Docks.  The Point Breeze refinery terminal consists of ten tanks with capacity to store 1.8 million barrels of crude oil and 53 tanks with shell capacity of approximately 3.3 million barrels for storage of intermediates, refined products and gasoline blend stock. It also includes a barge dock that transfers gasoline and distillate products to and from the Point Breeze terminal. The barge dock has two berths with a draft of 26 feet. In addition, the Point Breeze terminal has pipeline connections to the Sunoco Logistics Fort Mifflin Crude Terminal.

 

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    Schuylkill River Tank Farm and Girard Point Docks.  The Schuylkill River tank farm consists of 30 tanks with capacity to store 3.2 million barrels of refined products and gasoline blend stock. It also includes pipeline connections to and from the Colonial, Laurel and Harbor pipelines. The tank farm also has capacity to store 15,000 barrels of propane and 250,000 barrels of butane and has facilities to load propane trucks and off load and load butane trucks. Also included are the Girard Point docks, used to transfer refined products to and from the Schuylkill River Tank Farm and the Girard Point refinery. These docks include a vapor recovery system to allow the loading of high VOC liquid components, four berths for barges and ships with a draft of 32 feet.

    Propane/Propylene Rail and Truck Terminal.  This terminal consists of 22 propane storage bullets with a total capacity of 15,000 barrels, a propane/propylene rail loading terminal with 16 railcar stations and a propane/propylene truck loading terminal with four loading spots.

    Other Logistics Assets.  Refining also owns eight cumene storage tanks with a total capacity of 164,000 barrels and a benzene terminal with two storage tanks with total capacity of 58,000 barrels along with capabilities to unload benzene from trucks and railcars and from barges at the Girard Point barge docks.

We expect that Refining will be the primary customer for these logistics assets after any purchase of such assets by us. The consummation and timing of any acquisition of assets owned by Refining will depend upon, among other things, Refining's willingness to offer the asset for sale and obtain any necessary consents, the determination that the asset is suitable for our business at that particular time, our ability to agree on a mutually acceptable price, our ability to negotiate an acceptable purchase agreement and services agreement with respect to the asset and our ability to obtain financing on acceptable terms. We do not have a current agreement or understanding with Refining to purchase any assets covered by our right of first offer.


About North Yard Logistics, L.P.

              North Yard Logistics, L.P., our operating partnership, is a Delaware limited partnership in which we will own the general partner interest and a 45% limited partner interest at the completion of this offering. Our parent will own the remaining 55% limited partner interest in the operating partnership. The operating partnership will own and operate the rail unloading terminal located at our parent's Philadelphia refinery complex and a pipeline connection to accept deliveries of crude oil from a nearby third-party terminal. Our rail unloading terminal receives, handles and transfers crude oil and provides Refining's Point Breeze and Girard Point refineries with their primary access to high quality, lower-cost crude oil from the Bakken region as well as other North American shale oil production regions served by rail. The terminal currently has nominal unloading capacity of two unit trains per day, or 140,000 bpd of crude oil, with the current 104-car unit train configuration.

              Based on the successful operations of our terminal since its startup in the fourth quarter of 2013, Refining has undertaken an expansion project that will increase unloading capacity from two to three unit trains per day. When the expansion project is completed, unloading capacity will increase to 210,000 bpd. If the rail industry moves to more efficient 120-car unit trains, then the expanded capacity of our rail unloading terminal will improve to 240,000 bpd.

 

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              The following table sets forth certain operating information regarding our rail unloading terminal, as well as the volumes received via a third-party connection:

 
  April 1 to
October 23, 2013(1)
  October 23 to
December 31, 2013(2)
  Six Months Ended
June 30, 2014
 

Our Rail Unloading Terminal

                   

Capacity (bpd)(3)

        140,000     140,000  

Throughput (bpd)

        121,389     127,967  

Utilization

    n/a     87 %   91 %

Third-Party Connection

                   

Throughput (bpd)

    35,281     6,356     7,806  

(1)
The pipeline connection to the third-party terminal was completed on April 21, 2013.

(2)
The rail unloading terminal commenced operations on October 23, 2013.

(3)
Following the completion of the expansion project in mid-October 2014, the capacity of our rail unloading terminal will increase to 210,000 bpd.


Our Relationship with Refining

              We have no ownership interest in Refining or the Philadelphia refinery complex, but our relationship with Refining is one of our principal strengths. Refining operates the East Coast's largest refining complex, which consists of 335,000 bpd of throughput capacity at two refineries located on adjacent properties in Philadelphia, the 190,000 bpd Girard Point refinery and the 145,000 bpd Point Breeze refinery. These refineries are designed to run primarily light, sweet crude oils, and Refining is seeking to increase the amount of this type of crude oil processed at its facilities.

              Refining's credit rating is currently B1/B+ as assigned by Moody's and Standard & Poor's, respectively. From its inception on September 8, 2012 through December 31, 2012, Refining had operating income of $155 million, and for the year ended December 31, 2013, Refining had an operating loss of $76 million. For the six months ended June 30, 2013, Refining had an operating loss of $4 million as compared to operating income of $93 million for the six months ended June 30, 2014. Refining believes that the addition of our rail unloading terminal, which commenced operations on October 23, 2013 and allows Refining to purchase, deliver and process lower-priced, domestic crude oil, has been a primary driver of the improvement in Refining's financial results for the six months ended June 30, 2014 as compared to the six months ended June 30, 2013 financial results. These results do not reflect the impact of our formation transactions or the commercial agreement between the operating partnership and Refining that will be entered into at the closing of this offering. Additional summary financial information for Refining is presented in "Business—Refining's Summary Financial and Operating Information."

              We expect that our relationship with Refining will provide us the opportunity over time to grow a portfolio of midstream energy logistics assets. The anticipated increase in production in the Bakken region and other shale production regions provides us two distinct opportunities to grow our business:

    Increasing throughput on our existing system.  Our rail unloading terminal was placed into service in October 2013 and is currently undergoing a 70,000 bpd expansion, which is expected to be completed in mid-October 2014 and will increase capacity to 210,000 bpd.

    Expand and integrate crude-by-rail supply chain.  We expect to acquire from Refining or construct additional logistics assets that facilitate transport of crude oil from producing areas such as the Bakken to the Philadelphia refinery complex or third-party refineries. The supply chain to deliver domestic crude oil from the midcontinent to the East Coast of the United States is developing and involves exploration and production, gathering, storage, loading

 

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      terminal operation, rail car fleet ownership and management, unloading terminal operation and the ownership and operation of marine vessels under the Jones Act. These logistics assets each generate revenue through both fees charged for volumes transported on or through the additional assets, and potentially through increased crude oil volume at our rail unloading terminal.

              In conjunction with the offering, Refining will also grant us a right of first offer on certain logistics assets that it will retain or that it may acquire or construct in the future, as well as an option to purchase the NGL rail terminal that is currently being constructed by a third party.


Commercial Agreement with Refining

              The operating partnership will enter into a ten-year, fee-based commercial agreement with Refining at the closing of this offering under which the operating partnership will receive, handle and transfer crude oil at the rail unloading terminal. All of the operating partnership's revenue and cash flow will be initially derived from this commercial agreement, which will be supported by minimum quarterly volume commitments and inflation escalators. For the twelve months ending September 30, 2015, Refining's annual minimum fees under this agreement are expected to total $118 million, or approximately 98% of our forecasted revenues of $121 million for such period. Please read "Our Cash Distribution Policy and Restrictions on Distributions—Estimated Distributable Cash Flow for the Twelve Months Ending September 30, 2015" for additional information regarding our forecasted revenues and related assumptions. The commercial agreement will also provide Refining with a right of first refusal on certain proposed transfers of the rail unloading terminal by the operating partnership. Please read "Business—Commercial Agreement with Refining."


Other Agreements with Our Parent and Refining

              Upon the closing of this offering, we will enter into an omnibus agreement with our parent, Refining, our general partner and the operating partnership. Under the agreement, our parent will grant us a right of first offer to acquire the limited partner interests that it owns in the operating partnership and Refining will grant us an option or a right of first offer to acquire certain of its logistics assets that it will retain or that it may acquire or construct in the future. The omnibus agreement will also address Refining's reimbursement obligations related to certain operational failures of the contributed assets and Refining's indemnification of us for certain matters, including environmental, title, tax and accounting matters. Please read "Certain Relationships and Related Party Transactions—Agreements Governing the Transactions—Omnibus Agreement."

              We, our general partner and the operating partnership will also enter into a services and secondment agreement with our parent, Refining and PES Administrative Services, LLC, a wholly owned subsidiary of Refining ("PES Admin"). Under this agreement certain employees of Refining and PES Admin (including our Chief Executive Officer) will be seconded to our general partner to provide management, operational and maintenance services with respect to the rail unloading terminal, and Refining and PES Admin will be reimbursed or paid a fee for such employees. Additionally, the agreement addresses our and the operating partnership's obligation to pay our parent and Refining, respectively, an administrative fee for centralized corporate and administrative services, as well as our and the operating partnership's obligation to reimburse our parent and Refining, respectively, for the provision of other administrative, maintenance and operating services. Please read "Certain Relationships and Related Party Transactions—Agreements Governing the Transactions—Services and Secondment Agreement."

              In addition to the above agreements, the operating partnership will enter into a 25-year lease agreement with Refining relating to the operating partnership's lease of the real property on which our

 

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rail unloading terminal is located. Please read "Certain Relationships and Related Party Transactions—Agreements Governing the Transactions—Real Property Lease."


Our Emerging Growth Company Status

              As a company with less than $1.0 billion in revenue during its last fiscal year, we qualify as an "emerging growth company" as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. As an emerging growth company, we may, for up to five years, take advantage of specified exemptions from reporting and other regulatory requirements that are otherwise applicable generally to public companies. These exemptions include, among others:

    exemption from the auditor attestation requirement on the effectiveness of our system of internal controls over financial reporting;

    exemption from the adoption of new or revised financial accounting standards until they would apply to private companies;

    exemption from compliance with any new requirements adopted by the Public Company Accounting Oversight Board requiring mandatory audit firm rotation or a supplement to the auditor's report in which the auditor would be required to provide additional information about the audit and the financial statements of the issuer; and

    reduced disclosure about executive compensation arrangements.

              We may take advantage of these provisions until we are no longer an emerging growth company, which will occur on the earliest of (i) the last day of the fiscal year following the fifth anniversary of this offering, (ii) the last day of the fiscal year in which we have more than $1.0 billion in annual revenue, (iii) the end of the fiscal year in which we have more than $700.0 million in market value of our common units held by non-affiliates as of the preceding June 30th and (iv) the date on which we issue more than $1.0 billion of non-convertible debt over a three-year period.

              We have elected to take advantage of all of the applicable JOBS Act provisions, except that we will elect to opt out of the exemption that allows emerging growth companies to extend the transition period for complying with new or revised financial accounting standards (this election is irrevocable).

              Accordingly, the information that we provide you may be different than what you may receive from other public companies in which you hold equity interests.


Risk Factors

              An investment in our common units involves risks associated with our business, our partnership structure and the tax characteristics of our common units. Below is a summary of certain key risk factors that you should consider in evaluating an investment in our common units. However, this list is not exhaustive, and you should read the full discussion of these risks and the other risks described in "Risk Factors" and "Forward-Looking Statements."

Risks Related to Our Business

    We may not have sufficient cash from operations following the establishment of cash reserves and payment of fees and expenses, including cost reimbursements to our general partner and its affiliates, to enable us to pay the minimum quarterly distribution to our unitholders.

    Our pro forma financial data are not necessarily representative of the results of what we would have achieved and may not be a reliable indicator of our future results.

    The assumptions underlying the forecast of distributable cash flow that we include in "Our Cash Distribution Policy and Restrictions on Distributions" are inherently uncertain and are

 

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      subject to significant business, economic, financial, regulatory and competitive risks and uncertainties that could cause actual results to differ materially from those forecasted.

    All of our revenue and cash flow will be initially derived from our equity ownership in the operating partnership, and Refining will initially account for all of the operating partnership's revenues. Therefore, we and the operating partnership will be subject to the business risks of Refining. If Refining is unable to satisfy its obligations under the commercial agreement with the operating partnership for any reason, our revenues would decline and our financial condition, results of operations, cash flows and ability to make distributions to our unitholders would be adversely affected.

    Refining is a privately owned company that does not disclose financial or operating results to the public, limiting the ability of our unitholders to assess the performance or financial outlook of the operating partnership's only customer.

    Our business is difficult to evaluate because we have a limited operating history and do not have historical financial information upon which our performance may be evaluated.

    The rail unloading terminal, which will be the operating partnership's only operating asset, did not commence operations until October 23, 2013, and the expansion of the terminal is not expected to be completed until mid-October 2014. The terminal may fail to operate efficiently or reliably, which could adversely affect our financial condition, results of operations, cash flows and ability to make distributions to our unitholders.

    Refining may suspend, reduce or terminate its obligations under the commercial agreement with the operating partnership in certain circumstances, which could have a material adverse effect on our financial condition, results of operations, cash flows and ability to make distributions to our unitholders.

Risks Related to an Investment in Us

    Our parent will own and control our general partner, which has sole responsibility for conducting our business and managing our operations. Our general partner and its affiliates, including our parent and Refining, have conflicts of interest with us and limited duties to us and may favor their own interests to your detriment.

    Our partnership agreement restricts the remedies available to holders of our units for actions taken by our general partner that might otherwise constitute breaches of fiduciary duty.

    Holders of our common units have limited voting rights and are not entitled to elect our general partner or the board of directors of our general partner, which could reduce the price at which our common units will trade.

    Immediately effective upon closing, you will experience substantial dilution of $          in tangible net book value per common unit.

Tax Risks to Our Common Unitholders

    Our tax treatment depends on our status as a partnership for federal income tax purposes. If the Internal Revenue Service were to treat us as a corporation for federal income tax purposes, which would subject us to entity-level taxation, or if we were otherwise subjected to a material amount of additional entity-level taxation, then our distributable cash flow to you would be substantially reduced.

    Even if you do not receive any cash distributions from us, you will be required to pay taxes on your share of our taxable income.

 

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Our Formation and Other Related Transactions

              We were formed in June 2014 by our parent, PESRM Holdings, LLC and our general partner to own, operate, develop and acquire crude oil and refined product logistics assets. At the closing of this offering, the following transactions will occur:

    our parent will contribute the rail unloading terminal to the operating partnership as a capital contribution;

    our parent will contribute a 45% limited partner interest in the operating partnership and all of the outstanding membership interests in North Yard GP to us as a capital contribution;

    PESRM Holdings, LLC's interest in us will be distributed to our parent;

    our parent's interest in us will be converted into (a)             common units and             subordinated units, representing an aggregate        % limited partner interest in us and (b) the right to receive a $             million distribution, a portion of which is to reimburse our parent for certain capital expenditures incurred with respect to the contributed assets;

    our general partner's non-economic general partner interest will continue, and we will issue all of our incentive distribution rights to our general partner;

    we will issue            common units to the public in this offering, representing a            % limited partner interest in us, and will apply the proceeds as described in "Use of Proceeds;"

    we, our general partner and the operating partnership will enter into an omnibus agreement with our parent and Refining;

    we will enter into a $             million revolving credit facility, which will remain undrawn at the closing of this offering;

    the operating partnership will enter into a long-term commercial agreement with Refining;

    we, our general partner and the operating partnership will enter into a services and secondment agreement with our parent, Refining and PES Admin; and

    the operating partnership will enter into a lease agreement with Refining relating to the real property on which the rail unloading terminal is located.

Organizational Structure After Our Formation and Other Related Transactions

              After giving effect to the transactions described above under "—Our Formation and Other Related Transactions", assuming the underwriters' option to purchase additional common units from us is not exercised, our units will be held as follows:

Public Common Units (1)

      %

Parent Units:

      %

Common Units

      %

Subordinated Units

      %

Non-economic general partner interest

     
       

Total

    100.0 %
       
       

(1)
Includes up to        common units that may be purchased by directors, director nominees and executive officers of our general partner pursuant to a directed unit program, as described in more detail in "Underwriting—Directed Unit Program."

 

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              The following simplified diagram depicts our organizational structure after giving effect to our formation and other related transactions:

GRAPHIC


(1)
PES Equity Holdings, LLC is a subsidiary of Energy Transfer Partners, L.P.

(2)
Based on the total number of PES' outstanding common units as of September 19, 2014, and excludes any incentive units.

 

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Management of PES Logistics Partners, L.P.

              We are managed and operated by the board of directors and executive officers of PES Logistics GP, our general partner. Our parent is the sole owner of our general partner and has the right to appoint the entire board of directors of our general partner, including the independent directors appointed in accordance with the listing standards of the New York Stock Exchange (the "NYSE"). Unlike shareholders in a publicly traded corporation, our unitholders will not be entitled to elect our general partner or the board of directors of our general partner.             of the executive officers and directors of our general partner also currently serve as executive officers of our parent. For more information about the directors and executive officers of our general partner, please read "Management—Directors and Executive Officers of PES Logistics GP, LLC."

              Our operations will be conducted through, and our operating assets will be owned by, the operating partnership. However, neither we nor the operating partnership will have any employees. Our general partner will have the primary responsibility for providing the personnel necessary to conduct our operations, whether through directly hiring employees or by obtaining the services of personnel employed by our parent or others. In addition, pursuant to the services and secondment agreement that will be entered into at the closing of this offering, certain of Refining's and PES Admin's employees (including our Chief Executive Officer) will be seconded to our general partner to provide management, operational and maintenance services with respect to the rail unloading terminal. All of the personnel who will conduct our business will be employed or contracted by our general partner and its affiliates, including our parent, Refining and PES Admin.


Principal Executive Offices and Internet Address

              Our principal executive offices are located at 1735 Market Street, 10th Floor, Philadelphia, PA 19103, and our telephone number is (215) 339-1200. Following the completion of this offering, our website will be located at www.                         .com. We expect to make our periodic reports and other information filed with or furnished to the Securities and Exchange Commission (the "SEC") available, free of charge, through our website, as soon as reasonably practicable after those reports and other information are electronically filed with or furnished to the SEC. Information on our website or any other website is not incorporated by reference into this prospectus and does not constitute a part of this prospectus.


Conflicts of Interest and Duties

              Under our partnership agreement, our general partner has a duty to manage us in a manner it believes is in the best interests of our partnership. However, because our general partner is a wholly owned subsidiary of our parent, the officers and directors of our general partner have a duty to manage the business of our general partner in a manner that is in the best interests of our parent. As a result of this relationship, conflicts of interest may arise in the future between us and our unitholders, on the one hand, and our general partner and its affiliates, including our parent and Refining, on the other hand. For example, our general partner will be entitled to make determinations that affect the amount of cash distributions we make to the holders of common units, which in turn affects whether our general partner receives incentive cash distributions. For a more detailed description of the conflicts of interest and fiduciary duties of our general partner, please read "Conflicts of Interest and Duties."

              Delaware law provides that Delaware limited partnerships may, in their partnership agreements, expand, restrict or eliminate the fiduciary duties otherwise owed by the general partner to limited partners and the partnership, provided that partnership agreements may not eliminate the implied contractual covenant of good faith and fair dealing. This implied covenant is a judicial doctrine utilized by Delaware courts in connection with interpreting ambiguities in partnership agreements and other contracts and does not form the basis of any separate or independent fiduciary duty in addition

 

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to the express contractual duties set forth in our partnership agreement. Under the implied contractual covenant of good faith and fair dealing, a court will enforce the reasonable expectations of the partners where the language in the partnership agreement does not provide for a clear course of action.

              As permitted by Delaware law, our partnership agreement contains various provisions replacing the fiduciary duties that would otherwise be owed by our general partner with contractual standards governing the duties of the general partner and contractual methods of resolving conflicts of interest. The effect of these provisions is to restrict the remedies available to unitholders for actions that might otherwise constitute breaches of our general partner's fiduciary duties. Our partnership agreement also provides that affiliates of our general partner, including our parent and Refining, are not restricted from competing with us, and neither our general partner nor its affiliates have any obligation to present business opportunities to us. By purchasing a common unit, the purchaser agrees to be bound by the terms of our partnership agreement, and pursuant to the terms of our partnership agreement, each holder of common units consents to various actions and potential conflicts of interest contemplated in our partnership agreement that might otherwise be considered a breach of fiduciary or other duties under Delaware law. Please read "Conflicts of Interest and Duties—Duties of the General Partner" for a description of the fiduciary duties imposed on our general partner by Delaware law, the replacement of those duties with contractual standards under our partnership agreement and certain legal rights and remedies available to holders of our common units and subordinated units. For a description of our other relationships with our affiliates, please read "Certain Relationships and Related Party Transactions."

 

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The Offering

Common units offered to the public

                  common units.

 

                common units if the underwriters exercise in full their option to purchase additional common units from us.

Units outstanding after this offering

 

                common units and                subordinated units, representing an aggregate        % limited partner interest in us.

Use of proceeds

 

We expect to receive net proceeds of approximately $            million from the sale of common units offered by this prospectus, based on an assumed initial public offering price of $            per common unit (the midpoint of the price range set forth on the cover page of this prospectus), after deducting underwriting discounts and estimated offering expenses. We intend to use the net proceeds from this offering as follows:

 

$                million will be distributed to our parent in satisfaction of its right to reimbursement for certain capital expenditures incurred with respect to the contributed assets;

 

$                million capital will be contributed to the operating partnership for general partnership purposes; and

 

$                million will be retained by us for general partnership purposes.

 

The net proceeds from any exercise by the underwriters of their option to purchase additional common units from us will be used to redeem from our parent a number of common units equal to the number of common units issued upon exercise of the option at a price per common unit equal to the net proceeds per common unit in this offering before expenses but after deducting underwriting discounts. Accordingly, any exercise of the underwriters' option will not affect the total number of units outstanding or the amount of cash needed to pay the minimum quarterly distribution on all units.

Cash distributions

 

We intend to make a minimum quarterly distribution of $            per unit to the extent we have sufficient cash at the end of each quarter after establishment of cash reserves and payment of fees and expenses, including payments to our general partner. We refer to the amount of such cash as "available cash." Our ability to pay the minimum quarterly distribution is subject to various restrictions and other factors described in more detail under the caption "Our Cash Distribution Policy and Restrictions on Distributions."

 

For the quarter in which this offering closes, we will pay a prorated distribution on our units covering the period from the completion of this offering through                          , 2014, based on the actual length of that period.

 

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In general, we will pay any cash distributions we make each quarter in the following manner:

 

first, to the holders of common units, until each common unit has received a minimum quarterly distribution of $            plus any arrearages from prior quarters;

 

second, to the holders of subordinated units, until each subordinated unit has received a minimum quarterly distribution of $            ; and

 

third, to all unitholders, pro rata, until each unit has received a distribution of $                .

 

If cash distributions to our unitholders exceed $            per unit in any quarter, our general partner will receive increasing percentages, up to 50%, of the cash we distribute in excess of that amount. We refer to these distributions as "incentive distributions." In certain circumstances, our general partner, as the initial holder of our incentive distribution rights, has the right to reset the target distribution levels described above to higher levels based on our cash distributions at the time of the exercise of this reset election. Please read "Provisions of Our Partnership Agreement Relating to Cash Distributions."

 

If we do not have sufficient available cash at the end of each quarter, we may, but are under no obligation to, borrow funds to pay the minimum quarterly distribution to our unitholders.

 

We believe, based on our financial forecast and related assumptions included in "Our Cash Distribution Policy and Restrictions on Distributions—Estimated Distributable Cash Flow for the Twelve Months Ending September 30, 2015," that we will generate sufficient distributable cash flow to support the payment of the minimum quarterly distribution of $                per unit on all of our common units and subordinated units for the twelve months ending September 30, 2015. However, we do not have a legal obligation to pay distributions at our minimum quarterly distribution rate or at any other rate, subject to the requirement in our partnership agreement to distribute all of our available cash, and there is no guarantee that we will make quarterly cash distributions to our unitholders. Please read "Our Cash Distribution Policy and Restrictions on Distributions."

 

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Subordinated units

 

Our parent will initially own all of our subordinated units. The principal difference between our common units and subordinated units is that for any quarter during the subordination period, the subordinated units will not be entitled to receive any distribution until the common units have received the minimum quarterly distribution for such quarter plus any arrearages in the payment of the minimum quarterly distribution from prior quarters during the subordination period. Subordinated units will not accrue arrearages.

Conversion of subordinated units

 

The subordination period will end on the first business day after the date that we have earned and paid distributions of at least (1) $            (the annualized minimum quarterly distribution) on each of the outstanding common units and subordinated units for each of three consecutive, non-overlapping four quarter periods ending on or after                          , 2017, or (2)  $                (150% of the annualized minimum quarterly distribution) on each of the outstanding common units and subordinated units and the related distributions on the incentive distribution rights for any four-quarter period ending on or after                          , 2015, in each case provided there are no arrearages in payment of the minimum quarterly distributions on our common units at that time.

 

The subordination period also will end upon the removal of our general partner other than for cause if no subordinated units or common units held by the holders of subordinated units or their affiliates are voted in favor of that removal.

 

When the subordination period ends, each outstanding subordinated unit will convert into one common unit, and common units will no longer be entitled to arrearages. Please read "Provisions of Our Partnership Agreement Relating to Cash Distributions—Subordinated Units and Subordination Period."

Issuance of additional units

 

Our partnership agreement authorizes us to issue an unlimited number of additional units without the approval of our unitholders. Our unitholders will not have preemptive or participation rights to purchase their pro rata share of any additional units issued. Please read "Units Eligible for Future Sale" and "Our Partnership Agreement—Issuance of Additional Securities."

 

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Limited voting rights

 

Our general partner will manage and operate us. Unlike the holders of common stock in a corporation, our unitholders will have only limited voting rights on matters affecting our business. Our unitholders will have no right to elect our general partner or its directors on an annual or other continuing basis. Our general partner may not be removed except by a vote of the holders of at least 662/3% of the outstanding units, including any units owned by our general partner and its affiliates, voting together as a single class. Upon consummation of this offering, our parent will own        % of our total outstanding common units and subordinated units on an aggregate basis (or        % of our total outstanding common units and subordinated units on an aggregate basis, if the underwriters exercise in full their option to purchase additional common units). This will give our parent the ability to prevent the removal of our general partner. Please read "Our Partnership Agreement—Voting Rights."

Limited call right

 

If at any time our general partner and its affiliates own more than 80% of the outstanding common units, our general partner has the right, but not the obligation, to purchase all of the remaining common units at a price equal to the greater of (1) the average of the daily closing price of our common units over the 20 trading days preceding the date that is three business days before notice of exercise of the call right is first mailed and (2) the highest per-unit price paid by our general partner or any of its affiliates for common units during the 90-day period preceding the date such notice is first mailed. At the completion of this offering and assuming the underwriters' option to purchase additional common units from us is not exercised, our general partner and its affiliates will own approximately        % of our common units (excluding any common units purchased by directors, director nominees and executive officers of our general partner under our directed unit program). At the end of the subordination period (which could occur as early as within the quarter ending                          , 2015), assuming no additional issuances of common units by us (other than upon the conversion of the subordinated units) and the underwriters' option to purchase additional common units from us is not exercised, our general partner and its affiliates will own        % of our outstanding common units (excluding any common units purchased by directors, director nominees and executive officers of our general partner under our directed unit program) and therefore would not be able to exercise the call right at that time. Please read "Our Partnership Agreement—Limited Call Right."

 

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Estimated ratio of taxable income to distributions

 

We estimate that if you own the common units you purchase in this offering through the record date for distributions for the period ending December 31, 2017, you will be allocated, on a cumulative basis, an amount of federal taxable income for that period that will be        % or less of the cash distributed to you with respect to that period. For example, if you receive an annual distribution of $                per unit, we estimate that your average allocable federal taxable income per year will be no more than approximately $                per unit. Thereafter, the ratio of allocable taxable income to cash distributions to you could substantially increase. Please read "Material U.S. Federal Income Tax Consequences—Tax Consequences of Unit Ownership—Ratio of Taxable Income to Distributions" for the basis of this estimate.

Material U.S. federal income tax consequences

 

For a discussion of the material U.S. federal income tax consequences that may be relevant to prospective unitholders who are individual citizens or residents of the United States, please read "Material U.S. Federal Income Tax Consequences."

Directed Unit Program

 

At our request, the underwriters have reserved for sale, at the initial public offering price, up to        % of the common units being offered by this prospectus for sale to directors, director nominees and executive officers of our general partner. We do not know if these persons will choose to purchase all or any portion of these reserved common units, but any purchases they do make will reduce the number of common units available to the general public. Please read "Underwriting—Directed Unit Program."

Exchange listing

 

We intend to apply to list our common units on the NYSE under the symbol "PESL."

 

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SUMMARY UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET

              The summary unaudited pro forma consolidated balance sheet presented in the following table as of June 30, 2014 is derived from the unaudited pro forma consolidated balance sheet of PES Logistics Partners, L.P. included elsewhere in this prospectus. The unaudited pro forma consolidated balance sheet assumes the offering and the related transactions occurred as of June 30, 2014. These transactions include, and the unaudited pro forma consolidated balance sheet gives effect to, the following:

    our parent's contribution to us of the general partner interest and a 45% limited partner interest in the operating partnership which will own and operate the rail unloading terminal;

    the creation of a noncontrolling interest representing our parent's retained 55% limited partner interest in the operating partnership;

    our entry into a            -year $                 million revolving credit facility;

    the consummation of this offering and our issuance of                          common units to the public, the incentive distribution rights to our general partner and                          common units and                        subordinated units to our parent; and

    the application of the net proceeds of this offering as described in "Use of Proceeds."

              The following table should be read together with, and is qualified in its entirety by reference to, the unaudited pro forma consolidated balance sheet and the accompanying notes included elsewhere in this prospectus. The table should also be read together with "Management's Discussion and Analysis of Financial Condition."

 
  Pro Forma  
 
  June 30, 2014  
 
  (unaudited)
 
 
  (in thousands)
 

Balance sheet:

       

Cash and cash equivalents

  $ 28,500  

Property, plant and equipment, net

  $ 76,243  

Total assets

  $ 107,743  

PES Logistics Partners, L.P. partners' capital

  $ 50,134  

Noncontrolling interest

  $ 57,609  

Total equity

  $ 107,743  

              Because our operations will not commence until the closing of this offering when our parent contributes a 45% limited partner interest in the operating partnership and all of the outstanding membership interests in North Yard GP to us and we will be capitalized on a nominal basis prior to such time, we have not included any historical financial results in this prospectus.

 

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RISK FACTORS

              Investing in our common units involves a high degree of risk. You should carefully consider the risks described below together with the other information set forth in this prospectus before making an investment decision. Any of the following risks and uncertainties could have a material adverse effect on our financial condition, results of operations, cash flows and ability to make distributions to our unitholders. If that occurs, we might not be able to pay distributions on our common units, the trading price of our common units could decline materially, and you could lose all or part of your investment. Although many of our business risks are comparable to those faced by a corporation engaged in a similar business, limited partner interests are inherently different from the capital stock of a corporation and involve additional risks described below. The risks discussed below are not the only risks we face. We may experience additional risks and uncertainties not currently known to us or as a result of developments occurring in the future. Conditions that we currently deem to be immaterial may also materially and adversely affect our financial condition, results of operations, cash flows and ability to make distributions to our unitholders.


Risks Related to Our Business

We may not have sufficient cash from operations following the establishment of cash reserves and payment of fees and expenses, including cost reimbursements to our general partner and its affiliates, to enable us to pay the minimum quarterly distribution to our unitholders.

              In order to pay the minimum quarterly distribution of $             per unit per quarter, or $             per unit on an annualized basis, we will require available cash of approximately $             million per quarter, or approximately $             million per year, based on the number of common units and subordinated units to be outstanding immediately after completion of this offering. We may not have sufficient available cash each quarter to enable us to pay the minimum quarterly distribution. The amount of cash we can distribute on our units principally depends upon the amount of cash we generate from our operations, which will fluctuate from quarter to quarter based on, among other things:

    the volume of crude oil the operating partnership handles;

    the throughput fees with respect to the volumes that the operating partnership handles;

    the operating partnership's entitlement to payments associated with the minimum volume commitments under its commercial agreement with Refining;

    timely payments under the commercial agreement by Refining; and

    prevailing economic conditions.

              In addition, the actual amount of cash we will have available for distribution will also depend on other factors, some of which are beyond our control, including:

    the amount of our operating expenses and general and administrative expenses, including reimbursements to our general partner in respect of those expenses;

    the level of capital expenditures we make;

    the cost of acquisitions and organic growth projects, if any;

    our debt service requirements and other liabilities;

    fluctuations in our working capital needs;

    our ability to borrow funds and access capital markets;

    restrictions that are expected to be contained in our revolving credit facility and other debt service requirements;

    the amount of cash reserves established by our general partner; and

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    other business risks affecting our cash levels.

Our pro forma financial data are not necessarily representative of the results of what we would have achieved and may not be a reliable indicator of our future results.

              Our pro forma financial data included in this prospectus may not reflect what our financial condition would have been had we been a standalone company during the periods presented or what our financial condition will be in the future. The pro forma financial data we have included in this prospectus are based in part upon a number of estimates and assumptions. These estimates and assumptions may prove not to be accurate, and accordingly, our pro forma financial data should not be assumed to be indicative of what our financial condition actually would have been as a standalone company and may not be a reliable indicator of what our financial condition actually may be in the future.

The assumptions underlying the forecast of distributable cash flow that we include in "Our Cash Distribution Policy and Restrictions on Distributions" are inherently uncertain and are subject to significant business, economic, financial, regulatory and competitive risks and uncertainties that could cause actual results to differ materially from those forecasted.

              The forecast of distributable cash flow set forth in "Our Cash Distribution Policy and Restrictions on Distributions" includes our forecasted results of operations, EBITDA and distributable cash flow for the twelve months ending September 30, 2015. Our ability to pay the full minimum quarterly distribution in the forecast period is based upon a number of assumptions that are discussed in "Our Cash Distribution Policy and Restrictions on Distributions" that may not prove to be correct. The forecast has been prepared by our management. Neither our independent registered public accounting firm nor any other independent accountants have examined, compiled or performed any procedures with respect to the forecast nor have they expressed any opinion or any other form of assurance on such information or its achievability, and they assume no responsibility for the forecast. The assumptions underlying the forecast are inherently uncertain and are subject to significant business, economic, financial, regulatory and competitive risks and uncertainties that could cause actual results to differ materially from those forecasted. If we do not achieve the forecasted results, we may not be able to pay the full minimum quarterly distribution or any amount on our common units or subordinated units, in which event the market price of our common units may decline materially. Please read "Our Cash Distribution Policy and Restrictions on Distributions."

All of our revenue and cash flow will be initially derived from our equity ownership in the operating partnership, and Refining will initially account for all of the operating partnership's revenues. Therefore, we and the operating partnership will be subject to the business risks of Refining. If Refining is unable to satisfy its obligations under the commercial agreement with the operating partnership for any reason, our revenues would decline and our financial condition, results of operations, cash flows and ability to make distributions to our unitholders would be adversely affected.

              All of our revenue and cash flow will be initially derived from our equity ownership in the operating partnership, and Refining will initially account for all of the operating partnership's revenues. As we expect the operating partnership to derive all of its revenues from Refining for the foreseeable future, the operating partnership will be subject to the risk of nonpayment or nonperformance by Refining under the commercial agreement. Any event, whether related to our operations or otherwise, that materially and adversely affects Refining's financial condition, results of operations or cash flows may adversely affect our ability to sustain or increase cash distributions to our unitholders. Accordingly, we will be indirectly subject to the operational and business risks of Refining, including, among others:

    the price volatility of crude oil, other feedstock, refined and other products and fuel and utility services;

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    changes in crude oil and refined product inventory levels and carrying costs;

    Refining's liquidity and ability to purchase enough crude oil to operate its refineries at full capacity could be materially and adversely affected if Refining is unable to operate under its existing supply and offtake agreement and intermediation arrangement with JP Morgan Ventures Energy Corporation ("JPMVEC"), or renew or replace such agreement on similar terms;

    the risk of contract cancellation, non-renewal or failure to perform by JPMVEC under the existing supply and offtake agreement and intermediation arrangement;

    Refining's hedging transactions may limit its gains and expose it to other risks;

    Refining's indebtedness may limit its ability to obtain additional financing, and Refining may also face difficulties complying with the terms of its debt agreements;

    covenants and events of default in Refining's debt agreements could limit its ability to undertake certain types of transactions and adversely affect its liquidity;

    Refining has capital needs and planned and unplanned maintenance expenses for which its internally generated cash flows and other sources of liquidity may not be adequate;

    the dangers inherent in Refining's operations could cause disruptions and could expose Refining to potentially significant losses, costs or liabilities;

    environmental risks, incidents and violations that could give rise to material remediation costs, fines and other liabilities;

    Refining may incur significant costs and liabilities as a result of pipeline safety laws and regulations, including integrity management programs and safety standards, and any changes to those laws and regulations;

    Refining may incur significant costs to comply with state and federal environmental, economic, health and safety, energy and other laws, policies and regulations and any changes in those laws, policies and regulations;

    Refining could experience business interruptions or increased costs associated with waterway, pipeline or rail line shutdowns, or interruptions or changes in cost;

    a material decrease in the supply of crude oil available to Refining's refineries could significantly reduce its production levels;

    severe weather, including earthquakes, floods, fire and other natural disasters, could cause damage to Refining's pipelines and facilities, disrupt Refining's operations or interrupt the supply of some of Refining's feedstock for its refineries and Refining's ability to distribute refined products;

    Refining could incur substantial costs or disruptions in its business if it cannot obtain or maintain necessary permits and authorizations on favorable terms;

    Refining could incur substantial costs in order to generate or obtain the necessary number of RINs credits in connection with mandates to blend renewable fuels into the petroleum fuels produced and sold in the United States;

    competition in the refining and marketing industry is intense, and an increase in competition in the areas in which Refining's refined and other products are sold could adversely affect Refining's sales and profitability;

    general economic conditions;

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    Refining's insurance policies do not cover all losses, costs or liabilities that Refining may experience;

    Refining could be subject to damages based on claims brought by its customers or lose customers as a result of a failure of its products to meet certain quality specifications;

    a substantial portion of Refining's workforce is unionized, and Refining may face labor disruptions that would interfere with its operations;

    the loss by Refining of any of its key personnel; and

    terrorist attacks, cyber-attacks, threats of war or actual war.

              Petroleum refining and marketing is highly competitive. Refining's operations compete with domestic refiners and marketers in the PADD I region of the United States, as well as with domestic refiners in other PADD regions and foreign refiners and trading companies that import products into the United States. In addition, Refining competes with producers and marketers in other industries that supply alternative forms of energy and fuels. Certain of Refining's competitors have larger or more complex refineries and may be able to realize lower per-barrel costs or higher margins per barrel of throughput. Several of Refining's principal competitors are integrated national or international oil companies that are larger and have substantially greater resources than Refining and have access to proprietary sources of controlled crude oil production. Because of their integrated operations and larger capitalization, these companies may be more flexible in responding to volatile industry or market conditions, such as shortages of crude oil supply and other feedstocks or intense price fluctuations.

              Additionally, Refining may consider opportunities presented by third parties with respect to its refinery assets. These opportunities may include offers to purchase assets and joint venture propositions. Refining may also change its refineries' operations by developing new facilities, suspending or reducing certain operations, modifying or closing facilities or terminating operations. Changes may be considered to meet market demands, to satisfy regulatory requirements or environmental and safety objectives, to improve operational efficiency or for other reasons. Refining actively manages its assets and operations, and, therefore, changes of some nature, possibly material to its business relationship with us, are likely to occur at some point in the future. No such changes will be subject to our consent.

              In addition, our parent may sell all or a portion of its interest in Refining to strategic or public investors or other third parties or recapitalize Refining, which may result in a change in Refining's business or financial strategy, contractual obligations or risk profile and negatively impact its financial condition, results of operations, cash flows or creditworthiness. In turn, the operating partnership's cash flows from its commercial agreement with Refining and, therefore, our ability to sustain or increase cash distributions to our unitholders may be materially and adversely affected. Moreover, our credit rating may be adversely affected by a decline in Refining's creditworthiness, increasing our borrowing costs or hindering our ability to access the capital markets. Please read "—Refining's level of indebtedness, the terms of its borrowings and its credit ratings could adversely affect our ability to grow our business, our ability to make cash distributions to our unitholders and our credit ratings and profile. Our ability to obtain credit in the future may also be affected by Refining's credit rating." A third-party purchaser may identify alternative terminaling service providers and opt for minimum throughput volumes or decide to allow the commercial agreement to expire at the end of the original term. Such third party may also operate the refineries in a suboptimal manner, increasing the frequency of turnarounds and reducing capacity utilization. An initial public offering of Refining's business via a yield-focused investment vehicle, including a master limited partnership, may also adversely affect its operations as the board may feel obligated to distribute cash flows to investors that would have a higher value use if reinvested into its business. Any event that materially and adversely affects Refining's financial condition, results of operations or cash flows may adversely affect our financial condition, results of operations, cash flows and ability to make distributions to our unitholders.

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              Furthermore, conflicts of interest may arise between our general partner and its affiliates, including our parent and Refining, on the one hand, and us and our unitholders, on the other hand. We have no control over Refining, which is currently the operating partnership's sole source of revenue and sole customer, and Refining may elect to pursue a business strategy that does not favor us and our business. Please read "Risk Factors—Risks Related to an Investment in Us."

Refining's inability to generate or obtain the necessary number of RINs and waiver credits could adversely affect Refining's operating margins, which, in turn, could adversely affect our financial condition, results of operations, cash flows and ability to make distributions to our unitholders.

              Refining currently purchases RINs as well as certain waiver credits on the open market in order to comply with the Renewable Fuel Standard ("RFS") issued by the EPA. In the future, Refining may be required to generate or purchase additional RINs on the open market and/or waiver credits from the EPA to comply with the RFS. Because of uncertainty surrounding how the EPA will implement proposed regulations, RIN prices have remained volatile and have increased in 2014. In 2013 and the first half of 2014, Refining has experienced significantly higher RINs costs than in prior periods, which have had a material impact on its results of operations. Neither we nor Refining can predict the future prices of RINs or waiver credits as the cost of RINs is dependent upon a variety of factors, which include the availability of qualifying biofuels, the availability of RINs for purchase, the price at which RINs can be purchased, transportation fuel production levels, the mix of Refining's petroleum products and the fuel blending performed at Refining's refineries, each of which can vary significantly from quarter to quarter. If Refining fails to obtain sufficient RINs, or relies on invalid RINs, Refining could be subject to fines and penalties imposed by the EPA. The costs to generate or obtain the necessary number of RINs and waiver credits and any fines imposed for a failure to do so, could adversely affect Refining's operating margins, which, in turn could adversely affect our financial condition, results of operations, cash flows and ability to make distributions to our unitholders.

Refining is a privately owned company that does not disclose financial or operating results to the public, limiting the ability of our unitholders to assess the performance or financial outlook of the operating partnership's only customer.

              Refining is a privately owned company and has no obligations to disclose publicly financial or operating information. Accordingly, our unitholders will have little to no insight into Refining's ability to meet its obligations to us and the operating partnership, including its minimum volume commitments under the commercial agreement with the operating partnership. Our ability to make the minimum quarterly distribution on all outstanding units will be adversely affected if: (i) Refining does not fulfill its obligations to us and the operating partnership; (ii) after the end of the fifth contract year, Refining's obligations under the commercial agreement are suspended, reduced or terminated due to a refinery shutdown or force majeure event that prevents performance of its obligations under the commercial agreement; or (iii) at the end of the initial ten-year term of the commercial agreement, Refining elects not to extend the commercial agreement and the operating partnership is unable to generate additional revenues from third parties.

Our business is difficult to evaluate because we have a limited operating history and do not have historical financial information upon which our performance may be evaluated.

              We are a newly formed limited partnership, and until the contribution of the rail unloading terminal to the operating partnership at the completion of this offering, we will be capitalized on a nominal basis and will not have a business with revenue-generating activity. Accordingly, we do not present any historical financial statements. Additionally, financial or operating data relating to the terminal prior to the contribution may not be meaningful in evaluating our business since we intend to operate the terminal as a stand-alone business instead of as a cost center as part of a refining business.

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The rail unloading terminal, which will be the operating partnership's only operating asset, did not commence operations until October 23, 2013, and the expansion of the terminal is not expected to be completed until mid-October 2014. The terminal may fail to operate efficiently or reliably, which could adversely affect our financial condition, results of operations, cash flows and ability to make distributions to our unitholders.

              The rail unloading terminal will be the operating partnership's only operating asset and will initially generate all of our operating cash flow. This terminal was constructed in 2013 and commenced operations on October 23 of that year. Refining has initiated a capital project to expand the unloading capacity of the terminal from two to three unit trains per day, and Refining expects to complete the project in mid-October 2014. The project may face significant delays, and we cannot guarantee that the project will be completed at all. Furthermore, it is possible that we will discover issues that adversely impact efficient and reliable operations and would adversely affect our financial condition, results of operations, cash flows and ability to make distributions to our unitholders.

Our substantial dependence on Refining's refineries as well as the lack of diversification of our assets and geographic locations could adversely affect our financial condition, results of operations, cash flows and ability to make distributions to our unitholders.

              We believe that all of the operating partnership revenues for the foreseeable future will be derived from operations supporting Refining's Point Breeze and Girard Point refineries. Any event that renders either or both refineries temporarily or permanently unavailable or that temporarily or permanently reduces throughput rates at either or both refineries could adversely affect our financial condition, results of operations, cash flows and ability to make distributions to our unitholders.

              We will initially rely on revenues generated from the operating partnership's rail unloading terminal located at the Philadelphia refinery complex. Due to our lack of diversification in assets and geographic location, an adverse development in our business or area of operations, including adverse developments due to catastrophic events, weather, regulatory action and decreases in demand for crude oil throughput at the terminal, could have a significantly greater impact on our results of operations and distributable cash flow to our unitholders than if we maintained more diverse assets and locations. Such events may constitute force majeure events under the operating partnership's commercial agreement with Refining, potentially resulting in the suspension, reduction or termination of Refining's obligations under the commercial agreement to the extent Refining is affected by the force majeure event. In addition, during a refinery turnaround, Refining may not satisfy its minimum volume commitments under the commercial agreement. Please read "—Refining may suspend, reduce, or terminate its obligations under the commercial agreement with the operating partnership in certain circumstances, which could have a material adverse effect on our financial condition, results of operations, cash flows, and ability to make distributions to our unitholders" and "—If Refining satisfies only its minimum volume commitments under, or if the operating partnership is unable to renew or extend, the commercial agreement with Refining, our ability to make distributions to our unitholders will be reduced."

              In addition, Refining is a party to an intermediation arrangement under a supply and offtake agreement with JPMVEC whereby JPMVEC purchases crude oil and sells it to Refining as it enters the refinery. JPMVEC then purchases the refined products after the refining process. This intermediation arrangement expires in September 2017, but may be terminated with 90 days' notice prior to September 8, 2015 or September 8, 2016. There can be no assurances that the supply and offtake agreement can be replaced on similar terms upon its expiration, if at all.

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Refining may suspend, reduce or terminate its obligations under the commercial agreement with the operating partnership in certain circumstances, which could have a material adverse effect on our financial condition, results of operations, cash flows and ability to make distributions to our unitholders.

              The operating partnership's commercial agreement with Refining will include provisions that permit Refining to suspend, reduce or terminate its obligations under the agreement if certain events occur. These events include a material breach of the agreement by the operating partnership, Refining deciding to permanently or indefinitely suspend crude unit operations at one or more of its refineries after the end of the fifth contract year, as well as the operating partnership being subject to certain force majeure events that would prevent the operating partnership from performing required services under the agreement. Refining has the discretion to make such decisions notwithstanding the fact that it may significantly and adversely affect the operating partnership and, in turn, us. For instance, if after the first five contract years of the initial term of the commercial agreement, Refining decides to permanently or indefinitely suspend all or substantially all crude oil refining operations at either its Point Breeze or Girard Point refineries for a period of at least 12 consecutive months. Refining may then terminate or proportionately reduce, as applicable, its rights and obligations under the commercial agreement at the end of such 12-month period upon prior written notice to the operating partnership, unless it has publicly announced its intent to resume operations at the applicable refinery more than two months prior to the expiration of the 12-month period. In the event Refining proportionately reduces its obligations under the agreement, Refining will only be required to pay fees on the revised minimum throughput commitment. Under the commercial agreement, Refining has the right to terminate such agreement with respect to any services for which performance will be suspended by a force majeure event for a period in excess of 12 months. Additionally, under the commercial agreement, Refining will have the right to terminate such agreement in the event of a material breach by the operating partnership, subject to a 15-business day cure period.

              Refining will not be entitled to contractual relief due to a force majeure event during the first five contract years of the initial term of the commercial agreement and, accordingly, will be obligated to pay the minimum fees under the agreement; however, from and after the first five contract years, Refining will only be obligated to pay the throughput fee for volumes actually throughput under the agreement. As defined in the commercial agreement, a force majeure event is any circumstance not reasonably within the control of the party claiming force majeure and which by the exercise of commercially reasonable efforts such party is unable to prevent or overcome the circumstance that prevents performance of such party's obligations under the agreement, including:

    acts of God, strikes, lockouts or other industrial disturbances;

    acts of a public enemy, wars, terrorism, blockades, insurrections or riots;

    storms, unusually severe weather, floods, interruptions in the ability to have safe passage in navigable waterways or rail lines, high water, washouts or other interruptions caused by acts of nature or the environment; provided, however, that in the case of Refining, such events materially disrupt the operation of Refining's distillation units for a period of seven business days or more;

    the order of any court or governmental authority claiming or having jurisdiction while the same is in force and effect;

    civil disturbances, explosions, fires, leaks or releases;

    mechanical breakdown of equipment or infrastructure; provided, however, that in the case of Refining, such event materially disrupts the operation of Refining's distillation units for a period of seven business days or more; and

    inability to obtain or distribute refined products, feedstocks or other materials necessary for operation because of a force majeure event affecting a third-party supplier or transporter of

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      such refined products, feedstocks or other materials; provided, however, that in the case of Refining, such event materially disrupts the operation of Refining's distillation units for a period of seven business days or more.

              Accordingly, under the commercial agreement there will be a broad range of events that could result in the operating partnership no longer being required to unload and deliver Refining's minimum volume commitments in its rail unloading terminal and Refining no longer being required to pay the full amount of fees that would have been associated with its minimum volume commitments. Additionally, we have no control over Refining's business decisions and operations, and conflicts of interest may arise between our general partner and its affiliates, including our parent and Refining, on the one hand, and us and our unitholders, on the other hand. Refining is not required to pursue a business strategy that favors us or utilizes our assets and could elect to decrease refinery production or shutdown or reconfigure a refinery. Furthermore, a single event or business decision relating to one of Refining's refineries could have an impact on the commercial agreement with the operating partnership. These actions, as well the other activities described above, could result in a reduction or suspension of Refining's obligations under the commercial agreement. Any such reduction or suspension would have a material adverse effect on our financial condition, results of operations, cash flows, and ability to make distributions to our unitholders. Please read "Certain Relationships and Related Party Transactions—Agreements Governing the Transactions—Commercial Agreement with Refining."

If Refining satisfies only its minimum volume commitments under or if the operating partnership is unable to renew or extend the commercial agreement with Refining, our ability to make distributions to our unitholders will be reduced.

              Refining is not obligated to use the operating partnership's services with respect to volumes of crude oil in excess of the minimum commitment under the commercial agreement. Our ability to distribute the minimum quarterly distribution to our unitholders will be adversely affected if the operating partnership does not unload and deliver additional volumes for Refining at the rail unloading terminal (in excess of the minimum volume commitment under the commercial agreement) or other third parties. In addition, the term of Refining's obligations under that agreement extends ten years from the completion of this offering. If, at the end of the initial term, Refining elects not to extend the agreement and fails to use the operating partnership's terminal and the operating partnership is unable to generate additional revenues from third parties, our ability to make cash distributions to unitholders will be reduced. Furthermore, any renewal of the commercial agreement with Refining may not be on favorable commercial terms. For example, depending on prevailing market conditions at the time of contract renewal, Refining may desire to enter into contracts under different fee arrangements. To the extent the operating partnership is unable to renew the commercial agreement with Refining on terms that are favorable to the operating partnership, our revenue and cash flows could decline and our ability to make cash distributions to our unitholders could be materially and adversely affected.

A material decrease in Refining's margins could materially reduce the volumes of crude oil that the operating partnership handles, which could adversely affect our financial condition, results of operations, cash flows and ability to make distributions to our unitholders.

              The volume of crude oil that the operating partnership throughputs depends substantially on Refining's operating margins. Refining's operating margins are dependent mostly upon the price of crude oil or other refinery feedstocks and the price of refined products, as well as regulatory compliance costs such as the costs of generating and obtaining RINs. For a discussion of the impact that the costs of generating and obtaining RINs may have on Refining's margins, please read "—Refining's inability to generate or obtain the necessary number of RINs and waiver credits could adversely affect Refining's operating margins, which, in turn, could adversely affect our financial condition, results of operations, cash flows and ability to make distributions to our unitholders."

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              The price of crude oil or other refinery feedstocks and the price of refined products are affected by numerous factors beyond our or Refining's control, both domestic and global, including North American crude oil production levels, changes in North American refining capacity as well as the global supply and demand for crude oil and gasoline and other refined products. As a result of increases in North American crude oil production over the past several years, along with a long-standing U.S. ban on exports of domestic crude oil outside of North America, the price of domestic crude oil currently trades at a discount to foreign crude oil. Declines in North American crude oil production, a lifting of, or significant change in, the U.S. crude oil export ban, a significant increase in North American crude oil refining capacity, or a significant increase in the supply of non-North American crude oil supply could cause domestic crude oil prices to rise relative to foreign crude oil, and Refining may therefore reduce the volume of crude oil that the operating partnership handles. In addition, global economic weakness could depress demand for refined products. The impact of low demand may be further compounded by excess global refining capacity and high inventory levels. Over the past five years, several refineries in North America and Europe have been temporarily or permanently shut down in response to falling demand and excess refining capacity. If the demand for refined products decreases or if Refining's crude oil costs exceed the value of the refined products it produces, Refining may reduce the volumes of crude oil that the operating partnership handles.

              Refining's refineries are configured to process light, sweet crude oils, and their results of operations are affected by crude oil price differentials, which may fluctuate substantially. Prior to our parent's formation in September 2012, the refineries historically processed crude oils that were predominantly foreign waterborne crudes that priced at a premium to Brent crude oil. Since its formation in September 2012, our parent has pursued a strategy of purchasing and refining increasing amounts of discounted domestic crude oil. With the completion of the rail unloading terminal on October 23, 2013 and the improvement in efficiency of the light ends handling capabilities of Refining's Point Breeze crude units in the first quarter of 2014, Refining is currently pursuing a strategy to process up to 80% domestic crude oil, much of which it expects to source from the Bakken region in North Dakota and deliver to the rail unloading terminal. A barrel of Bakken crude oil has historically traded at a discount relative to a barrel of Brent. This discount has typically allowed East Coast refiners to purchase Bakken crude oil, delivered to the refinery, at a substantially lower cost as compared to a barrel of delivered Brent or other alternative light, sweet foreign waterborne crude oil. This Bakken-Brent crude oil price differential has been volatile as a result of various continuing geopolitical events as well as logistical and infrastructure constraints to move crude oil from the Bakken fields into the refining centers of the United States, including the northeastern United States. Between June 30, 2012 and June 30, 2014, the discount at which a barrel of Bakken crude oil traded at Clearbrook, MN relative to the price of a barrel of Brent trading on the London Intercontinental Exchange ranged from $32.03 to $2.52. This wide price differential benefits refineries, such as Refining's refineries, that are capable of sourcing and utilizing domestic crude oil that is priced more in line with Bakken. There can be no assurance that Refining will be successful in implementing its crude strategy, or that Bakken crude oil will continue to sell at a discount to Brent crude oil. A reduction in the discount of Bakken crude oil to Brent crude oil could result in lower throughput volumes at the terminal and adversely affect our financial condition, results of operations, cash flows and ability to make distributions to our unitholders.

              In addition to current market conditions, there are long-term factors that may impact the supply and demand of refined and other products in the United States. These factors include:

    changes in global and local economic conditions;

    demand for crude oil and gasoline and other refined products, especially in the United States, China, and India;

    worldwide political conditions, particularly in significant oil producing regions such as the Middle East, West Africa, and Latin America;

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    the level of foreign and domestic production of crude oil and refined products and the level of crude oil, feedstocks and refined products imported into the United States, which can be impacted by accidents, interruptions in transportation, inclement weather or other events affecting producers and suppliers;

    utilization rates of U.S. refineries;

    changes in fuel specifications required by environmental and other laws;

    the ability and/or willingness of the members of the Organization of Petroleum Exporting Countries ("OPEC") to maintain oil price and production controls;

    development and marketing of alternative and competing fuels;

    pricing and other actions taken by competitors that impact the market;

    accidents, interruptions in transportation, inclement weather or other events that can cause unscheduled shutdowns or otherwise adversely affect our plants, machinery or equipment or those of our suppliers or customers; and

    local factors, including market conditions, weather conditions and the level of operations of other refineries in our service areas.

              If the demand for refined and other products, particularly in Refining's primary market areas, decreases significantly, or if there were a material increase in the price of crude oil supplied to Refining's refineries without an increase in the value of the products produced by those refineries, either temporary or permanent, that causes Refining to reduce production of refined and other products at its refineries, there would likely be a reduction in the volumes of crude oil the operating partnership handles for Refining. Any such reduction could adversely affect our financial condition, results of operations, cash flows and ability to make distributions to our unitholders.

A material decrease in the supply of crude oil available to Refining's refineries could significantly reduce the volume of crude oil unloaded at the operating partnership's terminal, which could adversely affect our financial condition, results of operations, cash flows and ability to make distributions to unitholders.

              Refining's refineries have been designed and operated to maximize flexibility in sourcing crude oil. Refining has the ability to purchase and deliver both foreign and domestic crude oil on waterborne vessels and to purchase domestic crude oil delivered by rail through the operating partnership's terminal. Refining continually contracts with third-party crude oil suppliers to maintain a sufficient supply of crude oil for production at its refineries. The volume of crude oil unloaded at the operating partnership's terminal will depend on the total volume of crude oil processed at Refining's refineries and the relative cost of Refining's domestic and foreign crude oil alternatives, which will influence Refining's decision as to where to source its crude oil. At the closing of this offering the operating partnership will not have any customers other than Refining, and, therefore, its throughput volumes at the terminal will depend entirely on Refining's decision to purchase domestic crude oil that will be delivered by rail to the terminal. The relative values of domestic and foreign crude oils have been and are expected to remain volatile, and we have no control over Refining's crude purchasing decisions. A decline in domestic crude oil available for delivery by rail to Refining's refineries at economically attractive values or the inability of Refining to secure domestic crude oil supplies to meet the needs of its refineries could result in an overall decline in volumes of crude oil unloaded at the operating partnership's terminal. If the volume of attractively priced, high-quality domestic crude oil available by rail to Refining's refineries is materially reduced for a prolonged period of time, the volume of crude oil unloaded at the operating partnership's terminal and the related fees for those services could be materially reduced, which could adversely affect our financial condition, results of operations, cash flows and ability to make distributions to our unitholders.

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A material decrease in crude oil production in the Bakken region could result in a material decrease in the volume of attractively priced Bakken crude oil unloaded at our terminal and processed by Refining.

              During the first six months of 2014, Refining's refineries processed approximately 14% of the total crude oil produced in the Bakken region. This percentage may rise if Refining is successful in its strategy to process up to 80% domestic crude oil, much of which it expects to source from the Bakken region. Most of that Bakken crude oil was unloaded at the operating partnership's terminal. Producers in the Bakken region have outlets for their crude oil in the Midwest, West Coast, East Coast and Gulf Coast refining centers of the United States. The volume of attractively priced Bakken crude oil that Refining unloads at the operating partnership's terminal and processes in its refineries depends, in part, on the total production in the Bakken region. Because most of the crude oil unloaded in the terminal originates in the Bakken region, we may be indirectly exposed to production risks in the Bakken region, including:

    the availability of drilling rigs for producers;

    weather-related curtailment of operations by producers and disruptions to truck gathering operations;

    declines in production due to depletion rates;

    the nature and extent of governmental regulation and taxation, including regulations related to the exploration, production and transportation of shale oil, including hydraulic fracturing, natural gas flaring and rail transportation;

    the development of third-party crude oil gathering systems that could impact the price and availability of crude oil in the area; and

    the anticipated future prices of crude oil and refined products in surrounding markets.

              If, as a result of any of these or other factors, the volume of crude oil available in the Bakken region is materially reduced for a prolonged period of time, the volume of price advantaged Bakken crude unloaded at the operating partnership's terminal and processed in Refining's refineries could be materially reduced. Any deterioration of the current favorable conditions would have a material adverse effect on our financial condition, results of operations, cash flows and ability to make distributions to our unitholders.

A lifting of the U.S. crude oil export ban could affect crude oil price differentials which would have a material adverse effect on our financial condition, results of operations, cash flows and ability to make distributions to our unitholders.

              Since the 1970s, the United States has restricted the ability of producers to export domestic crude oil. As total crude oil production has increased in the United States in recent years, primarily due to the increase in shale crude oil production, there have been increasing calls by producers for a lifting of the crude oil export ban. If the export ban were to be lifted, the price of domestic crude oil would likely rise to levels that are competitive with world oil prices, making domestic crude oil less advantageous for Refining to process in its refineries. Any deterioration of the current favorable crude price differentials between domestic and foreign crude oils could lead Refining to reduce the volume of domestic crude oil unloaded at the operating partnership's terminal, could lead to a reduced likelihood that we or Refining are able to identify or complete attractive expansion projects and could have a material adverse effect on our financial condition, results of operations, cash flows and ability to make distributions to our unitholders.

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The rail unloading operations and Refining's operations are subject to many risks and operational hazards, some of which may result in business interruptions and shutdowns of the terminal or Refining's facilities and damages for which we may not be fully covered by insurance. A significant accident or event that results in business interruption or shutdown for which we are not adequately insured could have a material adverse effect on our financial condition, results of operation, cash flows and ability to make distributions to our unitholders.

              The rail unloading operations are subject to all of the risks and operational hazards inherent in transporting and refining crude oil, including:

    damages to equipment, pipelines, facilities and surrounding properties caused by earthquakes, floods, fires, severe weather, explosions and other natural disasters and acts of terrorism;

    the inability of third-party facilities on which our operations are dependent, including Refining's facilities, to complete capital projects and to restart timely refining operations following a shutdown;

    mechanical or structural failures at our facilities or at third-party facilities on which our operations are dependent, including Refining's facilities and those of the railroads that deliver trains to our facilities;

    curtailments of operations relative to severe seasonal weather; and

    other hazards.

              These risks could result in substantial losses due to personal injury and/or loss of life, severe damage to and destruction of property and equipment, pollution or other environmental damage, and business interruptions or shutdowns of our terminal. A serious accident at the facilities operated by Refining or the operating partnership could result in serious injury or death to employees of our general partner or its affiliates or contractors and could expose us to significant liability for personal injury claims and reputational risk. In addition, Refining's operations, on which our operations are substantially dependent, are subject to similar operational hazards and risks inherent in refining crude oil. Any such event or unplanned shutdown could have a material adverse effect on our financial condition, results of operations, cash flows and ability to make distributions to our unitholders.

Disruptions to rail transport of Bakken crude oil to the operating partnership's rail unloading terminal could cause a reduction of volumes unloaded in the terminal, which would have a material adverse effect on our financial condition, results of operation, cash flows and ability to make distributions to our unitholders.

              Refining is dependent upon multiple railroad companies and other intermediaries including crude oil producers, gatherers, terminal operators, traders and marketers to transport crude oil to the operating partnership's rail unloading terminal. Most of the crude oil unloaded at the terminal originates in the Bakken Region. To transport Bakken crude oil from North Dakota to the operating partnership's rail unloading terminal, the oil will pass from the wellhead through a gathering system and crude loading terminal, and then loaded onto railcars and transported by railroad to the unloading terminal. Any disruption to or reduction of capacities of this supply chain due to accidents, weather interruptions, governmental regulation, terrorism, depletion of oil reserves, congestion on rail lines or other causes could result in reduced volumes of crude oil unloaded at the operating partnership's terminal. Any significant reduction in volumes would materially adversely affect our financial condition, results of operations, cash flow and ability to make distributions to our unitholders.

              Recent railcar accidents in Lac-Megantic, Quebec, Aliceville, Alabama, Casselton, North Dakota, Philadelphia, Pennsylvania and Lynchburg, Virginia have led to increased regulatory scrutiny over the safety of transporting crude oil by rail. Each of these incidents involved trains carrying crude oil from North Dakota's Bakken shale formation. As a result of these train derailments, various

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industry groups and government agencies are considering new rail car standards, railroad operating procedures and other regulatory requirements that could increase the cost of delivering crude oil by railroad or could limit the ability to ship crude oil on certain existing rail cars.

              Federal regulators have issued a safety advisory warning that Bakken crude oil may be more volatile than many other North American crude oils and reinforcing the requirement to properly test, characterize, classify, and, if applicable, sufficiently degasify hazardous materials prior to and during transportation. These recent accidents have prompted lawmakers to step up their efforts to phase out or require upgrades on the Department of Transportation ("DOT") Class 111 tank railcar, which is the most commonly used tank car to transport crude oil by rail in North America. A DOT Class 111 rail tanker is not pressurized, unlike sturdier DOT-112 and -114 models used to transport more volatile liquids such as propane and methane. Transport Canada recently ordered that DOT-111 tank cars used to transport crude oil and ethanol that are not compliant with required safety standards must be phased out or retrofitted within three years (i.e., by May 2017). In addition, Transport Canada issued an emergency directive and ministerial order imposing speed limits on trains carrying one or more cars of crude oil or ethanol and requiring all companies to complete a risk assessment within six months to determine the level of risk associated with each key transportation route. The U.S. National Transportation Safety Board ("NTSB") has recommended that all tank cars used to carry crude oil be reinforced to make them more resistant to punctures if trains derail. This recommendation has not yet been adopted by the Pipeline and Hazardous Materials Safety Administration ("PHMSA"). On July 23, 2014, PHMSA and the Federal Rail Administration issued a Notice of Proposed Rulemaking and companion Advanced Notice of Proposed Rulemaking that propose, among other things, enhanced tank car standards for certain trains carrying crude oil (and other flammable liquids) and a requirement that older DOT 111 tank cars be phased out within two years if they are not retrofitted to comply with the new tank car design standards. The proposed rulemaking is available for public review and comment until September 30, 2014. Any requirement to retrofit and upgrade existing rail tankers (DOT-111 or other models) could increase the cost and reduce the availability of rail transportation of crude oil.

              Due to concerns about the increased movement of crude oil, particularly Bakken crude, through highly populated areas, the rail industry has announced new railroad operating practices for transportation of crude oil. These voluntary changes are designed to avoid derailments by reducing speeds in or rerouting trains around high population areas.

              These operating practices as well as potential new regulations on tank car standards and shipper classifications could increase time required to move crude oil from production areas to Refining's refineries, increase the cost of rail transportation and decrease the efficiency of Refining's receipts of crude oil by rail, any of which could materially reduce the volume of crude oil delivered by rail to the operating partnership's rail unloading terminal and adversely affect our financial condition, results of operations, cash flows and ability to make distributions to our unitholders. For a further discussion of recent regulatory developments regarding the shipment of crude oil by rail and the associated risks to our operations, please see "Business—Environmental Regulation—Rail Safety."

Terrorist attacks, cyber-attacks, threats of war or actual war may negatively affect our and Refining's financial condition, results of operations, cash flows and ability to make distributions to our unitholders.

              Terrorist attacks in the United States, as well as events occurring in response to or in connection with them, including threats of war or actual war, may adversely affect our and Refining's financial condition, results of operations, cash flows, and ability to make distributions to our unitholders. Energy related assets (including refineries, such as those owned and operated by Refining on which we are substantially dependent, and rail unloading terminals such as the operating partnership's) may be at greater risk of future terrorist attacks than other possible targets. A direct attack on our assets or assets used by us could have a material adverse effect on our financial condition, results of operations, cash flows and ability to make distributions to our unitholders. In addition, any terrorist attack could have an adverse impact on energy prices, including prices for

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Refining's crude oil and refined and other products. In addition, disruption or significant increases in energy prices could result in government imposed price controls. While we currently maintain insurance that provides coverage against terrorist attacks, such insurance has become increasingly expensive and difficult to obtain. As a result, insurance providers may not continue to offer this coverage to us on terms that we consider affordable or at all.

              We and Refining are dependent on technology infrastructure and maintain and rely upon certain critical information systems for the effective operation of our respective businesses. These information systems include data network and telecommunications, internet access and our websites, and various computer hardware equipment and software applications, including those that are critical to the safe operation of the rail unloading terminal. These information systems are subject to damage or interruption from a number of potential sources including natural disasters, software viruses or other malware, power failures, cyber-attacks and other events. To the extent that these information systems are under our control, we have implemented measures such as virus protection software and emergency recovery processes to address the outlined risks. However, security measures for information systems cannot be guaranteed to be failsafe. Any compromise of our data security or our inability to use or access these information systems at critical points in time could unfavorably impact the timely and efficient operation of our business and subject us to additional costs and liabilities, which could negatively affect our financial condition, results of operation, cash flows and ability to make distributions to our unitholders.

We may not be able to increase our third-party revenue significantly or at all due to competition and other factors, which could limit our ability to grow and extend our dependence on Refining.

              Part of our growth strategy includes diversifying our customer base by acquiring or developing new assets independently from Refining. Our ability to increase our third-party revenue is subject to numerous factors beyond our control, including competition from third parties and the extent to which we lack available capacity when third-party shippers require it.

              We have no operating history and have not provided any rail unloading services to third parties. We can provide no assurance that we will be able to attract any material third-party service opportunities. Our efforts to attract new unaffiliated customers may be adversely affected by (i) our relationship with Refining, (ii) our desire to provide services pursuant to fee-based contracts, (iii) Refining's operational requirements at its refineries that rely upon the operating partnership's terminal to supply a significant portion of their crude oil requirements and (iv) our expectation that Refining will continue to utilize substantially all of the available capacity of the terminal. Our potential customers may prefer to obtain services under other forms of contractual arrangements under which we would be required to assume direct commodity exposure. In addition, we will need to establish a reputation among our potential customer base for providing high-quality service in order to successfully attract unaffiliated third parties.

If we are unable to make acquisitions on economically acceptable terms from Refining or third parties, our future growth would be limited, and any acquisitions we may make may reduce, rather than increase, our cash flows and ability to make distributions to unitholders.

              A portion of our strategy to grow our business and increase distributions to unitholders is dependent on our ability to acquire businesses or assets that increase our cash flow. The acquisition component of our growth strategy is based, in large part, on our expectation of ongoing divestitures of gathering, transportation, storage and rail loading or unloading assets by industry participants, including Refining. A material decrease in such divestitures would limit our opportunities for future acquisitions and could adversely affect our ability to grow our operations and increase cash distributions to our unitholders. If we are unable to make acquisitions from Refining or third parties because we are unable to identify attractive acquisition candidates, negotiate acceptable purchase contracts, obtain financing for these acquisitions on economically acceptable terms or we are outbid by competitors, our future

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growth and ability to increase distributions will be limited. Furthermore, even if we do consummate acquisitions that we believe will be accretive, they may in fact result in a decrease in cash flow. Any acquisition involves potential risks, including, among other things:

    mistaken assumptions about revenues and costs, including synergies;

    an inability to integrate successfully the businesses or assets we acquire;

    the assumption of unknown liabilities;

    limitations on rights to indemnity from the seller;

    mistaken assumptions about the overall costs of equity or debt financing;

    the diversion of management's attention from other business concerns;

    unforeseen difficulties operating in new product areas or new geographic areas; and

    customer or key employee losses at the acquired businesses.

              If we consummate any future acquisitions, our capitalization and results of operations may change significantly, and unitholders will not have the opportunity to evaluate the economic, financial and other relevant information that we will consider in determining the application of these funds and other resources.

Our option to purchase and rights of first offer to acquire certain of our parent's and Refining's existing assets is subject to risks and uncertainty, and ultimately we may not acquire any of those assets.

              Our omnibus agreement provides us with rights of first offer on our parent's limited partner interests in the operating partnership and certain of Refining's existing assets for a period of ten years after the closing of this offering, as well as an option to purchase the NGL rail terminal from Refining. We do not have a current agreement or understanding with our parent or Refining to purchase any assets covered by our rights of first offer and option to purchase. The consummation and timing of any future acquisitions of these assets will depend upon, among other things, our parent's and Refining's willingness to offer these assets for sale, our ability to negotiate acceptable purchase agreements and commercial agreements with respect to the assets and our ability to obtain financing on acceptable terms. We can offer no assurance that we will be able to successfully consummate any future acquisitions pursuant to our rights of first offer or option to purchase. In addition, certain of the assets may require substantial capital expenditures in order to maintain compliance with applicable regulatory requirements or otherwise make them suitable for our commercial needs. For these or a variety of other reasons, we may decide not to exercise our rights of first offer if and when any assets are offered for sale or exercise our option to purchase the NGL rail terminal. Our decision will not be subject to unitholder approval. In addition, our right of first offer with respect to our parent's limited partner interest in the operating partnership will be terminated if Carlyle ceases to control our general partner and our right of first offer with respect to Refining's existing assets will be terminated if Carlyle ceases to control our general partner or Refining. Please read "Certain Relationships and Related Party Transactions—Agreements Governing the Transactions—Omnibus Agreement."

              In addition, if Refining were unable to perform under the commercial agreement for any reason, we would have the right to access or purchase, as the case may be, Refining's storage and pipeline assets to facilitate our ability to provide terminaling services to third parties. However, the contractual provisions associated with this right are untested, and the details associated with implementation of this right may be contested by Refining at such time. Moreover, our rail unloading terminal was constructed for Refining's business and is situated within our parent's refining complex. Third party refineries may have captive terminaling and storage services or may otherwise contract with service providers located closer to their refineries. Such refineries may also be disinclined to enter into a contractual relationship with a terminaling service provider with assets located adjacent to refineries

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that may become operational in the future. In addition, the cause of the suspension or termination of Refining's operations may also adversely affect other refineries in the region (e.g., transportation interruptions or disadvantageous crude oil price changes) and thus reduce or eliminate the pool of alternative customers. We cannot assure investors that, if Refining suspended or terminated its operations, we could find alternative customers to contract with on favorable terms or at all.

We could incur substantial costs or disruptions in our business if we cannot obtain or maintain necessary permits and authorizations or otherwise comply with environmental, health and safety and other laws and regulations.

              Our operations require numerous permits and authorizations under various laws and regulations, including environmental, health and safety laws and regulations. These authorizations and permits are subject to revocation, renewal or modification and can require operational changes that may involve significant costs. A violation of these authorization or permit conditions or other legal or regulatory requirements could result in substantial fines, criminal sanctions, permit revocations, injunctions, and/or terminal shutdowns.

              We will not own the land on which the operating partnership's rail unloading terminal is located, which could result in disruptions to our operations and have a material adverse effect on our financial condition, results of operations, cash flows and ability to make distributions to our unitholders.

              We will lease the land on which the operating partnership's rail unloading terminal is located from an affiliate under a long-term lease, and we are, therefore, subject to the possibility of more onerous terms and increased costs to renew the lease. Our inability to renew the lease on favorable terms could have a material adverse effect on our financial condition, results of operations, cash flows and ability to make distributions to our unitholders.

Restrictions in our revolving credit facility could adversely affect our financial condition, results of operations, cash flows and ability to make distributions to our unitholders.

              We will be dependent upon the earnings and cash flow generated by our operations in order to meet our debt service obligations and to allow us to make cash distributions to our unitholders. The operating and financial restrictions and covenants in our revolving credit facility or in any future financing agreements could restrict our ability to finance future operations or capital needs or to expand or pursue our business activities, which may, in turn, limit our ability to make cash distributions to our unitholders. For example, we expect our revolving credit facility will restrict our ability to, among other things:

    make certain cash distributions;

    incur certain indebtedness;

    create certain liens;

    make certain investments; and

    merge or sell all or substantially all of our assets.

              Furthermore, we expect that our revolving credit facility will contain covenants requiring us to maintain certain financial ratios. Please read "Management's Discussion and Analysis of Financial Condition—Capital Resources and Liquidity—Credit Facility" for additional information about our revolving credit facility.

              The provisions of our revolving credit facility may affect our ability to obtain future financing and pursue attractive business opportunities and our flexibility in planning for, and reacting to, changes in business conditions. In addition, a failure to comply with the provisions of our revolving credit facility could result in an event of default that could enable our lenders, subject to the terms and

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conditions of the revolving credit facility, to declare the outstanding principal of that debt, together with accrued interest, to be immediately due and payable. If we were unable to repay the accelerated amounts, our lenders could proceed against the collateral granted to them to secure such debt. If the payment of our debt is accelerated, defaults under our other debt instruments, if any, may be triggered, and our assets may be insufficient to repay such debt in full. Therefore the holders of our units could experience a partial or total loss of their investment. Please read "Management's Discussion and Analysis of Financial Condition—Capital Resources and Liquidity."

Debt we incur in the future may limit our flexibility to obtain financing and to pursue other business opportunities.

              Our future level of debt could have important consequences to us, including the following:

    our ability to obtain additional financing, if necessary, for working capital, capital expenditures or other purposes may be impaired, or such financing may not be available on favorable terms;

    our funds available for operations, future business opportunities and distributions to unitholders will be reduced by that portion of our cash flow required to make interest payments on our debt;

    we may be more vulnerable to competitive pressures or a downturn in our business or the economy generally; and

    our flexibility in responding to changing business and economic conditions may be limited.

              Our ability to service our debt will depend upon, among other things, our future financial and operating performance, which will be affected by prevailing economic conditions and financial, business, regulatory and other factors, some of which are beyond our control. If our operating results are not sufficient to service any future indebtedness, we will be forced to take actions such as reducing distributions, reducing or delaying our business activities, acquisitions, organic growth projects, investments or capital expenditures, selling assets or issuing equity. We may not be able to affect any of these actions on satisfactory terms or at all.

The amount of cash we have available for distribution to holders of our common and subordinated units depends primarily on our cash flow rather than on our net income, which may prevent us from making distributions, even during periods in which we record net income.

              The amount of cash we have available for distribution depends primarily upon our cash flow and not solely on net income. As a result, we may make cash distributions during periods when we record net losses for financial accounting purposes, and we may not make cash distributions during periods when we record net income for financial accounting purposes.

Refining's level of indebtedness, the terms of its borrowings and credit ratings could adversely affect our ability to grow our business, our ability to make cash distributions to our unitholders and our credit ratings and profile. Our ability to obtain credit in the future may also be affected by Refining's credit ratings.

              Refining must devote a portion of its cash flows from operating activities to service its indebtedness. A higher level of indebtedness at Refining in the future increases the risk that it may default on its obligations under the commercial agreement with the operating partnership. As of June 30, 2014, Refining had long-term indebtedness and capitalized lease obligations (including current portion) of $539 million.

              The covenants contained in the agreements governing Refining's outstanding and future indebtedness may limit Refining's ability to borrow additional funds for development and make certain investments and may directly or indirectly impact our operations in a similar manner. Furthermore,

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Refining has granted liens on substantially all of its assets as part of the terms of its outstanding indebtedness. Thus, in the event that Refining was to default under certain of its debt obligations, there is a risk that Refining's creditors would assert claims against our assets during the litigation of their claims against Refining. The defense of any such claims could be costly and could materially impact our financial condition, even absent any adverse determination. In the event these claims were successful, our ability to meet our obligations to our creditors, make distributions, and finance our operations could be materially adversely affected.

              Refining's long-term credit ratings are currently below investment grade. If these ratings are lowered in the future, Refining's borrowing costs may increase. In addition, although we will not have any indebtedness rated by any credit rating agency at the closing of this offering, we may have rated debt in the future. Credit rating agencies will likely consider Refining's debt ratings when assigning ours because of the significant commercial relationship between Refining and us, and our reliance on Refining for substantially all of our revenues. If one or more credit rating agencies were to downgrade the outstanding indebtedness of Refining, we could experience an increase in our borrowing costs or difficulty accessing the capital markets. Such a development could adversely affect our financial condition, results of operations, cash flows and ability to make distributions to our unitholders.

The operating partnership's assets and operations are subject to federal, state, and local laws and regulations relating to environmental protection and safety that could require us to make substantial expenditures which could have a material adverse effect on our financial condition, results of operations, cash flows and ability to make distributions to our unitholders.

              The operating partnership's assets and operations involve the unloading of crude oil, which is subject to increasingly stringent federal, state and local laws and regulations governing operational safety and the discharge of materials into the environment. The operating partnership's business of unloading crude oil involves the risk that crude oil may gradually or suddenly be released into the environment. We will lease property that has been used to store or distribute crude oil and refined and other products for many years; this property has been operated by third parties whose handling, disposal, or release of hydrocarbons and other wastes were not under our control. To the extent not covered by insurance or an indemnity, responding to the release of regulated substances, including releases caused by third parties, into the environment may cause us to incur potentially material expenditures related to response actions, government penalties, natural resources damages, personal injury or property damage claims from third parties and business interruption.

              The operating partnership's unloading operations are also subject to increasingly strict federal, state and local laws and regulations related to protection of the environment that require us and the operating partnership to comply with various safety requirements regarding the design, installation, testing, construction and operational management of the rail unloading terminal. Compliance with such laws and regulations may cause us to incur potentially material capital expenditures associated with the construction, maintenance and upgrading of equipment and facilities. Environmental laws and regulations, in particular, are subject to frequent change, and many of them have become and will continue to become more stringent.

              We could incur potentially significant additional expenses should we determine that any of our assets are not in compliance with applicable laws and regulations. Our failure to comply with these or any other environmental or safety-related regulations could result in the assessment of administrative, civil or criminal penalties, the imposition of investigatory and remedial liabilities and the issuance of injunctions that may subject us to additional operational constraints. Any such penalties or liabilities could have a material adverse effect on our financial condition, results of operations, cash flows and ability to make distributions. For a further discussion of the environmental regulations to which our operations are subject and the potential effects of noncompliance, please see "Business—Environmental Regulation."

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Transporting crude oil by pipeline within our terminal is subject to stringent environmental regulations governing spills and releases that could require us to make substantial expenditures.

              Transportation of crude oil involves inherent risks of spills and releases from the operating partnership's rail unloading terminal and can subject us and the operating partnership to various federal and state laws governing spills and releases, including reporting and remediation obligations. The costs associated with such obligations can be substantial, as can costs associated with related enforcement matters, including possible fines and penalties. Transportation of crude oil over water or proximate to navigable water bodies involves inherent risks (including risks of spills) and could subject us and the operating partnership to the provisions of the Oil Pollution Act of 1990 (the "Oil Pollution Act") and similar state environmental laws should a spill occur from the rail unloading terminal. Among other things, the Oil Pollution Act requires us to prepare a terminal response plan identifying the personnel and equipment necessary to remove to the maximum extent practicable a "worst case discharge." The rail unloading terminal is required to maintain such a terminal response plan. To meet this requirement, we will contract with various spill response service companies in the areas in which we transport or store crude oil and refined and other products; however, these companies may not be able to adequately contain a "worst case discharge" in all instances, and we cannot ensure that all of their services would be available for our use at any given time. Many factors that could inhibit the availability of these service providers, include, but are not limited to, weather conditions, governmental regulations or other global events. In these and other cases, we may be subject to liability in connection with the discharge of crude oil or products into navigable waters.

              If any of these events occur or are discovered in the future, whether in connection with the operating partnership's terminal, or any other terminal that we send or have sent wastes or by-products to for treatment or disposal, we could be liable for all costs and penalties associated with the remediation of such terminal under federal, state and local environmental laws or common law. We may also be liable for personal injury or property damage claims from third parties alleging contamination from spills or releases from our terminal or operations. In addition, we will be subject to a deductible of $50,000 per claim before we are entitled to indemnification from Refining for certain environmental liabilities under our omnibus agreement. Even if we are insured or indemnified against such risks, we may be responsible for costs or penalties to the extent our insurers or indemnitors do not fulfill their obligations to us. Please read "Business—Environmental Regulation—Waste Management and Related Liabilities."

Meeting the requirements of evolving environmental, health and safety laws and regulations, and in particular those related to climate change, could adversely affect our financial performance.

              Potential additional environmental, health and safety laws and regulations, and in particular those regarding climate change, could affect our operations. Currently, various legislative and regulatory measures to address greenhouse gas ("GHG") emissions (including carbon dioxide, methane and other gases) are in various phases of review, discussion or implementation in the United States. These measures include EPA programs to control GHG emissions and state actions to develop statewide or regional programs, each of which could require reductions in GHG emissions. These actions could result in increased (1) costs to operate and maintain the operating partnership's rail unloading terminal, (2) capital expenditures to install new emission controls on the terminal, and (3) costs to administer and manage any potential GHG emissions regulations or carbon trading or tax programs. The EPA was expected to propose specific GHG emission standards for refineries under the Clean Air Act by November 2012. Although the EPA has not yet proposed such standards, we expect that the EPA will propose standards applicable to Refining's facilities in the near future. The timing of such standards is not currently known. These developments could have an indirect adverse effect on our business if Refining's operations are adversely affected due to increased regulation of Refining's facilities or reduced demand for crude oil and refined and other products, and a direct adverse effect

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on our business from increased regulation of the terminal. For a further discussion of environmental laws and regulations and their potential impacts on our business and operations, please see "Business—Environmental Regulation—Air Emissions" and "Business—Environmental Regulation—Climate Change."

Our business is impacted by environmental risks inherent in our operations.

              The operation of crude oil unloading assets is inherently subject to the risks of spills, discharges or other inadvertent releases of crude oil, petroleum products and other hazardous substances. If any of these events have previously occurred or occur in the future, whether in connection with any of Refining's refineries or the operating partnership's rail unloading terminal, we could be liable for costs and penalties associated with the remediation of such facilities under federal, state and local environmental laws or the common law. We may also be liable for personal injury or property damage claims from third parties alleging contamination from spills or releases from our facilities or operations. Even if we are insured or indemnified against such risks, we may be responsible for costs or penalties to the extent our insurers or indemnitors do not fulfill their obligations to us. The payment of such costs or penalties could be significant and have a material adverse effect on our financial condition, results of operations, cash flows, and ability to make distributions to our unitholders.

We are subject to regulation by multiple governmental agencies, which could have a material adverse effect on our financial condition, results of operations, cash flows and ability to make distributions to our unitholders.

              Our business activities are subject to regulation by multiple federal, state, and local governmental agencies. Our projected operating costs reflect the recurring costs resulting from compliance with these regulations, and we do not anticipate material expenditures in excess of these amounts in the absence of future acquisitions, or changes in regulation, or discovery of existing but unknown compliance issues. Additional proposals and proceedings that affect the crude oil and refined products industry are regularly considered by Congress, as well as by state legislatures and federal and state regulatory commissions and agencies and courts. We cannot predict when or whether any such proposals may become effective or the magnitude of the impact changes in laws and regulations may have on our business; however, additions or enhancements to the regulatory burden on our industry generally increase the cost of doing business and affect our profitability.

Pursuant to the JOBS Act, our independent registered public accounting firm will not be required to attest to the effectiveness of our internal control over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act of 2002 for so long as we are an emerging growth company.

              We will be required to disclose changes made in our internal control over financial reporting on a quarterly basis, and we will be required to assess the effectiveness of our controls annually. However, for as long as we are an "emerging growth company" under the JOBS Act, we may take advantage of certain exemptions from various requirements that are applicable to other public companies that are not emerging growth companies, including not being required to provide an auditor's attestation report on management's assessment of the effectiveness of our system of internal control over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act ("Section 404"), and reduced disclosure obligations regarding executive compensation in our periodic reports. We could be an emerging growth company for up to five years. See "Prospectus Summary—Our Emerging Growth Company Status." Effective internal controls are necessary for us to provide reliable and timely financial reports, prevent fraud and to operate successfully as a publicly traded partnership. We prepare our consolidated financial statements in accordance with GAAP, but our internal accounting controls may not meet all standards applicable to companies with publicly traded securities. Our efforts to

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develop and maintain our internal controls may not be successful, and we may be unable to maintain effective controls over our financial processes and reporting in the future or to comply with our obligations under Section 404. For example, Section 404 will require us, among other things, to annually review and report on the effectiveness of our internal control over financial reporting. We must comply with Section 404 (except for the requirement for an auditor's attestation report) beginning with our fiscal year ending December 31, 2015. Any failure to develop, implement or maintain effective internal controls or to improve our internal controls could harm our operating results or cause us to fail to meet our reporting obligations. Even if we conclude that our internal controls over financial reporting are effective, once our independent registered public accounting firm is required to attest to our assessment they may decline to attest or may issue a report that is qualified if it is not satisfied with our controls or the level at which our controls are documented, designed, operated or reviewed, or if it interprets the relevant requirements differently from us.

              Given the difficulties inherent in the design and operation of internal controls over financial reporting, in addition to our limited accounting personnel and management resources, we can provide no assurance as to our, or our independent registered public accounting firm's, future conclusions about the effectiveness of our internal controls, and we may incur significant costs in our efforts to comply with Section 404. Any failure to implement and maintain effective internal controls over financial reporting will subject us to regulatory scrutiny and a loss of confidence in our reported financial information, which could have an adverse effect on our business and would likely have a negative effect on the trading price of our common units.

              We may take advantage of these exemptions until we are no longer an "emerging growth company." We cannot predict if investors will find our common units less attractive because we will rely on these exemptions. If some investors find our common units less attractive as a result, there may be a less active trading market for our common units, and our trading price may be more volatile.

Our insurance policies do not cover all losses, costs or liabilities that we may experience, and insurance companies that currently insure companies in the energy industry may cease to do so or substantially increase premiums.

              We intend to secure our own insurance policies, but initially we will be insured under the property, liability and business interruption policies of Refining, subject to the deductibles and limits under those policies. These policies do not cover all potential losses, costs or liabilities that we may experience. We could suffer losses for uninsurable or uninsured risks or in amounts in excess of existing insurance coverage. Additionally, to the extent Refining experiences losses under the insurance policies, the limits of our coverage may be decreased. Our ability to obtain and maintain adequate insurance may be adversely affected by conditions in the insurance market over which we have no control. In addition, if we experience insurable events, our annual premiums could increase further or insurance may not be available at all. If significant changes in the number or financial solvency of insurance underwriters for the energy industry occur, we may be unable to obtain and maintain adequate insurance at a reasonable cost. We cannot assure you that we will be able to renew our insurance coverage on acceptable terms, if at all, or that we will be able to arrange for adequate alternative coverage in the event of non-renewal. The occurrence of an event that is not fully covered by insurance, the failure by one or more insurers to honor its commitments for an insured event or the loss of insurance coverage could have a material adverse effect on our financial condition, results of operations, cash flows and ability to make distributions to our unitholders.

The loss of key personnel could adversely affect our ability to operate.

              We depend on the leadership, involvement and services of a relatively small group of our general partner's key management personnel, including its Chief Executive Officer and other executive

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officers and key technical and commercial personnel. The services of these individuals may not be available to us in the future. Because competition for experienced personnel in our industry is intense, we may not be able to find acceptable replacements with comparable skills and experience. Accordingly, the loss of the services of one or more of these individuals could have a material adverse effect on our ability to operate our business.

If our parent does not meet all the requirements for eligibility in the Pennsylvania Keystone Opportunity Zone ("KOZ"), then our operating partnership will not receive certain KOZ tax credits.

              The operating partnership is subject to certain income taxes that have a combined effective rate of 6.45%. Because the rail unloading terminal is located entirely within a KOZ, we expect that the operating partnership will receive certain annual tax benefits. The KOZ expires on December 31, 2020, at which time our operating partnership will no longer benefit from the KOZ tax credit. To be eligible for these annual tax credits, our parent or its affiliates must meet certain eligibility requirements, including a minimum employment level and a minimum capital investment in the KOZ. If these requirements are not met, then our operating partnership will not receive the KOZ tax credits which could adversely affect our financial condition, results of operations, cash flows and ability to make distributions to our unitholders.

We and our operating partnership do not have any employees and rely solely on employees of our general partner and its affiliates, including our parent, Refining and PES Admin.

              We and our operating partnership do not have any employees and rely solely on employees of our general partner and its affiliates, including our parent, Refining and PES Admin. Affiliates of our general partner conduct businesses and activities of their own in which we have no economic interest, including businesses and activities relating to Refining. As a result, there could be material competition for the time and efforts of the employees who provide services to us and to our general partner and its affiliates, including our parent, Refining and PES Admin. If the employees of our general partner and its affiliates do not devote sufficient attention to the operation of our business, our financial results may suffer and our ability to make distributions to our unitholders may be reduced.

A substantial portion of the workforce seconded to our general partner is unionized, and we may face labor disruptions that would interfere with our operations.

              Approximately 93 of Refining's employees associated with the operations of the rail unloading terminal and seconded to our general partner are covered by a collective bargaining agreement that expires in September 2015 but which will continue thereafter for successive one year terms, unless terminated by either party on 60 days' prior notice before the end of the term. While Refining believes it has a good relationship with the union, Refining may not be able to renegotiate the collective bargaining agreement on satisfactory terms or at all when such agreement expires. A failure to do so may increase our costs associated with the workforce that provides services to us. Other employees of Refining who are not presently represented by a union may become so represented in the future as well. A work stoppage resulting from, among other things, a dispute over a term or condition of employment applicable to employees who work at the rail unloading terminal, could cause disruptions in our business and negatively impact our results of operations and ability to make distributions.

The adoption of derivatives legislation by Congress could have an adverse impact on Refining's ability to hedge risks associated with their business.

              On July 21, 2010, the Dodd-Frank Act was signed into law. Title VII of the Dodd-Frank Act regulates derivative transactions, which include certain instruments used in Refining's management

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activities. The new legislation and regulations promulgated thereunder could increase the operational and transactional cost of derivatives contracts and affect the number and/or creditworthiness of counterparties available to Refining or to Refining's customers. While certain regulations under the Dodd-Frank Act have already been promulgated and are already in effect, the rulemaking and implementation process is still ongoing. Therefore, we cannot yet predict the ultimate effect of such regulations on our business or the business of Refining or our counterparties.

              Under the Commodity Exchange Act (the "CFTC") is directed generally to prevent price manipulation and fraud in the following two markets: (a) physical commodities traded in interstate commerce, including the physical energy and other commodities, as well as (b) financial instruments, such as futures, options and swaps. Pursuant to the Dodd-Frank Act, the CFTC has adopted additional anti-market manipulation, anti-fraud and disruptive trading practices regulations, that prohibit, among other things, fraud and price manipulation in the physical commodities, futures, options and swaps markets. Should we violate these laws and regulations, we could be subject to CFTC enforcement action and material penalties, sanctions, as well as resulting changes in the rates we can charge and liability to third parties.

If the supply and offtake agreement to which Refining is a party is not renewed or is otherwise terminated, Refining will be exposed to additional fluctuations in the price of crude oil or other refinery feedstocks and the price of refined products which could adversely affect our financial condition, results of operations, cash flows and ability to make distributions to our unitholders.

              Refining is a party to an intermediation arrangement under a supply and offtake agreement with JPMVEC whereby JPMVEC purchases crude oil and sells it to Refining as it enters the refinery. JPMVEC then purchases the refined products after the refining process. This intermediation arrangement expires in September 2017, but may be terminated with 90 days' notice prior to September 8, 2015 or September 8, 2016. JPMVEC has entered into a contract to sell the division that is a party to the intermediation arrangement. There can be no assurances that the supply and offtake agreement can be replaced on similar terms upon its expiration or that the buyer of this division will desire to continue the arrangement. If the supply and offtake agreement is not renewed or is otherwise terminated, then Refining will be exposed to additional fluctuations in the price of crude oil or other refinery feedstocks and the price of refined products. This may require Refining to increase the amount of its working capital and could adversely affect our financial condition, results of operations, cash flows and ability to make distributions to our unitholders.

Increases in interest rates could adversely affect our business.

              We will have exposure to increases in interest rates. Borrowings under our revolving credit facility are expected to bear interest at LIBOR plus an applicable margin. As a result, if we make any borrowings in the future our financial condition, results of operations, cash flows and ability to make distributions to our unitholders could be materially adversely affected by significant increases in interest rates.

              Additionally, as with other yield-oriented securities, our unit price is impacted by the level of our cash distributions and implied distribution yield. The distribution yield is often used by investors to compare and rank related yield-oriented securities for investment decision-making purposes. Therefore, changes in interest rates, either positive or negative, may affect the yield requirements of investors who invest in our units, and a rising interest rate environment could have an adverse impact on our unit price and our ability to issue additional equity, to incur debt to expand or for other purposes or to make cash distributions at our intended levels.

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Risks Related to an Investment in Us

Our parent will own and control our general partner, which has sole responsibility for conducting our business and managing our operations. Our general partner and its affiliates, including our parent and Refining, have conflicts of interest with us and limited duties to us and may favor their own interests to your detriment.

              Following the offering, our parent will own and control our general partner and will appoint all of the directors of our general partner. Some of the directors and all of the executive officers of our general partner are also directors or officers of our parent. Although our general partner has a duty to manage us in a manner it believes to be in our best interests, the directors and officers of our general partner also have a duty to manage our general partner in a manner that is in the best interests of our parent, in its capacity as the sole member of our general partner. Conflicts of interest may arise between our general partner and its affiliates, including our parent and Refining, on the one hand, and us and our unitholders, on the other hand. In resolving these conflicts of interest, our general partner may favor its own interests and the interests of its affiliates over the interests of our unitholders. These conflicts include, among others, the following situations:

    neither our partnership agreement nor any other agreement requires our parent to pursue a business strategy that favors us or utilizes our assets, which could involve decisions by our parent, which also controls Refining, to increase or decrease Refining's refinery production, shutdown or reconfigure Refining's refineries, enter into commercial agreements with us or pursue and grow particular markets. Our parent's directors and officers have a fiduciary duty to make these decisions in the best interests of the owners of our parent and affiliated entities, which may be contrary to our interests;

    our parent may be constrained by the terms of its debt instruments from taking actions, or refraining from taking actions, that may be in our best interests;

    Refining, as our only customer, has an economic incentive to cause us not to seek higher service fees, even if such fees would reflect fees that could be obtained in arm's-length, third-party transactions;

    some officers of our parent who provide services to us also will devote significant time to the business of Refining, and will be compensated by Refining for the services rendered to it;

    our general partner determines the amount and timing of asset purchases and sales, borrowings, issuance of additional partnership securities, and reserves, each of which can affect the amount of cash that is distributed to unitholders;

    our general partner may cause us to borrow funds in order to permit the payment of cash distributions, even if the purpose or effect of the borrowing is to make a distribution on the subordinated units, to make incentive distributions or to accelerate the expiration of the subordination period;

    our general partner determines which costs incurred by it are reimbursable by us;

    our partnership agreement permits us to distribute up to $         million as operating surplus, even if it is generated from asset sales, non-working capital borrowings or other sources that would otherwise constitute capital surplus. This cash may be used to fund distributions on our subordinated units or the incentive distribution rights;

    our general partner is allowed to take into account the interests of parties other than us in exercising certain rights under our partnership agreement;

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    our partnership agreement limits the liability of, and replaces the duties owed by, our general partner and also restricts the remedies available to our unitholders for actions that, without the limitations, might constitute breaches of fiduciary duty;

    contracts between us, on the one hand, and our general partner and its affiliates, on the other, are not and will not be the result of arm's-length negotiations;

    except in limited circumstances, our general partner has the power and authority to conduct our business without unitholder approval;

    disputes may arise under the operating partnership's commercial agreement with Refining;

    our general partner will determine the amount and timing of many of our cash expenditures and whether a cash expenditure is classified as an expansion capital expenditure, which would not reduce operating surplus, or a maintenance capital expenditure, which would reduce our operating surplus. This determination can affect the amount of cash from operating surplus that is distributed to our unitholders and to our general partner, the amount of adjusted operating surplus generated in any given period and the ability of the subordinated units to convert into common units;

    our general partner may exercise its right to call and purchase all of the common units not owned by it and its affiliates if it and its affiliates own more than 80% of the common units;

    our general partner controls the enforcement of obligations owed to us by our general partner and its affiliates, including under the commercial agreement, omnibus agreement and services and secondment agreement;

    our general partner decides whether to retain separate counsel, accountants or others to perform services for us;

    our general partner, as the holder of our incentive distribution rights, may elect to cause us to issue common units to it in connection with a resetting of incentive distribution levels without the approval of our unitholders. This election may result in lower distributions to our common unitholders in certain situations; and

    our general partner, as the holder of our incentive distribution rights, may transfer the incentive distribution rights without the approval of our unitholders.

Our parent and Refining may compete with us.

              Our parent and Refining may compete with us. Pursuant to the terms of our partnership agreement, the doctrine of corporate opportunity, or any analogous doctrine, does not apply to our general partner or any of its affiliates, including our parent and Refining and their respective executive officers and directors. Any such person or entity that becomes aware of a potential transaction, agreement, arrangement or other matter that may be an opportunity for us will not have any duty to communicate or offer such opportunity to us. Any such person or entity will not be liable to us or to any limited partner for breach of any fiduciary duty or other duty by reason of the fact that such person or entity pursues or acquires such opportunity for itself, directs such opportunity to another person or entity or does not communicate such opportunity or information to us. This may create actual and potential conflicts of interest between us and affiliates of our general partner and result in less than favorable treatment of us and our common unitholders. Please read "Conflicts of Interest and Duties."

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Our general partner intends to limit its liability regarding our obligations.

              Our general partner intends to limit its liability under contractual arrangements between us and third parties so that the counterparties to such arrangements have recourse only against our assets and not against our general partner or its assets. Our general partner may therefore cause us to incur indebtedness or other obligations that are nonrecourse to our general partner. Our partnership agreement provides that any action taken by our general partner to limit its liability is not a breach of our general partner's duties, even if we could have obtained more favorable terms without the limitation on liability. In addition, we are obligated to reimburse or indemnify our general partner to the extent that it incurs obligations on our behalf. Any such reimbursement or indemnification payments would reduce the amount of cash otherwise available for distribution to our unitholders.

Ongoing cost reimbursements due to our general partner and its affiliates for services provided, which will be determined by our general partner, will be substantial and will reduce our distributable cash flow to our unitholders.

              Prior to making distributions on our common units, we will reimburse our general partner and its affiliates for all expenses they incur on our behalf. These expenses will include all costs incurred by our general partner and its affiliates in managing and operating us, including costs for rendering corporate staff and support services to us. Our partnership agreement provides that our general partner will determine the expenses that are allocable to us in good faith. There are no limits or caps on the amount of expenses for which our general partner and its affiliates may be reimbursed. In addition, under Delaware partnership law, our general partner has unlimited liability for our obligations, such as our debts and environmental liabilities, except for our contractual obligations that are expressly made without recourse to our general partner. To the extent our general partner incurs obligations on our behalf, we are obligated to reimburse or indemnify it. If we are unable or unwilling to reimburse or indemnify our general partner, our general partner may take actions to cause us to make payments of these obligations and liabilities. Any such payments could reduce the amount of cash otherwise available for distribution to our unitholders.

Our partnership agreement requires that we distribute all of our available cash, which could limit our ability to grow and make acquisitions.

              Because we distribute all of our available cash to our unitholders, we expect that we will rely primarily upon external financing sources, including commercial bank borrowings and the issuance of debt and equity securities, to fund our expansion capital expenditures and acquisitions. As a result, to the extent we are unable to finance growth externally, our cash distribution policy will significantly impair our ability to grow.

              In addition, because we distribute all of our available cash, our growth may not be as fast as businesses that reinvest their available cash to expand ongoing operations. To the extent we issue additional units in connection with any acquisitions or expansion capital expenditures or as in-kind distributions, current unitholders will experience dilution and the payment of distributions on those additional units may increase the risk that we will be unable to maintain or increase our per unit distribution level. There are no limitations in our partnership agreement, and we do not anticipate that there will be limitations in our new revolving credit facility on our ability to issue additional units, including units ranking senior to the common units. The incurrence of additional commercial borrowings or other debt to finance our growth strategy would result in increased interest expense, which in turn may impact the available cash that we have to distribute to our unitholders.

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Our partnership agreement replaces our general partner's fiduciary duties to holders of our units with contractual standards governing its duties.

              Our partnership agreement contains provisions that eliminate and replace the fiduciary standards that our general partner would otherwise be held to by state fiduciary duty law. For example, our partnership agreement permits our general partner to make a number of decisions in its individual capacity, as opposed to in its capacity as our general partner, or otherwise, free of fiduciary duties to us and our unitholders. This entitles our general partner to consider only the interests and factors that it desires, and it has no duty or obligation to give any consideration to any interest of, or factors affecting, us, our affiliates or our limited partners. Examples of decisions that our general partner may make in its individual capacity include:

    how to allocate business opportunities among us and its other affiliates;

    whether to exercise its call right;

    how to exercise its voting rights with respect to the units it owns;

    whether to exercise its registration rights;

    whether to elect to reset target distribution levels;

    whether or not to consent to any merger or consolidation of the partnership or amendment to the partnership agreement; and

    whether or not the general partner should elect to seek the approval of the conflicts committee or the unitholders, or neither, of any conflicted transaction.

              By purchasing a common unit, a unitholder is treated as having consented to the provisions in the partnership agreement, including the provisions discussed above. Please read "Conflicts of Interest and Duties—Duties of the General Partner."

Our partnership agreement restricts the remedies available to holders of our units for actions taken by our general partner that might otherwise constitute breaches of fiduciary duty.

              Our partnership agreement contains provisions that restrict the remedies available to unitholders for actions taken by our general partner that might otherwise constitute breaches of fiduciary duty under state fiduciary duty law. For example, our partnership agreement provides that:

    whenever our general partner makes a determination or takes, or declines to take, any other action in its capacity as our general partner, our general partner is required to make such determination, or take or decline to take such other action, in good faith, and will not be subject to any higher standard imposed by our partnership agreement, Delaware law, or any other law, rule or regulation, or at equity;

    our general partner and its officers and directors will not be liable for monetary damages to us or our limited partners resulting from any act or omission unless there has been a final and non-appealable judgment entered by a court of competent jurisdiction determining that our general partner or its officers and directors, as the case may be, acted in bad faith or engaged in fraud or willful misconduct or, in the case of a criminal matter, acted with knowledge that the conduct was unlawful; and

    our general partner will not be in breach of its obligations under the partnership agreement or its duties to us or our limited partners if a transaction with an affiliate or the resolution of a conflict of interest is:

    approved by the conflicts committee of the board of directors of our general partner, although our general partner is not obligated to seek such approval; or

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      approved by the vote of a majority of the outstanding common units, excluding any common units owned by our general partner and its affiliates.

              Our general partner will not have any liability to us or our unitholders for decisions whether or not to seek the approval of the conflicts committee of the board of directors of our general partner or holders of a majority of the outstanding common units, excluding any common units owned by our general partner and its affiliates. If an affiliate transaction or the resolution of a conflict of interest is not approved by our common unitholders or the conflicts committee then it will be presumed that, in making its decision, taking any action or failing to act, the board of directors acted in good faith, and in any proceeding brought by or on behalf of any limited partner or the partnership, the person bringing or prosecuting such proceeding will have the burden of overcoming such presumption. Please read "Conflicts of Interest and Duties."

Our general partner may elect to cause us to issue common units to it in connection with a resetting of the target distribution levels related to our general partner's incentive distribution rights, without the approval of the conflicts committee of the board of directors of our general partner or the holders of our common units which could result in lower distributions to holders of our common units.

              Our general partner has the right, as the initial holder of our incentive distribution rights, at any time when there are no subordinated units outstanding and our general partner has received incentive distributions at the highest level to which it is entitled (50%) for the prior four consecutive fiscal quarters and the amount of each such distribution did not exceed the adjusted operating surplus for such quarter, to reset the initial target distribution levels at higher levels based on our distributions at the time of the exercise of the reset election. Following a reset election by our general partner, the minimum quarterly distribution will be adjusted to equal the reset minimum quarterly distribution and the target distribution levels will be reset to correspondingly higher levels based on percentage increases above the reset minimum quarterly distribution.

              If our general partner elects to reset the target distribution levels, it will be entitled to receive a number of common units. The number of common units to be issued to our general partner will equal the number of common units that would have entitled the holder to an aggregate quarterly cash distribution in the quarter prior to the reset election equal to the distribution to our general partner on the incentive distribution rights in the quarter prior to the reset election. We anticipate that our general partner would exercise this reset right in order to facilitate acquisitions or internal growth projects that would not be sufficiently accretive to cash distributions per common unit without such reset. It is possible, however, that our general partner could exercise this reset election at a time when it is experiencing, or expects to experience, declines in the cash distributions it receives related to its incentive distribution rights and may, therefore, desire to be issued common units rather than retain the right to receive incentive distributions based on the initial target distribution levels. This risk could be elevated if our incentive distribution rights have been transferred to a third party. As a result, a reset election may cause our common unitholders to experience a reduction in the amount of cash distributions that our common unitholders would have otherwise received had we not issued new common units to our general partner in connection with resetting the target distribution levels. Please read "Provisions of Our Partnership Agreement Relating to Cash Distributions—General Partner's Right to Reset Incentive Distribution Levels."

Our general partner has a limited call right that may require unitholders to sell their common units at an undesirable time or price.

              If at any time our general partner and its affiliates own more than 80% of the common units, our general partner will have the right, but not the obligation, which it may assign to any of its affiliates or to us, to acquire all, but not less than all, of the common units held by unaffiliated persons at a price equal to the greater of (1) the average of the daily closing price of the common units over

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the 20 trading days preceding the date three business days before notice of exercise of the call right is first mailed and (2) the highest per-unit price paid by our general partner or any of its affiliates for common units during the 90-day period preceding the date such notice is first mailed. As a result, unitholders may be required to sell their common units at an undesirable time or price and may not receive any return or a negative return on their investment. Unitholders may also incur a tax liability upon a sale of their units. Our general partner is not obligated to obtain a fairness opinion regarding the value of the common units to be repurchased by it upon exercise of the limited call right. There is no restriction in our partnership agreement that prevents our general partner from issuing additional common units and exercising its call right. If our general partner exercised its limited call right, the effect would be to take us private. Upon consummation of this offering, and assuming no exercise of the underwriters' option to purchase additional common units, affiliates of our general partner will own an aggregate of      % of our common units. At the end of the subordination period, assuming no additional issuances of units (other than upon the conversion of the subordinated units), affiliates of our general partner will own      % of our common units. For additional information about the limited call right, please read "Our Partnership Agreement—Limited Call Right."

Holders of our common units have limited voting rights and are not entitled to elect our general partner or the board of directors of our general partner, which could reduce the price at which our common units will trade.

              Unlike the holders of common stock in a corporation, unitholders have only limited voting rights on matters affecting our business and, therefore, limited ability to influence management's decisions regarding our business. Unitholders will not elect our general partner or the board of directors of our general partner, and will have no right to elect our general partner or the board of directors of our general partner on an annual or other continuing basis. The board of directors of our general partner, including its independent directors, will be chosen by the member of our general partner. Furthermore, if unitholders are dissatisfied with the performance of our general partner, they will have little ability to remove our general partner. Our partnership agreement also contains provisions limiting the ability of unitholders to call meetings or to acquire information about our operations, as well as other provisions limiting the unitholders' ability to influence the manner or direction of management. As a result of these limitations, the price at which the common units will trade could be diminished because of the absence or reduction of a takeover premium in the trading price.

Even if unitholders are dissatisfied, they cannot initially remove our general partner without its consent.

              The unitholders will initially be unable to remove our general partner without its consent because our general partner and its affiliates will own sufficient units upon completion of this offering to be able to prevent its removal. The vote of the holders of at least 662/3% of all outstanding units voting together as a single class is required to remove the general partner. Following the closing of this offering, our general partner and its affiliates will own a      % limited partner interest in us. Also, if our general partner is removed without cause during the subordination period and units held by our general partner and its affiliates are not voted in favor of that removal, all remaining subordinated units will automatically convert into common units and any existing arrearages on our common units will be extinguished. A removal of our general partner under these circumstances would adversely affect our common units by prematurely eliminating their distribution and liquidation preference over our subordinated units, which would otherwise have continued until we had met certain distribution and performance tests. Cause is narrowly defined to mean that a court of competent jurisdiction has entered a final, non-appealable judgment finding the general partner liable for actual fraud or willful or wanton misconduct in its capacity as our general partner. Cause does not include most cases of charges of poor management of the business.

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Our partnership agreement restricts the voting rights of unitholders owning 20% or more of our common units.

              Unitholders' voting rights are further restricted by the partnership agreement provision providing that any units held by a person that owns 20% or more of any class of units then outstanding, other than our general partner, its affiliates, their transferees and persons who acquired such units with the prior approval of the board of directors of our general partner, cannot vote on any matter.

Our general partner's interest in us and the control of our general partner may be transferred to a third party without unitholder consent.

              Our general partner may transfer its general partner interest to a third party in a merger or in a sale of all or substantially all of its assets without the consent of our unitholders. Furthermore, our partnership agreement does not restrict the ability of our parent from transferring all or a portion of the ownership interest in our general partner to a third party. The new owner of our general partner would then be in a position to replace the board of directors and officers of our general partner with its own choices and thereby exert significant control over the decisions made by the board of directors and officers. This effectively permits a "change of control" without the vote or consent of the unitholders.

The incentive distribution rights held by our general partner may be transferred to a third party without unitholder consent.

              Our general partner may transfer the incentive distribution rights to a third party at any time without the consent of our unitholders. If our general partner transfers the incentive distribution rights to a third party it may not have the same incentive to grow our partnership and increase quarterly distributions to unitholders over time as it would if it had retained ownership of the incentive distribution rights. For example, a transfer of incentive distribution rights by our general partner could reduce the likelihood of Refining accepting offers made by us relating to assets owned by it, as our parent, which controls both our general partner and Refining, would have less of an economic incentive to grow our business, which in turn would impact our ability to grow our asset base.

Immediately effective upon closing, you will experience substantial dilution of $            in tangible net book value per common unit.

              The assumed initial public offering price of $          per unit exceeds our pro forma net tangible book value of $          per unit. Based on the assumed initial public offering price of $          per unit, you will incur immediate and substantial dilution of $          per common unit after giving effect to the offering of common units and the application of the related net proceeds. Dilution results primarily because the assets contributed by our general partner and its affiliates are recorded in accordance with GAAP at their historical cost, and not their fair value. Please read "Dilution."

We may issue additional units, including units that are senior to the common units, without your approval, which would dilute your existing ownership interests.

              Our partnership agreement does not limit the number of additional limited partner interests that we may issue at any time without the approval of our unitholders. The issuance by us of additional common units or other equity securities of equal or senior rank will have the following effects:

    each unitholder's proportionate ownership interest in us will decrease;

    the amount of distributable cash flow on each unit may decrease;

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    because a lower percentage of total outstanding units will be subordinated units, the risk that a shortfall in the payment of the minimum quarterly distribution will be borne by our common unitholders will increase;

    because the amount payable to holders of incentive distribution rights is based on a percentage of the total distributable cash flow, the distributions to holders of incentive distribution rights will increase even if the per unit distribution on common units remains the same;

    the ratio of taxable income to distributions may increase;

    the relative voting strength of each previously outstanding unit may be diminished;

    the claims of the common unitholders to our assets in the event of our liquidation may be subordinated; and

    the market price of the common units may decline.

Units eligible for future sale may cause the price of our common units to decline.

              Sales of substantial amounts of our common units in the public market, or the perception that these sales may occur, could cause the market price of our common units to decline. This could also impair our ability to raise additional capital through the sale of our equity interests. After the sale of the common units offered hereby, our parent will hold                 common units and subordinated units (or                 common units and subordinated units if the underwriters exercise in full their option to purchase additional units). All of the subordinated units will convert into common units at the end of the subordination period and some may convert earlier. Additionally, we have agreed to provide our parent with certain registration rights. Please read "Units Eligible for Future Sale." The sale of these units could have an adverse impact on the price of the common units or on any trading market that may develop.

Our general partner's discretion in establishing cash reserves may reduce the amount of distributable cash flow to unitholders.

              Our partnership agreement requires our general partner to deduct from operating surplus cash reserves that it determines are necessary to fund our future operating expenditures. In addition, the partnership agreement permits the general partner to reduce available cash by establishing cash reserves for the proper conduct of our business, to comply with applicable law or agreements that we are a party to or to provide funds for future distributions to partners. These cash reserves will affect the amount of distributable cash flow to unitholders.

Your liability may not be limited if a court finds that unitholder action constitutes control of our business.

              A general partner of a partnership generally has unlimited liability for the obligations of the partnership, except for those contractual obligations of the partnership that are expressly made without recourse to the general partner. Our partnership is organized under Delaware law, and we will initially own assets and conduct business in Pennsylvania. You could be liable for any and all of our obligations as if you were a general partner if:

    a court or government agency determines that we were conducting business in a state but had not complied with that particular state's partnership statute; or

    your rights to act with other unitholders to remove or replace the general partner, to approve some amendments to our partnership agreement or to take other actions under our partnership agreement constitute "control" of our business.

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              For a discussion of the implications of the limitations of liability on a unitholder, please read "Our Partnership Agreement—Limited Liability."

Unitholders may have liability to repay distributions that were wrongfully distributed to them.

              Under certain circumstances, unitholders may have to repay amounts wrongfully distributed to them. Under Section 17-607 of the Delaware Revised Uniform Limited Partnership Act (the "Delaware Act"), we may not make a distribution to you if the distribution would cause our liabilities to exceed the fair value of our assets. Delaware law provides that for a period of three years from the date of the impermissible distribution, limited partners who received the distribution and who knew at the time of the distribution that it violated Delaware law will be liable to the limited partnership for the distribution amount. Substituted limited partners are liable for the obligations of the assignor to make contributions to the partnership that are known to the substituted limited partner at the time it became a limited partner and for unknown obligations if the liabilities could be determined from the partnership agreement. Liabilities to partners on account of their partnership interest and liabilities that are nonrecourse to the partnership are not counted for purposes of determining whether a distribution is permitted.

There is no existing market for our common units, and a trading market that will provide you with adequate liquidity may not develop. The price of our common units may fluctuate significantly, which could cause you to lose all or part of your investment.

              Prior to the offering, there has been no public market for our common units. After the offering, there will be only                  publicly traded common units. We do not know the extent to which investor interest will lead to the development of a trading market or how liquid that market might be. You may not be able to resell your common units at or above the initial public offering price. Additionally, the lack of liquidity may result in wide bid-ask spreads, contribute to significant fluctuations in the market price of the common units and limit the number of investors who are able to buy the common units.

              The initial public offering price for the common units will be determined by negotiations between us and the representatives of the underwriters and may not be indicative of the market price of the common units that will prevail in the trading market. The market price of our common units may decline below the initial public offering price. The market price of our common units may also be influenced by many factors, some of which are beyond our control, including:

    our operating and financial performance;

    quarterly variations in our financial indicators, such as net earnings (loss) per unit, net earnings (loss) and revenues;

    the amount of distributions we make and our earnings or those of other companies in our industry or other publicly traded partnerships;

    the loss of Refining as a customer;

    events affecting the business and operations of Refining;

    announcements by us or our competitors of significant contracts or acquisitions;

    changes in revenue or earnings estimates, or changes in recommendations or withdrawal of research coverage, by equity research analysts;

    speculation in the press or investment community;

    changes in accounting standards, policies, guidance, interpretations or principles;

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    additions or departures of key management personnel;

    actions by our unitholders;

    general market conditions, including fluctuations in commodity prices;

    domestic and international economic, legal and regulatory factors related to our performance;

    future sales of our common units by us or other unitholders, or the perception that such sales may occur; and

    other factors described in "Risk Factors."

              As a result of these factors, investors in our common units may not be able to resell their common units at or above the offering price. In addition, the stock market in general has experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of companies like us. These broad market and industry factors may materially reduce the market price of our common units, regardless of our operating performance.

The NYSE does not require a publicly traded partnership like us to comply with certain of its corporate governance requirements.

              We intend to apply to list our common units on the NYSE. Because we will be a publicly-traded partnership, the NYSE does not require us to have a majority of independent directors on our general partner's board of directors or to establish a compensation committee or a nominating and corporate governance committee. Accordingly, unitholders will not have the same protections afforded to certain corporations that are subject to all of the NYSE corporate governance requirements. Please read "Management—Management of PES Logistics Partners, L.P."

We will incur increased costs as a result of being a publicly-traded partnership.

              We have no history operating as a publicly-traded partnership. As a publicly-traded partnership, we will incur significant legal, accounting and other expenses that we did not incur prior to this offering. In addition, the Sarbanes-Oxley Act of 2002, as well as rules implemented by the SEC and the NYSE, require publicly-traded entities to adopt various corporate governance practices that will further increase our costs. Before we are able to make distributions to our unitholders, we must first pay or reserve cash for our expenses, including the costs of being a publicly-traded partnership. As a result, the amount of cash we have available for distribution to our unitholders will be affected by the costs associated with being a public company.

              Prior to this offering, we have not filed reports with the SEC. Following this offering, we will become subject to the public reporting requirements of the Exchange Act. We expect these rules and regulations to increase certain of our legal and financial compliance costs and to make activities more time-consuming and costly. For example, as a result of becoming a publicly-traded company, we are required to have at least three independent directors, create an audit committee and adopt policies regarding internal controls and disclosure controls and procedures, including the preparation of reports on internal controls over financial reporting. In addition, we will incur additional costs associated with our SEC reporting requirements.

              We also expect to incur significant expense in order to obtain director and officer liability insurance. Because of the limitations in coverage for directors, it may be more difficult for us to attract and retain qualified persons to serve on our board or as executive officers.

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              We estimate that we will incur $4.0 million of incremental costs per year associated with being a publicly-traded partnership; however, it is possible that our actual incremental costs of being a publicly-traded partnership will be higher than we currently estimate.


Tax Risks to Our Common Unitholders

              In addition to reading the following risk factors, you should read "Material U.S. Federal Income Tax Consequences" for a more complete discussion of the expected material federal income tax consequences of owning and disposing of common units.

Our tax treatment depends on our status as a partnership for federal income tax purposes. If the Internal Revenue Service were to treat us as a corporation for federal income tax purposes, which would subject us to entity-level taxation, or if we were otherwise subjected to a material amount of additional entity-level taxation, then our distributable cash flow to you would be substantially reduced.

              The anticipated after-tax benefit of an investment in our units depends largely on our being treated as a partnership for U.S. federal income tax purposes.

              Despite the fact that we are a limited partnership under Delaware law, it is possible in certain circumstances for a partnership such as ours to be treated as a corporation for federal income tax purposes. A change in our business or a change in current law could cause us to be treated as a corporation for federal income tax purposes or otherwise subject us to taxation as an entity.

              If we were treated as a corporation for U.S. federal income tax purposes, we would pay U.S. federal income tax on our taxable income at the corporate tax rate, which is currently a maximum of 35%, and would likely pay state and local income tax at varying rates. Distributions to our unitholders would generally be taxed again as corporate dividends (to the extent of our current and accumulated earnings and profits), and no income, gains, losses, deductions, or credits would flow through to our unitholders. Because a tax would be imposed upon us as a corporation, our distributable cash flow would be substantially reduced. In addition, changes in current state law may subject us to additional entity-level taxation by individual states. Because of widespread state budget deficits and other reasons, several states are evaluating ways to subject partnerships to entity-level taxation through the imposition of state income, franchise and other forms of taxation. Imposition of any such taxes may substantially reduce the distributable cash flow to you. Therefore, if we were treated as a corporation for federal income tax purposes or otherwise subjected to a material amount of entity-level taxation, there would be material reduction in the anticipated cash flow and after-tax return to our unitholders, likely causing a substantial reduction in the value of our units.

              Our partnership agreement provides that, if a law is enacted or existing law is modified or interpreted in a manner that subjects us to taxation as a corporation or otherwise subjects us to entity-level taxation for U.S. federal, state or local income tax purposes, the minimum quarterly distribution amount and the target distribution levels may be adjusted to reflect the impact of that law on us.

The tax treatment of publicly traded partnerships or an investment in our units could be subject to potential legislative, judicial or administrative changes or differing interpretations, possibly applied on a retroactive basis.

              The present U.S. federal income tax treatment of publicly traded partnerships, including us, or an investment in our common units may be modified by administrative, legislative or judicial interpretation at any time. For example, from time to time, members of Congress propose and consider substantive changes to the existing federal income tax laws that affect publicly traded partnerships. Any modification to the federal income tax laws and interpretations thereof may or may not be retroactively applied and could make it more difficult or impossible to meet the exception for us to be treated as a

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partnership for federal income tax purposes. Please read "Material U.S. Federal Income Tax Consequences—Partnership Status." We are unable to predict whether any such changes will ultimately be enacted. However, it is possible that a change in law could affect us, and any such changes could negatively impact the value of an investment in our common units.

If the IRS were to contest the federal income tax positions we take, it may adversely impact the market for our common units, and the costs of any such contest would reduce distributable cash flow to our unitholders.

              We have not requested a ruling from the IRS with respect to our treatment as a partnership for federal income tax purposes. The IRS may adopt positions that differ from the conclusions of our counsel expressed in this prospectus or from the positions we take, and the IRS's positions may ultimately be sustained. It may be necessary to resort to administrative or court proceedings to sustain some or all of our counsel's conclusions or the positions we take. A court may not agree with some or all of our counsel's conclusions or the positions we take. Any contest with the IRS may materially and adversely impact the market for our common units and the prices at which they trade. Moreover, the costs of any contest between us and the IRS will result in a reduction in distributable cash flow to our unitholders and thus will be borne indirectly by our unitholders.

Even if you do not receive any cash distributions from us, you will be required to pay taxes on your share of our taxable income.

              Because you will be treated as a partner to whom we will allocate taxable income that could be different in amount than the cash we distribute, your allocable share of our taxable income will be taxable to you, which may require the payment of federal income taxes and, in some cases, state and local income taxes, on your share of our taxable income even if you receive no cash distributions from us. You may not receive cash distributions from us equal to your share of our taxable income or even equal to the actual tax liability that results from that income.

Tax gain or loss on the disposition of our units could be more or less than expected.

              If you sell your units, you will recognize gain or loss equal to the difference between the amount realized and your tax basis in those units. Because distributions in excess of your allocable share of our net taxable income decrease your tax basis in your units, the amount, if any, of such prior excess distributions with respect to the units you sell will, in effect, become taxable income to you if you sell such units at a price greater than your tax basis therein, even if the price you receive is less than your original cost. Furthermore, a substantial portion of the amount realized, whether or not representing gain, may be taxed as ordinary income to you due to potential recapture items, including depreciation and depletion recapture. In addition, because the amount realized includes a unitholder's share of our nonrecourse liabilities, if you sell your units, you may incur a tax liability in excess of the amount of cash you receive from the sale. Please read "Material U.S. Federal Income Tax Consequences—Disposition of Common Units—Recognition of Gain or Loss" for a further discussion of the foregoing.

Tax-exempt entities and non-U.S. persons owning our units face unique tax issues that may result in adverse tax consequences to them.

              Investment in our units by tax-exempt entities, such as individual retirement accounts (known as "IRAs") and non-U.S. persons, raises issues unique to them. For example, virtually all of our income allocated to organizations exempt from federal income tax, including IRAs and other retirement plans, will be unrelated business taxable income and will be taxable to them. Distributions to non-U.S. persons will be reduced by withholding taxes at the highest applicable effective tax rate, and non-U.S. persons will be required to file U.S. federal income tax returns and pay tax on their share of our

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taxable income. If you are a tax exempt entity or a non-U.S. person, you should consult your tax advisor before investing in our common units.

We will treat each purchaser of our units as having the same tax benefits without regard to the units purchased. The IRS may challenge this treatment, which could adversely affect the value of our units.

              Because we cannot match transferors and transferees of units and because of other reasons, we will adopt depreciation and amortization positions that may not conform to all aspects of existing Treasury Regulations. A successful IRS challenge to those positions could adversely affect the amount of tax benefits available to you. Latham & Watkins LLP is unable to opine as to the validity of such filing positions. It also could affect the timing of these tax benefits or the amount of gain from your sale of units and could have a negative impact on the value of our units or result in audit adjustments to your tax returns. Please read "Material U.S. Federal Income Tax Consequences—Tax Consequences of Unit Ownership—Section 754 Election" for a further discussion of the effect of the depreciation and amortization positions we will adopt.

We will prorate our items of income, gain, loss, and deduction between transferors and transferees of our units each month based upon the ownership of our units on the first day of each month, instead of on the basis of the date a particular unit is transferred. The IRS may challenge this treatment, which could change the allocation of items of income, gain, loss, and deduction among our unitholders.

              We will prorate our items of income, gain, loss, and deduction for federal income tax purposes between transferors and transferees of our units each month based upon the ownership of our units on the first day of each month, instead of on the basis of the date a particular unit is transferred. The use of this proration method may not be permitted under existing Treasury Regulations, and, accordingly, our counsel is unable to opine as to the validity of this method. The U.S. Treasury Department has issued proposed Treasury Regulations that provide a safe harbor pursuant to which a publicly-traded partnership may use a similar monthly simplifying convention to allocate tax items among transferor and transferee unitholders. Nonetheless, the proposed regulations do not specifically authorize the use of the proration method we will adopt. If the IRS were to challenge our proration method or new Treasury Regulations were issued, we may be required to change the allocation of items of income, gain, loss, and deduction among our unitholders. Latham & Watkins LLP has not rendered an opinion with respect to whether our monthly convention for allocating taxable income and losses is permitted by existing Treasury Regulations. Please read "Material U.S. Federal Income Tax Consequences—Disposition of Common Units—Allocations Between Transferors and Transferees."

A unitholder whose units are the subject of a securities loan (e.g., a loan to a "short seller" to cover a short sale of units) may be considered as having disposed of those units. If so, he would no longer be treated for tax purposes as a partner with respect to those units during the period of the loan and may recognize gain or loss from the disposition.

              Because a unitholder whose common units are loaned to a "short seller" to effect a short sale of common units may be considered as having disposed of the loaned common units, he may no longer be treated for federal income tax purposes as a partner with respect to those common units during the period of the loan to the short seller and the unitholder may recognize gain or loss from such disposition. Moreover, during the period of the loan to the short seller, any of our income, gain, loss or deduction with respect to those common units may not be reportable by the unitholder and any cash distributions received by the unitholder as to those common units could be fully taxable as ordinary income. Latham & Watkins LLP has not rendered an opinion regarding the treatment of a unitholder where common units are loaned to a short seller to effect a short sale of common units; therefore, our unitholders desiring to assure their status as partners and avoid the risk of gain recognition from a loan

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to a short seller are urged to consult a tax advisor to discuss whether it is advisable to modify any applicable brokerage account agreements to prohibit their brokers from loaning their common units.

We will adopt certain valuation methodologies that may result in a shift of income, gain, loss, and deduction between the unitholders. The IRS may challenge this treatment, which could adversely affect the value of the common units.

              When we issue additional units or engage in certain other transactions, we will determine the fair market value of our assets and allocate any unrealized gain or loss attributable to our assets to the capital accounts of our unitholders and our general partner. Our methodology may be viewed as understating the value of our assets. In that case, there may be a shift of income, gain, loss, and deduction between certain unitholders and our general partner, which may be unfavorable to such unitholders. Moreover, under our valuation methods, subsequent purchasers of common units may have a greater portion of their Internal Revenue Code Section 743(b) adjustment allocated to our tangible assets and a lesser portion allocated to our intangible assets. The IRS may challenge our valuation methods, or our allocation of the Section 743(b) adjustment attributable to our tangible and intangible assets, and allocations of income, gain, loss, and deduction between our general partner and certain of our unitholders.

              A successful IRS challenge to these methods or allocations could adversely affect the amount of taxable income or loss being allocated to our unitholders. It also could affect the amount of taxable gain from our unitholders' sale of common units and could have a negative impact on the value of the common units or result in audit adjustments to our unitholders' tax returns without the benefit of additional deductions.

The sale or exchange of 50% or more of our capital and profits interests within a twelve-month period will result in the termination of us as a partnership for federal income tax purposes.

              We will be considered to have technically terminated our partnership for federal income tax purposes if there is a sale or exchange of 50% or more of the total interests in our capital and profits within a twelve-month period. For purposes of determining whether the 50% threshold has been met, multiple sales of the same interest will be counted only once. Our technical termination would, among other things, result in the closing of our taxable year for all unitholders, which would result in our filing two tax returns (and our unitholders could receive two Schedules K-1 if relief was not available, as described below) for one fiscal year and could result in a significant deferral of depreciation deductions allowable in computing our taxable income. In the case of a unitholder reporting on a taxable year other than a fiscal year ending December 31, the closing of our taxable year may also result in more than twelve months of our taxable income or loss being includable in taxable income for the unitholder's taxable year that includes our termination. Our termination currently would not affect our classification as a partnership for federal income tax purposes, but it would result in our being treated as a new partnership for U.S. federal income tax purposes following the termination. If we were treated as a new partnership, we would be required to make new tax elections, including a new election under Section 754 of the Internal Revenue Code, and could be subject to penalties if we were unable to determine that a termination occurred. The IRS announced a relief procedure whereby if a publicly traded partnership that has technically terminated requests and the IRS grants special relief, among other things, the partnership may be permitted to provide one Schedule K-1 to unitholders for the year notwithstanding two partnership tax years. Please read "Material Federal Income Tax Consequences—Disposition of Common Units—Constructive Termination" for a discussion of the consequences of our termination for federal income tax purposes.

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As a result of investing in our common units, you may be subject to state and local taxes and return filing requirements in jurisdictions where we operate or own or acquire properties.

              In addition to federal income taxes, you may be subject to other taxes, including foreign, state, and local taxes, unincorporated business taxes, and estate, inheritance or intangible taxes that are imposed by the various jurisdictions in which we conduct business or control property now or in the future, even if you do not live in any of those jurisdictions. You may be required to file foreign, state, and local income tax returns and pay state and local income taxes in some or all of these various jurisdictions. Further, you may be subject to penalties for failure to comply with those requirements. We will initially own assets and conduct business in Pennsylvania. Pennsylvania imposes a personal income tax on individuals as well as corporations and other entities. As we make acquisitions or expand our business, we may own assets or conduct business in additional states that impose a personal income tax. It is your responsibility to file all U.S. federal, foreign, state, and local tax returns. Our counsel has not rendered an opinion on the state or local tax consequences of an investment in our common units. Please consult your tax advisor.

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USE OF PROCEEDS

              We expect to receive net proceeds of approximately $             million from the sale of            common units offered by this prospectus, based on an assumed initial public offering price of $            per common unit (the midpoint of the price range set forth on the cover page of this prospectus), after deducting underwriting discounts and estimated offering expenses. We intend to use the net proceeds from this offering as follows:

    $         million will be distributed to our parent in satisfaction of its right to reimbursement for certain capital expenditures incurred with respect to the contributed assets;

    $         million capital will be contributed to the operating partnership for general partnership purposes; and

    $         million will be retained by us for general partnership purposes.

              The net proceeds from any exercise by the underwriters of their option to purchase additional common units from us will be used to redeem from our parent a number of common units equal to the number of common units issued upon exercise of the option at a price per common unit equal to the net proceeds per common unit in this offering before expenses but after deducting underwriting discounts. Accordingly, any exercise of the underwriters' option will not affect the total number of units outstanding or the amount of cash needed to pay the minimum quarterly distribution on all units. Please read "Underwriting."

              An increase or decrease in the initial public offering price of $1.00 per common unit would cause the net proceeds from the offering, after deducting underwriting discounts and estimated offering expenses, to increase or decrease by $             million, based on an assumed initial public offering price of $            per common unit (the midpoint of the price range set forth on the cover of this prospectus). If the proceeds increase due to a higher initial public offering price or decrease due to a lower initial public offering price, then the cash distribution to our parent from the proceeds of this offering will increase or decrease, as applicable, by a corresponding amount.

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CAPITALIZATION

              The following table shows our pro forma cash and cash equivalents and capitalization as of June 30, 2014, giving effect to the pro forma adjustments described in our unaudited pro forma consolidated balance sheet included elsewhere in this prospectus, including this offering and the application of the net proceeds of this offering in the manner described under "Use of Proceeds" and the other transactions described under "Prospectus Summary—Our Formation and Other Related Transactions."

              This table is derived from, should be read together with and is qualified in its entirety by reference to the unaudited pro forma consolidated balance sheet and the accompanying notes included elsewhere in this prospectus.

 
  Pro Forma
 
  June 30, 2014
 
  (in thousands)

Cash and cash equivalents

  $
     
     

Debt:

   

Revolving credit facility

   
     

Total debt

  $
     

Equity(1):

   

PES Logistics Partners, L.P. partners' capital:

   

Held by public:

   

Common units

   

Held by Parent:

   

Common units

   

Subordinated units

   
     

Total PES Logistics Partners, L.P. partners' capital

   

Noncontrolling interest

   
     

Total equity

   
     

Total capitalization

  $
     
     

(1)
Assumes the underwriters' option to purchase additional common units from us is not exercised.

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DILUTION

              Dilution is the amount by which the offering price per common unit in this offering will exceed the pro forma net tangible book value per common unit after the offering. Based on an assumed initial public offering price of $            per common unit (the mid-point of the price range set forth on the cover page of this prospectus), on a pro forma basis as of June 30, 2014, after giving effect to the offering of common units and the related transactions, our net tangible book value would have been approximately $             million, or $            per common unit. Purchasers of our common units in this offering will experience substantial and immediate dilution in pro forma net tangible book value per common unit for financial accounting purposes, as illustrated in the following table.

Assumed initial public offering price per common unit(1)

      $             

Pro forma net tangible book value per common unit before the offering(2)

  $                  

Increase in net tangible book value per common unit attributable to purchasers in the offering

           
             

Less: Pro forma net tangible book value per common unit after the offering(3)

           
           

Immediate dilution in net tangible book value per common unit to purchasers in the offering(4)(5)

      $             
           
           

(1)
The midpoint of the price range set forth on the cover page of this prospectus.

(2)
Determined by dividing the pro forma net tangible book value of the contributed assets and liabilities, of $             million by the number of units (            common units and            subordinated units) to be issued to our general partner and its affiliates for their contribution of assets and liabilities to us .

(3)
Determined by dividing the number of units to be outstanding after this offering (            common units and            subordinated units) into our pro forma net tangible book value, after giving effect to the application of the net proceeds of this offering, of $             million.

(4)
Because the total number of units outstanding following this offering will not be impacted by any exercise of the underwriters' option to purchase additional common units and any net proceeds from such exercise will not be retained by us, there will be no change to the dilution in net tangible book value per common unit to purchasers in this offering due to any such exercise of the option.

(5)
If the initial public offering price were to increase or decrease by $1.00 per common unit, then dilution in net tangible book value per common unit would equal $            and $            , respectively.

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              The following table sets forth the number of units that we will issue and the total consideration contributed to us by our general partner and its affiliates in respect of their units and by the purchasers of our common units in this offering upon consummation of the transactions contemplated by this prospectus.

 
  Units acquired   Total consideration  
 
  Number   %   Amount   %  
 
   
   
  (in millions)
   
 

General partner and its affiliates(1)(2)(3)

                              % $                           %

Purchasers in this offering

                              %                             %
                   

Total

                   100.0 % $                100.0 %
                   
                   

(1)
Upon the consummation of the transactions contemplated by this prospectus, our general partner and its affiliates will own            common units,             subordinated units and the general partner interest.

(2)
Assumes the underwriters' option to purchase additional common units from us is not exercised.

(3)
The assets contributed by our general partner and its affiliates were recorded at historical cost in accordance with accounting principles generally accepted in the United States. Book value of the consideration provided by our general partner and its affiliates, as of June 30, 2014, was $             million.

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OUR CASH DISTRIBUTION POLICY AND RESTRICTIONS ON DISTRIBUTIONS

              The following discussion of our cash distribution policy should be read in conjunction with the specific assumptions included in this section. In addition, "Forward-Looking Statements" and "Risk Factors" should be read for information regarding statements that do not relate strictly to historical or current facts and regarding certain risks inherent in our business.

              For additional information regarding our pro forma results of operations, please refer to the unaudited pro forma consolidated balance sheet and the accompanying notes included elsewhere in this prospectus.


General

Rationale for Our Cash Distribution Policy

              Our partnership agreement requires that we distribute all of our available cash quarterly. This requirement forms the basis of our cash distribution policy and reflects a basic judgment that our unitholders will be better served if we distribute our available cash rather than retain our available cash, because, among other reasons, we believe we will generally finance any expansion capital expenditures from external financing sources. Under our current cash distribution policy, we intend to make a minimum quarterly distribution to the holders of our common units and subordinated units of $            per unit, or $            per unit on an annualized basis, to the extent we have sufficient available cash after the establishment of cash reserves and the payment of costs and expenses, including the payment of expenses to our general partner and its affiliates. However, other than the requirement in our partnership agreement to distribute all of our available cash each quarter, we have no legal obligation to make quarterly cash distributions in this or any other amount, and our general partner has considerable discretion to determine the amount of our available cash each quarter. In addition, our general partner may change our cash distribution policy at any time, subject to the requirement in our partnership agreement to distribute all of our available cash quarterly. Generally, our available cash is the sum of our (1) cash on hand at the end of a quarter after the payment of our expenses and the establishment of cash reserves and (2) cash on hand resulting from working capital borrowings made after the end of the quarter. Because we are not subject to an entity-level federal income tax, we expect to have more cash to distribute than would be the case if we were subject to federal income tax. If we do not generate sufficient available cash from our operations, we may, but are under no obligation to, borrow funds to pay the minimum quarterly distribution to our unitholders.

Limitations on Cash Distributions and Our Ability to Change Our Cash Distribution Policy

              Although our partnership agreement requires that we distribute all of our available cash quarterly, there is no guarantee that we will make quarterly cash distributions to our unitholders at our minimum quarterly distribution rate or at any other rate, and we have no legal obligation to do so. Our current cash distribution policy is subject to certain restrictions, as well as the considerable discretion of our general partner in determining the amount of our available cash each quarter. The following factors will affect our ability to make cash distributions, as well as the amount of any cash distributions we make:

    Our cash distribution policy will be subject to restrictions on cash distributions under our revolving credit facility, which we expect will prohibit us, until such time that we have an investment grade credit rating, from making cash distributions while an event of default has occurred and is continuing under the credit facility, notwithstanding our stated cash distribution policy. Please read "Management's Discussion and Analysis of Financial Condition—Capital Resources and Liquidity—Credit Facility."

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    The amount of cash that we distribute and the decision to make any distribution is determined by our general partner, taking into consideration the terms of our partnership agreement. Specifically, our general partner will have the authority to establish cash reserves for the prudent conduct of our business and for future cash distributions to our unitholders, and the establishment of or increase in those reserves could result in a reduction in cash distributions from levels we currently anticipate pursuant to our stated cash distribution policy. Any decision to establish cash reserves made by our general partner in good faith will be binding on our unitholders.

    While our partnership agreement requires us to distribute all of our available cash, our partnership agreement, including the provisions requiring us to make cash distributions, may be amended. During the subordination period our partnership agreement may not be amended without the approval of our public common unitholders, except in a limited number of circumstances where our general partner can amend our partnership agreement without any unitholder approval. For a description of these limited circumstances, please read "Our Partnership Agreement—Amendment of Our Partnership Agreement—No Unitholder Approval." However, after the subordination period has ended, our partnership agreement may be amended with the consent of our general partner and the approval of a majority of the outstanding common units, including common units owned by our general partner and its affiliates. At the closing of this offering, our parent will own our general partner and will indirectly own        % of our total outstanding common units and subordinated units on an aggregate basis (or        % of our total outstanding common units and subordinated units on an aggregate basis if the underwriters' option to purchase additional common units is exercised in full).

    Under Section 17-607 of the Delaware Revised Uniform Limited Partnership Act, or the Delaware Act, we may not make a distribution if the distribution would cause our liabilities to exceed the fair value of our assets.

    We may lack sufficient cash to pay distributions to our unitholders due to cash flow shortfalls attributable to a number of operational, commercial or other factors as well as increases in our operating and maintenance or general and administrative expenses, principal and interest payments on our debt, tax expenses, working capital requirements and anticipated cash needs. Our available cash is directly impacted by our cash expenses necessary to run our business and will be reduced dollar-for-dollar to the extent such uses of cash increase. Please read "Provisions of Our Partnership Agreement Relating to Cash Distributions—Distributions of Available Cash."

    Our ability to make cash distributions to our unitholders depends on the performance of our subsidiaries and their ability to distribute cash to us. The ability of our subsidiaries to make cash distributions to us may be restricted by, among other things, the provisions of future indebtedness, applicable state partnership and limited liability company laws and other laws and regulations.

    If and to the extent our available cash materially declines from quarter to quarter, we may elect to change our current cash distribution policy and reduce the amount of our quarterly distributions in order to service or repay our debt or fund expansion capital expenditures.

              To the extent that our general partner determines not to distribute the full minimum quarterly distribution on our common units with respect to any quarter during the subordination period, the common units will accrue an arrearage equal to the difference between the minimum quarterly distribution and the amount of the distribution actually paid on the common units with respect to that quarter. The aggregate amount of any such arrearages must be paid on the common units before any distributions of available cash from operating surplus may be made on the subordinated units and

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before any subordinated units may convert into common units. The subordinated units will not accrue any arrearages. Any shortfall in the payment of the minimum quarterly distribution on the common units with respect to any quarter during the subordination period may decrease the likelihood that our quarterly distribution rate would increase in subsequent quarters. Please read "Provisions of Our Partnership Agreement Relating to Cash Distributions—Subordinated Units and Subordination Period."

Our Ability to Grow is Dependent on Our Ability to Access External Expansion Capital

              Our partnership agreement requires us to distribute all of our available cash to our unitholders on a quarterly basis. As a result, we expect that we will rely primarily upon our cash reserves and external financing sources, including borrowings under our revolving credit facility and the issuance of debt and equity securities, to fund future acquisitions and other expansion capital expenditures. To the extent we are unable to finance growth with external sources of capital, the requirement in our partnership agreement to distribute all of our available cash and our current cash distribution policy will significantly impair our ability to grow. In addition, because we will distribute all of our available cash, our growth may not be as fast as businesses that reinvest all of their available cash to expand ongoing operations. We expect that our revolving credit facility will restrict our ability to incur additional debt, including through the issuance of debt securities. Please read "Risk Factors—Risks Related to Our Business—Restrictions in our revolving credit facility could adversely affect our financial condition, results of operations, cash flows and ability to make distributions to our unitholders." To the extent we issue additional units, the payment of distributions on those additional units may increase the risk that we will be unable to maintain or increase our cash distributions per unit. There are no limitations in our partnership agreement on our ability to issue additional units, including units ranking senior to our common units, and our unitholders will have no preemptive or other rights (solely as a result of their status as unitholders) to purchase any such additional units. If we incur additional debt (under our revolving credit facility or otherwise) to finance our growth strategy, we will have increased interest expense, which in turn will reduce the available cash that we have to distribute to our unitholders. Please read "Risk Factors—Risks Related to Our Business—Debt we incur in the future may limit our flexibility to obtain financing and to pursue other business opportunities."


Our Minimum Quarterly Distribution

              Upon the consummation of this offering, our partnership agreement will provide for a minimum quarterly distribution of $            per unit for each whole quarter, or $            per unit on an annualized basis. Our ability to make cash distributions at the minimum quarterly distribution rate will be subject to the factors described above under "—General—Limitations on Cash Distributions and Our Ability to Change Our Cash Distribution Policy." Quarterly distributions, if any, will be made within 60 days after the end of each calendar quarter to holders of record on or about the first day of each such month in which such distributions are made. If the distribution date does not fall on a business day, we will make the distribution on the first business day immediately following the indicated distribution date. We will not make distributions for the period that begins on                , 2014, and ends on the day prior to the closing of this offering. We will adjust the amount of our first distribution for the period from the closing of this offering through                 , 2014, based on the actual length of the period.

              The amount of available cash needed to pay the minimum quarterly distribution on all of our common units and subordinated units to be outstanding immediately after this offering for one quarter

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and on an annualized basis (assuming no exercise and full exercise of the underwriters' option to purchase additional common units) is summarized in the table below:

 
  No Exercise of Option
to Purchase
Additional Common Units
  Full Exercise of Option
to Purchase
Additional Common Units
 
 
  Aggregate Minimum
Quarterly
Distributions
  Aggregate Minimum
Quarterly
Distributions
 
 
  Number of
Units
  One
Quarter
  Annualized
(Four
Quarters)
  Number of
Units
  One
Quarter
  Annualized
(Four
Quarters)
 
 
   
  (in millions)
   
  (in millions)
 

Publicly held common units

                   $                $                                 $                $               

Common units held by our parent

                                     

Subordinated units held by our parent

                                     
                           

Total

                   $                $                                 $                $               
                           
                           

              Our general partner will initially hold all of the incentive distribution rights, which entitle the holder to increasing percentages, up to a maximum of 50%, of the cash we distribute in excess of $            per unit per quarter.

              During the subordination period, before we make any quarterly distributions to our subordinated unitholders, our common unitholders are entitled to receive payment of the full minimum quarterly distribution for such quarter plus any arrearages in distributions of the minimum quarterly distribution from prior quarters. Please read "Provisions of Our Partnership Agreement Relating to Cash Distributions—Subordinated Units and Subordination Period." We cannot guarantee, however, that we will pay distributions on our common units at our minimum quarterly distribution rate or at any other rate in any quarter.

              Although holders of our common units may pursue judicial action to enforce provisions of our partnership agreement, including those related to requirements to make cash distributions as described above, our partnership agreement provides that any determination made by our general partner in its capacity as our general partner must be made in good faith and that any such determination will not be subject to any other standard imposed by the Delaware Act or any other law, rule or regulation or at equity. Our partnership agreement provides that, in order for a determination by our general partner to be made in "good faith," our general partner must subjectively believe that the determination is in the best interests of our partnership. In making such determination, our general partner may take into account the totality of the circumstances or the totality of the relationships between the parties involved, including other relationships or transactions that may be particularly favorable or advantageous to us. Please read "Conflicts of Interest and Duties."

              The provision in our partnership agreement requiring us to distribute all of our available cash quarterly may not be modified or repealed without amending our partnership agreement; however, as described above, the actual amount of our cash distributions for any quarter is subject to fluctuations based on the amount of cash we generate from our business, the amount of reserves our general partner establishes in accordance with our partnership agreement and the amount of available cash from working capital borrowings.

              Additionally, our general partner may reduce the minimum quarterly distribution and the target distribution levels if legislation is enacted or modified that results in our becoming taxable as a corporation or otherwise subject to taxation as an entity for federal, state or local income tax purposes. In such an event, the minimum quarterly distribution and the target distribution levels may be reduced proportionately by the percentage decrease in our available cash resulting from the estimated tax

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liability we would incur in the quarter in which such legislation is effective. The minimum quarterly distribution will also be proportionately adjusted in the event of any distribution, combination or subdivision of common units in accordance with the partnership agreement, or in the event of a distribution of available cash from capital surplus. Please read "Provisions of Our Partnership Agreement Relating to Cash Distributions—Adjustment to the Minimum Quarterly Distribution and Target Distribution Levels." The minimum quarterly distribution is also subject to adjustment if the holder(s) of the incentive distribution rights (initially only our general partner) elect to reset the target distribution levels related to the incentive distribution rights. In connection with any such reset, the minimum quarterly distribution will be reset to an amount equal to the average cash distribution amount per common unit for the two quarters immediately preceding the reset. Please read "Provisions of Our Partnership Agreement Relating to Cash Distributions—General Partner's Right to Reset Incentive Distribution Levels."

              In the section that follows, we present in detail the basis for our belief that we will be able to fully fund our annualized minimum quarterly distribution of $            per unit for the twelve months ending September 30, 2015. In that section, we present a table captioned "Estimated Distributable Cash Flow for the Twelve Months Ending September 30, 2015," in which we provide our estimated forecast of our ability to generate sufficient distributable cash flow to support the payment of the minimum quarterly distribution on all units for the twelve months ending September 30, 2015.


Estimated Distributable Cash Flow for the Twelve Months Ending September 30, 2015

              Our estimated distributable cash flow for the twelve months ending September 30, 2015 is forecasted to be $38.0 million. This amount would exceed by $             million the amount needed to pay the minimum quarterly distribution of $            per unit on all of our outstanding common and subordinated units for the twelve months ending September 30, 2015. The number of outstanding units on which we have based our estimate does not include any common units that may be issued under the long-term incentive plan that our general partner will adopt prior to the closing of this offering and assumes that the underwriters' option to purchase additional common units is not exercised.

              Management has prepared the forecast of estimated distributable cash flow for the twelve months ending September 30, 2015, and related assumptions set forth below to substantiate our belief that we will have sufficient available cash to pay the minimum quarterly distribution to all of our unitholders for the twelve months ending September 30, 2015. Please read below under "—Significant Forecast Assumptions" for further information as to the assumptions we have made for the financial forecast. This forecast is a forward-looking statement and should be read together with our unaudited pro forma balance sheet and the accompanying notes included elsewhere in this prospectus and "Management's Discussion and Analysis of Financial Condition." This forecast was not prepared with a view toward complying with guidelines established by the American Institute of Certified Public Accountants with respect to prospective financial information, but, in the view of our management, was prepared on a reasonable basis, reflects the best currently available estimates and judgments, and presents, to the best of management's knowledge and belief, the assumptions on which we base our belief that we can generate sufficient distributable cash flow to pay the minimum quarterly distribution to all unitholders for the forecasted period. However, this information is not fact and should not be relied upon as being necessarily indicative of our future results, and readers of this prospectus are cautioned not to place undue reliance on the prospective financial information.

              The prospective financial information included in this registration statement has been prepared by, and is the responsibility of, our management. KPMG LLP has neither compiled nor performed any procedures with respect to the accompanying prospective financial information and, accordingly, KPMG LLP does not express an opinion or any other form of assurance with respect thereto.

              When considering our financial forecast, you should keep in mind the risk factors and other cautionary statements under "Risk Factors." Any of the risks discussed in this prospectus, to the extent they are realized, could cause our actual results of operations to vary significantly from those that would enable us to generate our estimated distributable cash flow.

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              We do not undertake any obligation to release publicly the results of any future revisions we may make to the forecast or to update this forecast to reflect events or circumstances after the date of this prospectus. Therefore, you are cautioned not to place undue reliance on this prospective financial information.


PES Logistics Partners, L.P.
Estimated Distributable Cash Flow
(In thousands)

 
   
  Three Months Ending  
 
  Twelve Months
Ending
September 30,
2015
 
 
  December 31,
2014
  March 31,
2015
  June 30,
2015
  September 30,
2015
 

Total Revenues

  $ 121,772   $ 29,946   $ 29,815   $ 30,836   $ 31,175  

Costs and Expenses:

   
 
   
 
   
 
   
 
   
 
 

Operating and maintenance expenses

    17,284     4,213     4,254     4,379     4,438  

General and administrative expense(1)

    7,000     1,750     1,750     1,750     1,750  

Depreciation expense

    4,200     1,050     1,050     1,050     1,050  
                       

Total costs and expenses

    28,484     7,013     7,054     7,179     7,238  

Operating Income

    93,287     22,933     22,761     23,656     23,937  

Interest expense, net(2)

    1,650     413     413     413     413  
                       

Net Income attributable to the controlling and noncontrolling interests

    91,637     22,520     22,349     23,244     23,524  

Plus:

                               

Interest expense, net

    1,650     413     413     413     413  

Depreciation expense

    4,200     1,050     1,050     1,050     1,050  
                       

Estimated EBITDA(3)

    97,487     23,983     23,811     24,706     24,987  

Less:

                               

Cash interest paid, net(2)

    1,100     275     275     275     275  

Maintenance capital expenditures(4)

    2,000     500     500     500     500  

Expansion capital expenditures

                     

Distribution to noncontrolling interest(5)

    56,368     13,878     13,784     14,276     14,430  
                       

Estimated Distributable Cash Flow

  $ 38,019   $ 9,330   $ 9,252   $ 9,655   $ 9,782  
                       
                       

Distributions to public common unitholders(6)

  $   $     $     $     $    

Distributions to our parent—common units(6)        

                             

Distributions to our parent—subordinated units(6)

                             

Distributions to our general partner

                     
                       

Total distributions to unitholders and general partner

                     
                       

Excess of distributable cash flow over aggregate annualized minimum quarterly distributions

  $     $     $     $     $    
                       
                       

(1)
Includes $4.0 million of estimated annual incremental general and administrative expenses as a result of being a separate publicly traded partnership.

(2)
Interest expense, net and cash interest paid, net both include the estimated commitment fee on a $275 million revolving credit facility that is expected to be undrawn during the period. Interest expense, net also includes the estimated amortization of debt issuance costs that will

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      be incurred in connection with our revolving credit facility. Cash interest, net excludes the amortization of debt issuance costs.

(3)
We define EBITDA in "Management's Discussion and Analysis of Financial Condition—How We Evaluate Our Results of Operations—EBITDA and Distributable Cash Flow".

(4)
Maintenance capital expenditures are cash expenditures (including expenditures for the construction or development of new capital assets or the replacement, improvement or expansion of existing capital assets) made to maintain, over the long-term, our operating capacity or operating income. Examples of maintenance capital expenditures are expenditures to repair, refurbish and replace unloading equipment or other equipment at our facilities, to maintain equipment reliability, integrity and safety and to address environmental laws and regulations.

(5)
Distributions to noncontrolling interest represent distributable cash flow from our operating partnership to our parent. Distributable cash flow from our operating partnership will be allocated 45% to us and 55% to our parent. Distributions to noncontrolling interest are determined prior to deductions incurred by us but not incurred by our operating partnership. Since we have expenses that our operating partnership does not have, our operating partnership may be able to make distributions to us and to our parent when we are unable to make distributions to our unitholders. The following table shows the calculation of forecast distributions to noncontrolling interest:

 
   
  Three Months Ending  
 
  Twelve Months
Ending
September 30,
2015
 
 
  December 31,
2014
  March 31,
2015
  June 30,
2015
  September 30,
2015
 

Estimated EBITDA

  $ 97,487   $ 23,983   $ 23,811   $ 24,706   $ 24,987  

Plus:

   
 
   
 
   
 
   
 
   
 
 

Allocated general & administrative expenses        

    3,000     750     750     750     750  

Public company expenses

   
4,000
   
1,000
   
1,000
   
1,000
   
1,000
 

Less:

   
 
   
 
   
 
   
 
   
 
 

Maintenance capital expenditures

    2,000     500     500     500     500  
                       

Estimated distributable cash flow by our operating partnership

    102,487     25,233     25,061     25,956     26,237  

Noncontrolling ownership interest

    55 %   55 %   55 %   55 %   55 %
                       

Distribution to noncontrolling interest

  $ 56,368   $ 13,878   $ 13,784   $ 14,276   $ 14,430  
                       
                       
(6)
Based on the number of common units and subordinated units expected to be outstanding upon the closing of this offering and assumes that the underwriters' option to purchase additional common units is not exercised.


Significant Forecast Assumptions

              The forecast is unaudited and has been prepared by and is the responsibility of management. The forecast reflects our judgment as of the date of this prospectus of conditions we expect to exist and the course of action we expect to take during the twelve months ending September 30, 2015. While the

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assumptions discussed below are not all-inclusive, they include those that we believe are material to our forecasted results of operations, and any assumptions not discussed below were not deemed to be material. We believe we have a reasonable, objective basis for these assumptions. We believe our actual results of operations will approximate those reflected in our forecast, but we can give no assurance that our forecasted results will be achieved. There will likely be differences between our forecast and our actual results and those differences could be material. If the forecasted results are not achieved, we may not be able to make cash distributions on our common units at the minimum quarterly distribution rate or at all.

Volumes and Revenue

              We estimate that we will generate revenue of $121.8 million for the twelve months ending September 30, 2015. We expect all of our forecasted revenues will be derived from our equity ownership in the operating partnership and its ten-year, fee-based commercial agreement with Refining, supported by Refining's minimum volume commitments. To forecast revenue, we used the historical volumes handled on behalf of Refining from the inception of our rail unloading terminal operations on October 23, 2013 through December 31, 2013, as well as volumes received from a third party terminal for Refining during 2013. These volumes were adjusted to reflect a full year of operations, the commercial agreement with Refining that will be in effect at the closing of this offering, and forecasts for crude supply and refined petroleum product demand. Our operating partnership did not have a commercial agreement in effect with Refining with respect to the volumes handled for Refining during 2013. We have forecasted volumes from Refining of approximately 9.6% above the minimum volume commitments under the commercial agreement. We expect that any variances between actual and forecasted revenue will be driven by differences between actual and forecasted volumes in excess of the minimum volume commitments of Refining, as well as variances in volumes received from the third party terminal.

              The following table reflects our forecasted volumes and revenue for the twelve months ended September 30, 2015.

 
  Thousands
of Barrels
Per Day
  Thousands
of Barrels
Per Year
  Throughput
Fee (Dollars
Per Barrel)
  Revenue
(Thousands of
Dollars)
 

Our terminal

                         

Minimum Volume Commitment

    170.0     62,050   $ 1.91   $ 118,777  

Additional throughput

    11.3     4,110   $ 0.51     2,076  

Third party terminal throughput

   
5.0
   
1,825
 
$

0.51
   
919
 
                     

Total throughput

    186.3     67,985         $ 121,772  
                     
                     

Operating and Maintenance Expenses

              Our operating and maintenance expenses are comprised primarily of labor expenses, outside contractor expenses, insurance premiums, repairs and maintenance expenses, utility costs and lease expenses. We estimate that we will incur operating and maintenance expenses of $17.3 million for the twelve months ending September 30, 2015.

              Our operating and maintenance expenses includes an operating and administrative service fee of $0.7 million per year that the operating partnership will pay to Refining under the services and secondment agreement for the provision of certain infrastructure-related services with respect to the operating partnership's business. See "Certain Relationships and Related Party Transactions—Agreements Governing the Transactions—Services and Secondment Agreement."

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General and Administrative Expenses

              We estimate that our total general and administrative expenses will be $7.0 million for the twelve months ending September 30, 2015. These forecast expenses consist of:

    an annual fee of $3.0 million per year that we will pay our parent under the services and secondment agreement for the secondment of certain employees and the provision of various centralized administrative services for our benefit, including financial and administrative services, information technology services, legal services, health, safety and environmental services, human resources services and insurance administration. For a more complete description of this agreement and the services covered by it, see "Certain Relationships and Related Party Transactions—Agreements Governing the Transactions—Services and Secondment Agreement"; and

    approximately $4.0 million of incremental annual expenses as a result of being a publicly traded partnership, including costs associated with annual and quarterly reports to unitholders, financial statement audit, tax return and Schedule K-1 preparation and distribution, investor relations, activities, registrar and transfer agent fees, incremental director and officer liability insurance premiums, independent director compensation, and incremental costs associated with operating our logistics assets as a growth-oriented business.

Depreciation Expense

              We estimate that depreciation expense will be $4.2 million for the twelve months ending September 30, 2015.

Financing

              We estimate that interest expense will be approximately $1.7 million for the twelve months ending September 30, 2015 based on the following assumptions:

    we will enter into a $275 million revolving credit facility, which will remain undrawn during the forecast period with an estimated weighted average rate on any borrowings of approximately        %;

    interest expense includes an estimated 0.4% commitment fee for the unutilized portion of the revolving credit; and

    interest expense also includes the amortization of debt issuance costs incurred in connection with our revolving credit facility.

Capital Expenditures

              We estimate that total capital expenditures for the twelve months ending September 30, 2015 will be $2.0 million, based on the following assumptions:

    Maintenance Capital Expenditures.  We estimate that our maintenance capital expenditures will be $2.0 million for the twelve months ending September 30, 2015, based on the fact that the rail unloading terminal has only recently been placed into service.

    Expansion Capital Expenditures.  Our estimate for the twelve months ending September 30, 2015 does not include any expansion capital expenditures. A project to expand the throughput unloading capacity at our terminal from 140,000 to 210,000 bpd is currently underway and is expected to be completed in mid-October 2014. The total estimated cost of the expansion project is approximately $30 million. See "Management's Discussion and Analysis of Financial Condition—Capital Resources and Liquidity—Capital Expenditures".

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Regulatory, Industry and Economic Factors

              Our forecast of estimated EBITDA for the twelve months ending September 30, 2015 is based on the following significant assumptions related to regulatory, industry and economic factors:

    Refining will not default under the commercial agreement with the operating partnership or reduce, suspend or terminate its obligations, nor will any events occur that would be deemed a force majeure event, under such agreement;

    there will not be any new federal, state or local regulation, or any interpretation of existing regulation, of the portions of the logistics industries in which we operate that will be materially adverse to our business;

    there will not be any material accidents, weather-related incidents, unscheduled downtime or similar unanticipated events that affect our assets, the Philadelphia refinery complex or the delivery of the crude oil volumes included in our forecast;

    there will not be a shortage of skilled labor; and

    there will not be any material adverse changes in the refining industry, the midstream energy sector or market or overall economic conditions.

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PROVISIONS OF OUR PARTNERSHIP AGREEMENT RELATING TO CASH DISTRIBUTIONS

              Set forth below is a summary of the significant provisions of our partnership agreement that relate to cash distributions.


Distributions of Available Cash

General

              Our partnership agreement requires that, within 60 days after the end of each quarter, beginning with the quarter ending                         , 2014, we distribute all of our available cash to unitholders of record on the applicable record date. We will adjust the amount of our distribution for the period from the closing of this offering through                        , 2014, based on the actual length of the period.

Definition of Available Cash

              Available cash generally means, for any quarter, all cash and cash equivalents on hand at the end of that quarter:

    less, the amount of cash reserves established by our general partner to:

    provide for the proper conduct of our business (including reserves for our future capital expenditures, future acquisitions and anticipated future debt service requirements);

    comply with applicable law, any of our or our subsidiaries' debt instruments or other agreements or any other obligation; or

    provide funds for distributions to our unitholders for any one or more of the next four quarters (provided that our general partner may not establish cash reserves for distributions if the effect of the establishment of such reserves will prevent us from distributing the minimum quarterly distribution on all common units and any cumulative arrearages on such common units for the current quarter);

    plus, if our general partner so determines, all or any portion of the cash on hand on the date of determination of available cash for the quarter resulting from working capital borrowings made subsequent to the end of such quarter.

              The purpose and effect of the last bullet point above is to allow our general partner, if it so decides, to use cash from working capital borrowings made after the end of the quarter but on or before the date of determination of available cash for that quarter to pay distributions to unitholders. Under our partnership agreement, working capital borrowings are generally borrowings that are made under a credit facility, commercial paper facility or similar financing arrangement, and in all cases are used solely for working capital purposes or to pay distributions to partners and with the intent of the borrower to repay such borrowings within twelve months with funds other than from additional working capital borrowings.

Intent to Distribute the Minimum Quarterly Distribution

              Under our current cash distribution policy, we intend to make a minimum quarterly distribution to the holders of our common units and subordinated units of $             per unit, or $             per unit on an annualized basis, to the extent we have sufficient available cash after the establishment of cash reserves and the payment of costs and expenses, including reimbursements of expenses to our general partner and its affiliates. However, there is no guarantee that we will pay the minimum quarterly distribution on our units in any quarter. The amount of distributions paid under

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our cash distribution policy and the decision to make any distribution will be determined by our general partner, taking into consideration the terms of our partnership agreement. Please read "Management's Discussion and Analysis of Financial Condition—Capital Resources and Liquidity—Credit Facility" for a discussion of the restrictions that we expect to be included in our revolving credit facility that may restrict our ability to make distributions.

Incentive Distribution Rights

              Our general partner currently holds incentive distribution rights that entitle it to receive increasing percentages, up to a maximum of 50%, of the available cash we distribute from operating surplus (as defined below) in excess of $            per unit per quarter. The maximum distribution of 50% does not include any distributions that our general partner or its affiliates may receive on common or subordinated units that they may own. Please read "—Incentive Distribution Rights" for additional information.


Operating Surplus and Capital Surplus

General

              All cash distributed to unitholders will be characterized as either being paid from "operating surplus" or "capital surplus." We treat distributions of available cash from operating surplus differently than distributions of available cash from capital surplus.

Operating Surplus

              We define operating surplus as:

    $       million (as described below); plus

    all of our cash receipts after the closing of this offering, excluding cash from interim capital transactions (as defined below), provided that cash receipts from the termination of a commodity hedge or interest rate hedge prior to its specified termination date shall be included in operating surplus in equal quarterly installments over the remaining scheduled life of such commodity hedge or interest rate hedge; plus

    working capital borrowings made after the end of a quarter but on or before the date of determination of operating surplus for that quarter; plus

    cash distributions (including incremental distributions on incentive distribution rights) paid in respect of equity issued other than equity issued in this offering, to finance all or a portion of expansion capital expenditures in respect of the period from the date that we enter into a binding obligation to commence the construction, development, replacement, improvement or expansion of a capital asset and ending on the earlier to occur of the date the capital asset commences commercial service and the date that it is abandoned or disposed of; plus

    cash distributions (including incremental distributions on incentive distribution rights) paid in respect of equity issued to pay the construction period interest on debt incurred, or to pay construction period distributions on equity issued, to finance all or a portion of expansion capital expenditures in respect of the period from the date that we enter into a binding obligation to commence the construction, development, replacement, improvement or expansion of a capital asset and ending on the earlier to occur of the date the capital asset commences commercial service and the date that it is abandoned or disposed of; less

    all of our operating expenditures (as defined below) after the closing of this offering; less

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    the amount of cash reserves established by our general partner to provide funds for future operating expenditures; less

    all working capital borrowings not repaid within twelve months after having been incurred, or repaid within such 12-month period with the proceeds of additional working capital borrowings.

              As described above, operating surplus does not reflect actual cash on hand that is available for distribution to our unitholders and is not limited to cash generated by our operations. For example, it includes a provision that will enable us, if we choose, to distribute as operating surplus up to $         million of cash we receive in the future from non-operating sources such as asset sales, issuances of securities and long-term borrowings that would otherwise be distributed as capital surplus. In addition, the effect of including, as described above, certain cash distributions on equity interests in operating surplus will be to increase operating surplus by the amount of any such cash distributions. As a result, we may also distribute as operating surplus up to the amount of any such cash that we receive from non-operating sources.

              The proceeds of working capital borrowings increase operating surplus and repayments of working capital borrowings are generally operating expenditures (as described below) and thus reduce operating surplus when repayments are made. However, if working capital borrowings, which increase operating surplus, are not repaid during the twelve-month period following the borrowing, they will be deemed repaid at the end of such period, thus decreasing operating surplus at such time. When such working capital borrowings are in fact repaid, they will not be treated as a further reduction in operating surplus because operating surplus will have been previously reduced by the deemed repayment.

              We define interim capital transactions as (1) borrowings, refinancings or refundings of indebtedness (other than working capital borrowings and items purchased on open account or for a deferred purchase price in the ordinary course of business) and sales of debt securities, (2) sales of equity securities, and (3) sales or other dispositions of assets, other than sales or other dispositions of inventory, accounts receivable and other assets in the ordinary course of business and sales or other dispositions of assets as part of normal asset retirements or replacements.

              We define operating expenditures as all of our cash expenditures, including, but not limited to, taxes, reimbursements of expenses of our general partner and its affiliates, officer, director and employee compensation, debt service payments, payments made in the ordinary course of business under interest rate hedge contracts and commodity hedge contracts (provided that payments made in connection with the termination of any interest rate hedge contract or commodity hedge contract prior to the expiration of its settlement or termination date specified therein will be included in operating expenditures in equal quarterly installments over the remaining scheduled life of such interest rate hedge contract or commodity hedge contract and amounts paid in connection with the initial purchase of a rate hedge contract or a commodity hedge contract will be amortized at the life of such rate hedge contract or commodity hedge contract), maintenance capital expenditures (as discussed in further detail below), and repayment of working capital borrowings; provided, however, that operating expenditures will not include:

    repayments of working capital borrowings where such borrowings have previously been deemed to have been repaid (as described above);

    payments (including prepayments and prepayment penalties) of principal of and premium on indebtedness other than working capital borrowings;

    the purchase price of indebtedness that is repurchased and cancelled;

    expansion capital expenditures;

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    payment of transaction expenses (including taxes) relating to interim capital transactions;

    distributions to our partners;

    repurchases of partnership interests (excluding repurchases we make to satisfy obligations under employee benefit plans); or

    any other expenditures or payments using the proceeds of this offering that are described in "Use of Proceeds."

Capital Surplus

              Capital surplus is defined in our partnership agreement as any distribution of available cash in excess of our cumulative operating surplus. Accordingly, except as described above, capital surplus would generally be generated by:

    borrowings other than working capital borrowings;

    sales of our equity and debt securities;

    sales or other dispositions of assets, other than inventory, accounts receivable and other assets sold in the ordinary course of business or as part of ordinary course retirement or replacement of assets; and

    capital contributions received.

Characterization of Cash Distributions

              All available cash distributed by us on any date from any source will be treated as distributed from operating surplus until the sum of all available cash distributed by us since the closing of this offering equals the operating surplus from the closing of this offering through the end of the quarter immediately preceding that distribution. We anticipate that distributions from operating surplus will generally not represent a return of capital. However, operating surplus, as defined in our partnership agreement, includes certain components, including a $             million cash basket, that represent non-operating sources of cash. Consequently, it is possible that all or a portion of specific distributions from operating surplus may represent a return of capital. Any available cash distributed by us in excess of our cumulative operating surplus will be deemed to be capital surplus under our partnership agreement. Our partnership agreement treats a distribution of capital surplus as the repayment of the initial unit price from this initial public offering and as a return of capital. We do not anticipate that we will make any distributions from capital surplus.


Capital Expenditures

              Maintenance capital expenditures are cash expenditures (including expenditures for the construction or development of new capital assets or the replacement, improvement or expansion of existing capital assets) made to maintain, over the long term, our operating capacity or operating income. Examples of maintenance capital expenditures are expenditures to repair, refurbish and replace unloading equipment or other equipment at our facilities, to maintain equipment reliability, integrity and safety and to address environmental laws and regulations.

              Expansion capital expenditures are cash expenditures incurred for acquisitions or capital improvements that we expect will increase our operating capacity or operating income over the long term. Examples of expansion capital expenditures include the acquisition of equipment, or the construction, development or acquisition of additional unloading equipment or other equipment at our facilities, to the extent such capital expenditures are expected to expand our long-term operating capacity or operating income. Expansion capital expenditures include interest payments (and related

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fees) on debt incurred to finance all or a portion of expansion capital expenditures in respect of the period from the date that we enter into a binding obligation to commence the construction, development, replacement, improvement or expansion of a capital asset and ending on the earlier to occur of the date that such capital improvement commences commercial service and the date that such capital improvement is abandoned or disposed of.

              Capital expenditures that are made in part for maintenance capital purposes and in part for expansion capital purposes will be allocated as maintenance capital expenditures or expansion capital expenditures by our general partner.


Subordinated Units and Subordination Period

General

              Our partnership agreement provides that, during the subordination period (which we define below), the common units will have the right to receive distributions of available cash from operating surplus each quarter in an amount equal to $            per common unit, which amount is defined in our partnership agreement as the minimum quarterly distribution, plus any arrearages in the payment of the minimum quarterly distribution on the common units from prior quarters, before any distributions of available cash from operating surplus may be made on the subordinated units. These units are deemed "subordinated" because for a period of time, referred to as the subordination period, the subordinated units will not be entitled to receive any distributions until the common units have received the minimum quarterly distribution on the common units plus any arrearages in the payment of the minimum quarterly distribution on the common units from prior quarters. Furthermore, no arrearages will accrue or be payable on the subordinated units. The practical effect of the subordinated units is to increase the likelihood that, during the subordination period, there will be sufficient available cash from operating surplus to pay the minimum quarterly distribution on the common units.

Subordination Period

              Except as described below, the subordination period will begin on the closing date of this offering and will extend until the first business day following the distribution of available cash in respect of any quarter beginning after                        , 2017, that each of the following tests are met:

    distributions of available cash from operating surplus on each of the outstanding common units and subordinated units equaled or exceeded $            (the annualized minimum quarterly distribution), for each of the three consecutive, non-overlapping four-quarter periods immediately preceding that date;

    the adjusted operating surplus (as defined below) generated during each of the three consecutive, non-overlapping four-quarter periods immediately preceding that date equaled or exceeded the sum of $            (the annualized minimum quarterly distribution) on all of the outstanding common units and subordinated units during those periods on a fully diluted basis; and

    there are no arrearages in payment of the minimum quarterly distribution on the common units.

Early Termination of the Subordination Period

              Notwithstanding the foregoing, the subordination period will automatically terminate, and all of the subordinated units will convert into common units on a one-for-one basis, on the first business day

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following the distribution of available cash in respect of any quarter, beginning with the quarter ending                , 2015, that each of the following tests are met:

    distributions of available cash from operating surplus on each of the outstanding common units and subordinated units equaled or exceeded $            (150% of the annualized minimum quarterly distribution), plus the related distributions on the incentive distribution rights, for the four-quarter period immediately preceding that date;

    the adjusted operating surplus (as defined below) generated during the four-quarter period immediately preceding that date equaled or exceeded the sum of (1) $            (150% of the annualized minimum quarterly distribution) on all of the outstanding common units and subordinated units during that period on a fully diluted basis and (2) the corresponding distributions on the incentive distribution rights; and

    there are no arrearages in payment of the minimum quarterly distributions on the common units.

Expiration Upon Removal of the General Partner

              In addition, if the unitholders remove our general partner other than for cause:

    the subordinated units held by any person will immediately and automatically convert into common units on a one-for-one basis, provided (1) neither such person nor any of its affiliates voted any of its units in favor of the removal and (2) such person is not an affiliate of the successor general partner;

    if all of the subordinated units convert pursuant to the foregoing, all cumulative common unit arrearages on the common units will be extinguished and the subordination period will end; and

    our general partner will have the right to convert its incentive distribution rights into common units or to receive cash in exchange for those interests.

Expiration of the Subordination Period

              When the subordination period ends, each outstanding subordinated unit will convert into one common unit and will thereafter participate pro rata with the other common units in distributions of available cash.

Adjusted Operating Surplus

              Adjusted operating surplus is intended to reflect the cash generated from operations during a particular period and therefore excludes net drawdowns of reserves of cash established in prior periods. Adjusted operating surplus for a period consists of:

    operating surplus generated with respect to that period (excluding any amounts attributable to the item described in the first bullet under the caption "—Operating Surplus and Capital Surplus—Operating Surplus" above); less

    any net increase in working capital borrowings with respect to that period; less

    any net decrease in cash reserves for operating expenditures with respect to that period not relating to an operating expenditure made with respect to that period; plus

    any net decrease in working capital borrowings with respect to that period; plus

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    any net decrease made in subsequent periods to cash reserves for operating expenditures initially established with respect to that period to the extent such decrease results in a reduction in adjusted operating surplus in subsequent periods; plus

    any net increase in cash reserves for operating expenditures with respect to that period required by any debt instrument for the repayment of principal, interest or premium.


Distributions of Available Cash from Operating Surplus During the Subordination Period

              We will make distributions of available cash from operating surplus for any quarter during the subordination period in the following manner:

    first, to the common unitholders, pro rata, until we distribute for each outstanding common unit an amount equal to the minimum quarterly distribution for that quarter and any arrearages in payment of the minimum quarterly distribution on the common units for any prior quarters;

    second, to the subordinated unitholders, pro rata, until we distribute for each outstanding subordinated unit an amount equal to the minimum quarterly distribution for that quarter; and

    thereafter, in the manner described in "—Incentive Distribution Rights" below.

              The preceding discussion is based on the assumption that we do not issue additional classes of equity securities.


Distributions of Available Cash from Operating Surplus After the Subordination Period

              We will make distributions of available cash from operating surplus for any quarter after the subordination period in the following manner:

    first, to all unitholders, pro rata, until we distribute for each outstanding unit an amount equal to the minimum quarterly distribution for that quarter; and

    thereafter, in the manner described in "—Incentive Distribution Rights" below.

              The preceding discussion is based on the assumption that we do not issue additional classes of equity securities.


General Partner Interest

              Our general partner owns a non-economic general partner interest in us, which does not entitle it to receive cash distributions. However, our general partner may in the future own common units or other equity securities in us and will be entitled to receive distributions on any such interests.


Incentive Distribution Rights

              Incentive distribution rights represent the right to receive an increasing percentage (15%, 25% and 50%) of quarterly distributions of available cash from operating surplus after the minimum quarterly distribution and the target distribution levels have been achieved. Our general partner currently holds the incentive distribution rights, but may transfer these rights at any time.

              If for any quarter:

    we have distributed available cash from operating surplus to the common unitholders and subordinated unitholders in an amount equal to the minimum quarterly distribution; and

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    we have distributed available cash from operating surplus on outstanding common units in an amount necessary to eliminate any cumulative arrearages in payment of the minimum quarterly distribution;

then, we will distribute any additional available cash from operating surplus for that quarter among the unitholders and our general partner (as the holder of our incentive distribution rights) in the following manner:

    first, to all unitholders, pro rata until each unitholder receives a total of $            per unit for that quarter (the "first target distribution");

    second, 85% to all common unitholders and subordinated unitholders, pro rata, and 15% to the holders of our incentive distribution rights, until each unitholder receives a total of $            per unit for that quarter (the "second target distribution");

    third, 75% to all common unitholders and subordinated unitholders, pro rata, and 25% to the holders of our incentive distribution rights, until each unitholder receives a total of $            per unit for that quarter (the "third target distribution"); and

    thereafter, 50% to all common unitholders and subordinated unitholders, pro rata, and 50% to the holders of our incentive distribution rights.


Percentage Allocations of Available Cash from Operating Surplus

              The following table illustrates the percentage allocations of available cash from operating surplus between the unitholders and our general partner (as the holder of our incentive distribution rights) based on the specified target distribution levels. The amounts set forth under "Marginal Percentage Interest in Distributions" are the percentage interests of our general partner (as the holder of our incentive distribution rights) and the unitholders in any available cash from operating surplus we distribute up to and including the corresponding amount in the column "Total Quarterly Distribution Per Unit Target Amount." The percentage interests shown for our unitholders and our general partner assume that our general partner has not transferred its incentive distribution rights and that there are no arrearages on common units.

 
   
   
  Marginal Percentage Interest
In Distributions
 
 
  Total Quarterly
Distribution Per Unit
Target Amount
  Unitholders   General Partner (as
Holder of Our
Incentive
Distribution Rights)
 

Minimum Quarterly Distribution

              $             100 %   0 %

First Target Distribution

  above $     up to $       100 %   0 %

Second Target Distribution

  above $     up to $       85 %   15 %

Third Target Distribution

  above $     up to $       75 %   25 %

Thereafter

  above $             50 %   50 %


General Partner's Right to Reset Incentive Distribution Levels

              Our general partner, as the initial holder of our incentive distribution rights, has the right under our partnership agreement, subject to certain conditions, to elect to relinquish the right to receive incentive distribution payments based on the initial target distribution levels and to reset, at higher levels, the minimum quarterly distribution amount and target distribution levels upon which the incentive distribution payments to our general partner would be set. If our general partner transfers all or a portion of the incentive distribution rights in the future, then the holder or holders of a majority of our incentive distribution rights will be entitled to exercise this right. The following discussion assumes that our general partner holds all of the incentive distribution rights at the time that a reset

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election is made. Our general partner's right to reset the minimum quarterly distribution amount and the target distribution levels upon which the incentive distributions payable to our general partner are based may be exercised, without approval of our unitholders or the conflicts committee of our general partner, at any time when there are no subordinated units outstanding, we have made cash distributions to the holders of the incentive distribution rights at the highest level of incentive distributions for each of the four consecutive fiscal quarters immediately preceding such time and the amount of each such distribution did not exceed adjusted operating surplus for such quarter. If our general partner and its affiliates are not the holders of a majority of the incentive distribution rights at the time an election is made to reset the minimum quarterly distribution amount and the target distribution levels, then the proposed reset will be subject to the prior written concurrence of the general partner that the conditions described above have been satisfied. The reset minimum quarterly distribution amount and target distribution levels will be higher than the minimum quarterly distribution amount and the target distribution levels prior to the reset such that the holder of the incentive distribution rights will not receive any incentive distributions under the reset target distribution levels until cash distributions per unit following this event increase as described below. We anticipate that our general partner would exercise this reset right in order to facilitate acquisitions or internal growth projects that would otherwise not be sufficiently accretive to cash distributions per common unit, taking into account the existing levels of incentive distribution payments being made to our general partner.

              In connection with the resetting of the minimum quarterly distribution amount and the target distribution levels and the corresponding relinquishment by our general partner of incentive distribution payments based on the target distributions prior to the reset, our general partner will be entitled to receive a number of newly issued common units based on a predetermined formula described below that takes into account the "cash parity" value of the average cash distributions related to the incentive distribution rights received by our general partner for the two quarters immediately preceding the reset event as compared to the average cash distributions per common unit during that two-quarter period.

              The number of common units that our general partner (or the then-holder of the incentive distribution rights, if other than our general partner) would be entitled to receive from us in connection with a resetting of the minimum quarterly distribution amount and the target distribution levels then in effect would be equal to the quotient determined by dividing (x) the average aggregate amount of cash distributions received by our general partner in respect of its incentive distribution rights during the two consecutive fiscal quarters ended immediately prior to the date of such reset election by (y) the average of the aggregate amount of cash distributed per common unit during each of these two quarters.

              Following a reset election, the minimum quarterly distribution amount will be reset to an amount equal to the average cash distribution amount per common unit for the two fiscal quarters immediately preceding the reset election (which amount we refer to as the "reset minimum quarterly distribution") and the target distribution levels will be reset to be correspondingly higher such that we would distribute all of our available cash from operating surplus for each quarter thereafter as follows:

    first, to all common unitholders, pro rata, until each unitholder receives an amount per unit equal to 115% of the reset minimum quarterly distribution for that quarter;

    second, 85% to all common unitholders, pro rata, and 15% to our general partner, until each unitholder receives an amount per unit equal to 125% of the reset minimum quarterly distribution for the quarter;

    third, 75% to all common unitholders, pro rata, and 25% to our general partner, until each unitholder receives an amount per unit equal to 150% of the reset minimum quarterly distribution for the quarter; and

    thereafter, 50% to all common unitholders, pro rata, and 50% to our general partner.

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Because a reset election can only occur after the subordination period expires, the reset minimum quarterly distribution will have no significance except as a baseline for the target distribution levels.

              The following table illustrates the percentage allocations of available cash from operating surplus between the unitholders and our general partner (as the holder of our incentive distribution rights) at various cash distribution levels (1) pursuant to the cash distribution provisions of our partnership agreement in effect at the completion of this offering, as well as (2) following a hypothetical reset of the minimum quarterly distribution and target distribution levels based on the assumption that the average quarterly cash distribution amount per common unit during the two fiscal quarters immediately preceding the reset election was $            .

 
   
  Marginal Percentage
Interest in Distributions
  Quarterly
Distribution
Per Unit
Following
Hypothetical
Reset
 
  Quarterly
Distribution
Per Unit
Prior To Reset
 
  Common
Unitholders
  Incentive
Distribution
Rights

Minimum Quarterly Distribution

  $     100 %   0 % $

First Target Distribution

  above $        up to $             100 %   0 % above $        up to $        (1)

Second Target Distribution

  above $        up to $             85 %   15 % above $        up to $        (2)

Third Target Distribution

  above $        up to $             75 %   25 % above $        up to $        (3)

Thereafter

  above $             50 %   50 % above $        (3)

(1)
This amount is 115% of the hypothetical reset minimum quarterly distribution.

(2)
This amount is 125% of the hypothetical reset minimum quarterly distribution.

(3)
This amount is 150% of the hypothetical reset minimum quarterly distribution.

              The following table illustrates the total amount of available cash from operating surplus that would be distributed to the unitholders and our general partner (as the holder of our incentive distribution rights) in respect of incentive distribution rights, based on an average of the amounts distributed for the two quarters immediately prior to the reset. The table assumes that immediately prior to the reset there would be            common units outstanding and the average distribution to each common unit would be $            per quarter for the two consecutive non-overlapping quarters prior to the reset.

 
   
   
  Cash Distribution To General
Partner Prior To Reset
   
 
 
   
  Cash
Distributions
To Common
Unitholders
Prior To Reset
   
 
 
  Quarterly
Distribution
Per Unit
Prior To Reset
   
 
 
  Common
Units
  Incentive
Distribution
Rights
  Total   Total
Distributions
 

Minimum Quarterly Distribution

  $               $                $                $                $                $               

First Target Distribution

  above $        up to $                                        

Second Target Distribution

  above $        up to $                                        

Third Target Distribution

  above $        up to $                                        

Thereafter

  above $                                            
                           

      $                $                $                $                $               
                           
                           

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              The following table illustrates the total amount of available cash from operating surplus that would be distributed to the unitholders and the general partner (as the holder of our incentive distribution rights) in respect of incentive distribution rights, with respect to the quarter after the reset occurs. The table reflects that, as a result of the reset, there would be             common units outstanding, and that the average distribution to each common unit would be $            . The number of common units issued as a result of the reset was calculated by dividing (x) $            as the average of the amounts received by the general partner in respect of its incentive distribution rights for the two consecutive non-overlapping quarters prior to the reset as shown in the table above, by (y) the average of the cash distributions made on each common unit per quarter for the two consecutive non-overlapping quarters prior to the reset as shown in the table above, or $            .

 
   
   
  Cash Distribution to General
Partner After Reset
   
 
 
   
  Cash
Distributions
to Common
Unitholders
After Reset
   
 
 
  Quarterly
Distribution
Per Unit
After Reset
   
 
 
  Common
Units
  Incentive
Distribution
Rights
  Total   Total
Distributions
 

Minimum Quarterly Distribution

  $               $                $                $                $                $               

First Target Distribution

  above $        up to $                                        

Second Target Distribution

  above $        up to $                                        

Third Target Distribution

  above $        up to $                                        

Thereafter

  above $                                            
                           

      $                $                $                $                $               
                           
                           

              Our general partner (as the holder of our incentive distribution rights) will be entitled to cause the minimum quarterly distribution amount and the target distribution levels to be reset on more than one occasion, provided that it may not make a reset election except at a time when it has received incentive distributions for the immediately preceding four consecutive fiscal quarters based on the highest level of incentive distributions that it is entitled to receive under our partnership agreement.


Distributions from Capital Surplus

How Distributions from Capital Surplus Will be Made

              We will make distributions of available cash from capital surplus, if any, in the following manner:

    first, to all common unitholders and subordinated unitholders, pro rata, until the minimum quarterly distribution is reduced to zero, as described below;

    second, to all common unitholders and subordinated unitholders, pro rata, until we distribute for each common unit, an amount of available cash from capital surplus equal to any unpaid arrearages in payment of the minimum quarterly distribution on the outstanding common units; and

    thereafter, we will make all distributions of available cash from capital surplus as if they were from operating surplus.

              The preceding discussion is based on the assumption that we do not issue additional classes of equity securities.

Effect of a Distribution from Capital Surplus

              Our partnership agreement treats a distribution of capital surplus as the repayment of the initial unit price from this initial public offering, which is a return of capital. Each time a distribution

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of capital surplus is made, the minimum quarterly distribution and the target distribution levels will be reduced in the same proportion as the corresponding reduction in relation to the fair market value of the common units prior to the announcement of the distribution. Because distributions of capital surplus will reduce the minimum quarterly distribution and target distribution levels after any of these distributions are made, it may be easier for our general partner to receive incentive distributions and for the subordinated units to convert into common units. However, any distribution of capital surplus before the minimum quarterly distribution is reduced to zero cannot be applied to the payment of the minimum quarterly distribution or any arrearages.

              Once we reduce the minimum quarterly distribution and target distribution levels to zero, all future distributions will be made such that 50% is paid to all unitholders, pro rata, and 50% is paid to the holder or holders of incentive distribution rights, pro rata.


Adjustment to the Minimum Quarterly Distribution and Target Distribution Levels

              In addition to adjusting the minimum quarterly distribution and target distribution levels to reflect a distribution of capital surplus, if we combine our common units into fewer common units or subdivide our common units into a greater number of common units, we will proportionately adjust:

    the minimum quarterly distribution;

    the target distribution levels;

    the initial unit price;

    the arrearages per common unit in payment of the minimum quarterly distribution on the common units; and

    the number of subordinated units.

              For example, if a two-for-one split of the common units should occur, the minimum quarterly distribution, the target distribution levels and the initial unit price would each be reduced to 50% of its initial level, and each subordinated unit would be split into two subordinated units. If we combine our common units into a lesser number of units or subdivide our common units into a greater number of units, we will combine or subdivide our subordinated units using the same ratio applied to the common units. We will not make any adjustment by reason of the issuance of additional units for cash or property (including additional common units issued under any compensation or benefit plans).

              In addition, if legislation is enacted or if the official interpretation of existing law is modified by a governmental authority, so that we become taxable as a corporation or otherwise subject to taxation as an entity for federal, state or local income tax purposes, our partnership agreement specifies that the minimum quarterly distribution and the target distribution levels for each quarter may be reduced by multiplying each distribution level by a fraction, the numerator of which is available cash for that quarter (reduced by the amount of the estimated tax liability for such quarter payable by reason of such legislation or interpretation) and the denominator of which is the sum of available cash for that quarter (reduced by the amount of the estimated tax liability for such quarter payable by reason of such legislation or interpretation) plus our general partner's estimate of our aggregate liability for the quarter for such income taxes payable by reason of such legislation or interpretation. To the extent that the actual tax liability differs from the estimated tax liability for any quarter, the difference may be accounted for in subsequent quarters.

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Distributions of Cash Upon Liquidation

General

              If we dissolve in accordance with our partnership agreement, we will sell or otherwise dispose of our assets in a process called liquidation. We will first apply the proceeds of liquidation to the payment of our creditors. We will distribute any remaining proceeds to the unitholders and the holders of our incentive distribution rights, in accordance with their capital account balances, as adjusted to reflect any gain or loss upon the sale or other disposition of our assets in liquidation.

              The allocations of gain and loss upon liquidation are intended, to the extent possible, to entitle the holders of common units to a repayment of the initial value contributed by unitholders for their units in this offering, which we refer to as the "initial unit price" for each unit. The allocations of gain and loss upon liquidation are also intended, to the extent possible, to entitle the holders of outstanding common units to a preference over the holders of outstanding subordinated units upon our liquidation, to the extent required to permit common unitholders to receive their initial unit price plus the minimum quarterly distribution for the quarter during which liquidation occurs plus any unpaid arrearages in payment of the minimum quarterly distribution on the common units. However, there may not be sufficient gain upon our liquidation to enable the holders of common units to fully recover all of these amounts, even though there may be distributable cash flow to the holders of subordinated units. Any further net gain recognized upon liquidation will be allocated in a manner that takes into account the incentive distribution rights of our general partner.

Manner of Adjustments for Gain

              The manner of the adjustment for gain is set forth in our partnership agreement. If our liquidation occurs before the end of the subordination period, we will allocate any gain to our partners in the following manner:

    first, to the common unitholders, pro rata, until the capital account for each common unit is equal to the sum of:

      (1)
      the initial unit price;

      (2)
      the amount of the minimum quarterly distribution for the quarter during which our liquidation occurs; and

      (3)
      any unpaid arrearages in payment of the minimum quarterly distribution;

    second, to the subordinated unitholders, pro rata, until the capital account for each subordinated unit is equal to the sum of:

      (1)
      the initial unit price; and

      (2)
      the amount of the minimum quarterly distribution for the quarter during which our liquidation occurs;

    third, to all unitholders, pro rata, until we allocate under this paragraph an amount per unit equal to:

      (1)
      the sum of the excess of the first target distribution per unit over the minimum quarterly distribution per unit for each quarter of our existence; less

      (2)
      the cumulative amount per unit of any distributions of available cash from operating surplus in excess of the minimum quarterly distribution per unit that we distributed to the unitholders, pro rata, for each quarter of our existence;

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    fourth, 85% to all unitholders, pro rata, and 15% to our general partner (as the holder of our incentive distribution rights), until we allocate under this paragraph an amount per unit equal to:

      (1)
      the sum of the excess of the second target distribution per unit over the first target distribution per unit for each quarter of our existence; less

      (2)
      the cumulative amount per unit of any distributions of available cash from operating surplus in excess of the first target distribution per unit that we distributed 85% to the unitholders, pro rata, and 15% to our general partner (as the holder of our incentive distribution rights) for each quarter of our existence;

    fifth, 75% to all unitholders, pro rata, and 25% to our general partner (as the holder of our incentive distribution rights), until we allocate under this paragraph an amount per unit equal to:

      (1)
      the sum of the excess of the third target distribution per unit over the second target distribution per unit for each quarter of our existence; less

      (2)
      the cumulative amount per unit of any distributions of available cash from operating surplus in excess of the second target distribution per unit that we distributed 75% to the unitholders, pro rata, and 25% to our general partner (as the holder of our incentive distribution rights) for each quarter of our existence; and

    thereafter, 50% to all unitholders, pro rata, and 50% to our general partner (as the holder of our incentive distribution rights).

              The percentages set forth above are based on the assumption that our general partner has not transferred its incentive distribution rights and that we do not issue additional classes of equity securities.

              We may make special allocations of income and gain among the partners in a manner to create economic uniformity among the common units into which the subordinated units convert and the common units held by public unitholders.

              If the liquidation occurs after the end of the subordination period, the distinction between common units and subordinated units will disappear, so that clause (3) of the first bullet point above and all of the second bullet point above will no longer be applicable.

Manner of Adjustments for Losses

              If our liquidation occurs before the end of the subordination period, after making allocations of loss to the general partner and the unitholders in a manner intended to offset in reverse order the allocations of gains that have previously been allocated, we will generally allocate any loss to our general partner and unitholders in the following manner:

    first, to the holders of subordinated units in proportion to the positive balances in their capital accounts, until the capital accounts of the subordinated unitholders have been reduced to zero;

    second, to the holders of common units in proportion to the positive balances in their capital accounts, until the capital accounts of the common unitholders have been reduced to zero; and

    thereafter, 100% to our general partner.

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              The percentages set forth above are based on the assumption that our general partner has not transferred its incentive distribution rights and that we do not issue additional classes of equity securities.

              If the liquidation occurs after the end of the subordination period, the distinction between common units and subordinated units will disappear, so that all of the first bullet point above will no longer be applicable.

              We may make special allocations of loss among the partners in a manner to create economic uniformity among the common units into which the subordinated units convert and the common units held by public unitholders.

Adjustments to Capital Accounts

              Our partnership agreement requires that we make adjustments to capital accounts upon the issuance of additional units. In this regard, our partnership agreement specifies that we allocate any unrealized and, for tax purposes, unrecognized gain resulting from the adjustments to the unitholders and our general partner (as the holder of our incentive distribution rights) in the same manner as we allocate gain upon liquidation. In the event that we make positive adjustments to the capital accounts upon the issuance of additional units, our partnership agreement requires that we generally allocate any later negative adjustments to the capital accounts resulting from the issuance of additional units or upon our liquidation in a manner that results, to the extent possible, in the partners' capital account balances equaling the amount that they would have been if no earlier positive adjustments to the capital accounts had been made. In contrast to the allocations of gain, and except as provided above, we generally will allocate any unrealized and unrecognized loss resulting from the adjustments to capital accounts upon the issuance of additional units to the unitholders and our general partner based on their respective percentage ownership of us. In this manner, prior to the end of the subordination period, we generally will allocate any such loss equally with respect to our common and subordinated units. If we make negative adjustments to the capital accounts as a result of such loss, future positive adjustments resulting from the issuance of additional units will be allocated in a manner designed to reverse the prior negative adjustments, and special allocations will be made upon liquidation in a manner that results, to the extent possible, in our unitholders' capital account balances equaling the amounts they would have been if no earlier adjustments for loss had been made.

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

              You should read the following discussion of the financial condition for PES Logistics Partners, L.P. in conjunction with the pro forma combined balance sheet for PES Logistics Partners, L.P. included elsewhere in this prospectus. In this section, references to "we," "our," "us" or like terms when used in the present tense or prospectively, refer to PES Logistics Partners, L.P. and its subsidiaries, including the operating partnership.

              Because our operations will not commence until the closing of this offering when our parent contributes a 45% limited partner interest in the operating partnership and all of the outstanding membership interests in North Yard GP to us and we will be capitalized on a nominal basis prior to such time, we have not included any historical financial results in this "Management's Discussion and Analysis of Financial Condition."


Overview

              We are a fee-based, growth oriented traditional master limited partnership recently formed by our parent to own, operate, develop and acquire crude oil, refined product and other logistics assets. Upon the consummation of this offering, we will own the general partner interest and a 45% limited partner interest in the operating partnership, which will own and operate a crude oil rail unloading terminal located at our parent's Philadelphia refinery complex. We will generate revenue by charging fees for receiving, handling and transferring crude oil for our parent. We will not take ownership of or receive any payments based on the value of the crude oil we handle, and as a result, we will not have any direct exposure to the fluctuations in commodity prices.

              Our rail unloading terminal, which was completed on October 23, 2013, has the capacity to unload two crude oil unit trains, or 140,000 bpd, based on the industry-standard 104-car unit train configuration. Refining has commenced an expansion project, expected to be completed in mid-October 2014, to increase the unloading capacity of our terminal to three unit trains, or 210,000 bpd. Our rail unloading terminal was designed to unload 120-car unit trains and, if the rail industry moves to these more efficient trains, then the expanded capacity of our rail unloading terminal will improve to 240,000 bpd.


How We Generate Revenue

              We will generate revenue through our 45% limited partner interest in the operating partnership. The operating partnership will generate revenue by charging fees for receiving, handling and transferring crude oil. Following the closing of this offering, all of our revenue will be derived from our equity ownership in the operating partnership and its ten-year, fee-based commercial agreement with Refining. This commercial agreement with Refining will be supported by minimum volume commitments and inflation escalators, which we believe will enhance the stability and predictability of our cash flow over time.

              Under the commercial agreement, Refining will be obligated to throughput a minimum of 170,000 bpd through the rail unloading terminal. The volume of crude oil actually throughput at the rail unloading terminal will be measured by a custody transfer meter that measures the amount of crude oil leaving the terminal. Refining will bear the risk of loss at all times of any crude oil handled or delivered by Refining at the terminal and, unless the operating partnership experiences a spill or other release while the crude oil is in the operating partnership's custody, all volumetric losses and gains in crude oil will be for Refining's account.

              The operating partnership will charge an initial throughput fee of $1.90 per barrel for all throughput up to the minimum volume commitment. For any throughput volumes in excess of the minimum volume commitment, the operating partnership will initially charge Refining $0.50 per barrel

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(the "excess throughput fee"). The fees charged by the operating partnership will be increased annually by a percentage equal to the increase in the Consumer Price Index ("CPI"). In no event will the annual rate adjustments result in a reduction of the applicable fees.

              The initial term of this agreement will be ten years, and the agreement will automatically extend for two separate five-year periods thereafter unless terminated in advance by either party. For a detailed description of the operating partnership's commercial agreement with Refining, please read "Business—Commercial Agreement with Refining."


How We Evaluate Our Results of Operations

              Our management intends to use a variety of financial and operating metrics to analyze our performance. These metrics are significant factors in assessing our operating results and profitability and include: (i) volumes; (ii) operating and maintenance expenses; (iii) general and administrative expenses; (iv) financing expenses; (v) income tax expenses; and (vi) EBITDA and distributable cash flow. We define EBITDA and distributable cash flow below.

Volumes

              Our revenue will primarily depend on the volumes of crude oil that the operating partnership throughputs at the rail unloading terminal. The volumes of crude oil that the operating partnership throughputs will depend substantially on Refining's total operating margins, and more specifically on Refining's operating margins on domestic crude oil delivered by rail through the terminal as compared to its operating margins on alternative sources of crude oil. Although Refining will commit to minimum volumes under the commercial agreement with the operating partnership, our results of operations will be impacted by Refining's utilization of our assets in excess of its minimum volume commitments and our ability to identify and execute accretive acquisitions and organic expansion projects.

Operating and Maintenance Expenses

              Our management seeks to maximize the profitability of our operations by effectively managing operating and maintenance expenses. These expenses are comprised primarily of labor expenses, outside contractor expenses, insurance premiums, repairs and maintenance expenses, utility costs and lease expenses. These expenses generally remain relatively stable across broad ranges of throughput volumes but can fluctuate from period to period depending on the maintenance activities performed during that period. We will seek to manage our maintenance expenditures by scheduling maintenance activities over time to avoid significant variability in our cash flow.

General and Administrative Expenses

              Our general and administrative expenses include direct monthly charges from our parent, which we currently estimate will be approximately $1.0 million per year for the management of our logistics assets, and an annual fee of $2.0 million allocated by our parent for general corporate services, such as treasury, accounting and legal services. These expenses are allocated to us based on the nature of the expenses and our proportionate share of employee time and headcount. We also expect to incur approximately $4.0 million of incremental annual general and administrative expense as a result of being a publicly traded partnership. For more information about such fees and services, please read "Certain Relationships and Related Party Transactions—Agreements Governing the Transactions—Services and Secondment Agreement."

Financing Expenses

              At closing, we expect to enter into a            -year, $             million revolving credit facility to fund working capital, acquisitions, distributions and capital expenditures and for other general

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partnership purposes. We will incur interest expense on any borrowings, will pay a commitment fee for the unutilized portion of the revolving credit and will amortize the debt issuance costs incurred in connection with the credit facility over the term of the credit facility.

Income Tax Expenses

              We will be taxed as a partnership for U.S. federal and state income tax purposes, with each partner being separately taxed on its share of taxable income; therefore, there will be no federal or state income tax expense in our financial statements. The operating partnership is subject to certain income taxes that have a combined effective rate of 6.45%. Because the rail unloading terminal is located entirely within a Pennsylvania KOZ, we expect that the operating partnership will receive certain annual tax benefits. The KOZ expires on December 31, 2020, at which time our operating partnership will no longer benefit from the KOZ tax credit.

EBITDA and Distributable Cash Flow

              We define EBITDA as net income attributable to controlling and noncontrolling interests before interest expense, net and depreciation expense. To analyze our performance after the closing of this offering we intend to use distributable cash flow, which we define as EBITDA less net cash paid for interest, maintenance capital expenditures, income taxes and cash distributions to noncontrolling interests (which represent cash distributions to our parent attributable to its ownership interest in our operating partnership). EBITDA and distributable cash flow are not presentations made in accordance with GAAP.

              EBITDA and distributable cash flow are non-GAAP supplemental financial measures that management and external users of our 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 EBITDA, financing methods;

    the ability of our assets to generate sufficient cash flow 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.

              We believe that the presentation of EBITDA and distributable cash flow will provide useful information to investors in assessing our financial condition and results of operations. EBITDA and distributable cash flow should not be considered alternatives to net income, operating income, cash from operations or any other measure of financial performance or liquidity presented in accordance with GAAP. EBITDA and distributable cash flow have important limitations as analytical tools because they exclude some but not all items that affect net income, operating income and cash from operations. Additionally, because EBITDA and distributable cash flow may be defined differently by other companies in our industry, our definitions of EBITDA and distributable cash flow may not be comparable to similarly titled measures of other companies, thereby diminishing its utility.


Other Factors That Will Significantly Affect Our Results

Results of Operations and Financial Condition of Refining

              We will generate revenue by charging fees for receiving, handling and transferring crude oil. All of our revenue and cash flow will be initially derived from our equity ownership in the operating

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partnership and its commercial agreement with Refining. Under this commercial agreement, Refining's minimum throughput obligation at the operating partnership's rail unloading terminal will be 170,000 bpd. Refining owns and operates the Philadelphia refinery complex, which is comprised of two oil refineries configured to process light, sweet crude oil, with a combined throughput capacity of approximately 335,000 bpd and a weighted average Nelson Complexity Index of 9.8, as well as a portfolio of associated logistics assets supporting the refineries.

              The volumes of crude oil that the operating partnership throughputs will depend substantially on Refining's total operating margins, and more specifically on Refining's operating margins on domestic crude oil delivered by rail through the terminal as compared to its operating margins on alternative sources of crude oil. Refining's margins are dependent mostly upon the price of crude oil or other refinery feedstocks and the price of refined products. These prices are affected by numerous factors beyond our or Refining's control, both domestic and global, including North American crude oil production levels, changes in North American refining capacity and the global supply and demand for crude oil and gasoline and other refined products. As a result of increases in North American crude oil production over the past several years, along with a long-standing U.S. ban on exports of domestic crude oil outside of North America, the price of domestic crude oil currently trades at a discount to foreign crude oil, and Refining therefore currently has an economic incentive to maximize the volume of domestic crude oil it processes, including crude oil delivered through the rail unloading terminal.

              From its inception on September 8, 2012, Refining has embarked on a strategy by which it seeks to purchase an increasing amount of domestic crude oil that currently trades at a discount to foreign crude oil in order to lower the overall cost of the feedstock for its refinery operations. Because our rail unloading terminal is located onsite at the Philadelphia refinery complex and has direct access to Class I railroads, it offers a dedicated, economic means by which Refining can source light, sweet domestic crude oil. Our rail unloading terminal is integral to Refining's efforts to supply its refineries with lower-cost domestic crude oil, particularly from the Bakken region. In addition, Refining has begun construction on a project to expand the rail unloading capacity from 140,000 to 210,000 bpd to enhance Refining's ability to increase the amount of domestic crude oil run through its refinery operations.

              Declines in North American crude oil production, a lifting of the U.S. crude oil export ban, or a significant increase in North American crude oil refining capacity could cause domestic crude oil prices to rise relative to foreign crude oil, and Refining may therefore reduce the volume of crude oil that the operating partnership handles. In addition, global economic weakness could depress demand for refined products and cause a reduction in Refining's operating margins. The impact of low demand may be further compounded by excess global refining capacity and high inventory levels. Over the past five years as the global economy was slowly recovering from the 2008-2009 recession, several refineries in North America and Europe have been temporarily or permanently shut down in response to falling demand and excess refining capacity. If the demand for refined products decreases, or if Refining's crude oil costs exceed the value of the refined products it produces, Refining may reduce the volumes of crude oil that we handle.

              Because all of the operating partnership's revenue and cash flow will be initially derived from its commercial agreement with Refining, our distributable cash flow will be dependent upon Refining's financial condition and its ability to meet its contractual obligations to the operating partnership, including the payment for any potential shortfall in its minimum volume commitment. As of June 30, 2014, Refining's total long-term debt (including the current portion) was $537 million and capital lease obligations (including the current portion) were $2 million. The long-term debt matures in April 2018. Under its debt agreements, Refining is required to make mandatory prepayments of the long-term debt upon the occurrence of specified events, including certain asset sales, a change in control of Refining, or an event of a default as defined in such agreements. Refining's credit rating is currently B1/B+ as assigned by Moody's and Standard & Poor's, respectively.

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              As of June 30, 2014, Refining had total liquidity of $176 million, comprised of cash and borrowing capacity under its $100 million revolving credit facility. Refining is a party to a supply and offtake agreement with JP Morgan Ventures Energy Corporation ("JPMVEC") which expires in September 2017, but may be terminated with 90 days' notice prior to September 8, 2015 or September 8, 2016. Under this agreement, JPMVEC supplies substantially all of Refining's crude oil and noncrude feedstocks. JPMVEC purchases and holds legal title to the crude oil and other feedstocks, and then stores them in tank facilities. Refining purchases the crude oil and noncrude feedstocks from JPMVEC at daily market prices when they are drawn out of the storage tanks and processed at the refineries. JPMVEC also purchases substantially all of Refining's production of blendstocks and refined products. On a daily basis, Refining sells these products to JPMVEC at market prices for the respective products and title passes when the products are delivered to storage tanks at the refineries. Refining pays JPMVEC transaction and other fees under the supply and offtake agreement. By entering into this supply and offtake agreement, the working capital requirements and cash flow volatility of Refining's business are substantially reduced as compared to other refiners that do not utilize such agreements.

              For more information about Refining's results of operations and financial condition and the risks that may affect Refining's business, please read "Business—Our Relationship with Refining," "Business—Refining's Operations," "Business—Refining's Summary Financial and Operating Information" and "Risk Factors—All of our revenue and cash flow will be initially derived from our equity ownership in the operating partnership, and Refining will initially account for all of the operating partnership's revenues. Therefore, we and the operating partnership will be subject to the business risks of Refining. If Refining is unable to satisfy its obligations under the commercial agreement with the operating partnership for any reason, our revenues would decline and our financial condition, results of operations, cash flows, and ability to make distributions to our unitholders would be adversely affected."

Acquisition Opportunities

              We plan to pursue strategic acquisitions that complement our existing assets and that will provide attractive returns for our unitholders. We may acquire additional ownership interests in the operating partnership from our parent, or additional logistics assets from Refining or third parties. We have an option to purchase the NGL rail terminal that is currently under construction at Refining's site. We also have a right of first offer on certain logistics assets retained by Refining to the extent it decides to sell or otherwise dispose of any of those assets. In addition, Refining may, under certain circumstances, offer us the opportunity to purchase additional logistics assets that it may acquire or construct in the future. Please read "Certain Relationships and Related Party Transactions—Agreements Governing the Transactions—Omnibus Agreement." Under its commercial agreement with Refining, the operating partnership will have the option to purchase certain assets at Refining's Girard Point and Point Breeze refineries related to its business in the event Refining permanently shuts down the crude unit operations at either refinery. Furthermore, we believe our current asset base and our knowledge of the regional markets in which we operate will allow us to target and consummate accretive third-party acquisitions. We intend to pursue these opportunities both independently and jointly with our parent in connection with our parent's growth strategy. However, if we do not make acquisitions on economically acceptable terms, our future growth will be limited, and the acquisitions we do make may reduce, rather than increase, our distributable cash flow.

Third-Party Business

              Immediately following the closing of this offering, Refining will account for all of the operating partnership's revenues. We plan to seek to diversify our customer base by expanding our asset portfolio to include midstream logistics assets that service third-party customers. Unless we are successful in

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acquiring or developing midstream logistics assets that service third-party customers, our ability to increase volumes will be dependent on Refining, which has no obligation under the commercial agreement to supply the operating partnership's terminal with additional volumes in excess of its minimum volume commitments. If we are unable to increase throughput volumes, future growth may be limited.


Capital Resources and Liquidity

              Our principal liquidity requirements are to finance current operations, to fund maintenance capital expenditures and periodic expansion capital, and to service our debt. Following the closing of this offering, we expect our ongoing sources of liquidity to include cash generated from operations, borrowings under our revolving credit facility, and the issuance of additional debt and equity securities as appropriate given market conditions. Because we intend to pay the minimum quarterly distributions discussed below, we expect to fund future expansion capital expenditures primarily from external sources including borrowings under our revolving credit facility, and issuances of debt and equity securities. We expect that these sources of funds will be adequate to provide for our short-term and long-term liquidity needs. Our ability to meet our debt service obligations and other capital requirements, including capital expenditures, as well as make acquisitions, will depend on our future operating performance which, in turn, will be subject to general economic, financial, business, competitive, legislative, regulatory and other conditions, many of which are beyond our control. As a normal part of our business, depending on market conditions, we will from time to time consider opportunities to repay, redeem, repurchase or refinance our indebtedness.

Distributions to Unitholders

              We intend to pay a minimum quarterly distribution of $            per unit per quarter, which equates to $             million per quarter, or $             million per year, based on the number of common and subordinated units to be outstanding immediately after closing of this offering. We do not have a legal or contractual obligation to pay this distribution. Please read "Our Cash Distribution Policy and Restrictions on Distributions."

Credit Facility

              At closing, we expect to enter into an agreement for a            -year, $             million senior secured revolving credit facility with                          as administrative agent, and a syndicate of lenders. Any borrowings outstanding under this revolving credit facility as of the closing date will be repaid from the proceeds of this offering. The revolving credit facility will be available to fund working capital, acquisitions, distributions and capital expenditures and for other general partnership purposes. We expect the revolving credit agreement to have customary terms and conditions, including the following:

    borrowings will bear interest at either a base rate plus an applicable margin, or at LIBOR plus an applicable margin;

    a $             million sublimit for standby letters of credit and a $             million sublimit for swingline loans;

    obligations under the credit facility and certain cash management obligations designated by us will be guaranteed by                         , and will be secured by a first priority lien on our assets (including our equity interests in our operating partnership) and our operating partnership's assets other than excluded assets and a guaranty of collection from                          ;

    affirmative and negative covenants customary for revolving credit facilities of this nature that, among other things, limit or restrict our ability to incur or guarantee debt, incur liens, make

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      investments, make restricted payments, amend material contracts, engage in business activities, engage in mergers, consolidations and other organizational changes, sell, transfer or otherwise dispose of assets or enter into burdensome agreements or enter into transactions with affiliates on terms that are not arm's length;

    we will generally be prohibited from making cash distributions (subject to certain exceptions) except so long as no default or event of default exists or would be caused thereby, and only to the extent permitted by our partnership agreement, we may make cash distributions to unitholders up to the amount of our available cash (as defined in our partnership agreement); and

    customary events of default, including, but not limited to (and subject to grace periods in certain circumstances), the failure to pay any principal, interest or fees when due, failure to perform or observe any covenant contained in the credit agreement or related documentation, any representation or warranty made in the agreements or related documentation being untrue in any material respect when made, default under certain material debt agreements, commencement of bankruptcy or other insolvency proceedings, certain changes in our ownership or the ownership or board composition of our general partner and material judgments or orders. Upon the occurrence and during the continuation of an event of default under the agreements, the lenders may, among other things, terminate their commitments, declare any outstanding loans to be immediately due and payable and/or exercise remedies against us and the collateral as may be available to the lenders under the agreements and related documentation or applicable law.

Capital Expenditures

              Our operations are expected to require capital investments to expand, upgrade or enhance existing operations and to meet environmental and operational regulations. Our capital requirements are expected to consist of maintenance capital expenditures and expansion capital expenditures. Maintenance capital expenditures are cash expenditures (including expenditures for the construction or development of new capital assets or the replacement, improvement or expansion of existing capital assets) made to maintain, over the long-term, our operating capacity or operating income. Expansion capital expenditures include expenditures to construct or acquire assets or businesses, or expand our existing terminal to increase throughput capacity. We have budgeted maintenance capital expenditures of approximately $2.0 million for the twelve months ending September 30, 2015.

              We currently have not included any potential future acquisitions in our budgeted capital expenditures for the twelve months ending September 30, 2015. Following this offering, we expect that we will rely primarily upon borrowings under our revolving credit facility to fund expansion capital expenditures. We may also rely on other external sources including issuances of equity and debt securities to fund significant future expansions.

              Under the omnibus agreement, during the first five years after the closing of this offering our parent has agreed to reimburse our operating partnership for any costs, up to $20.0 million per event (net of any insurance recoveries), that we incur for repairs required due to the failure of any contributed asset to operate in substantially the same manner and condition as such asset was operating prior to the closing of this offering.

Contractual Obligations

              We did not have any contractual obligations as of June 30, 2014.

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Effects of Inflation

              Inflation in the United States has been relatively low in recent years and we do not expect it to have a material impact on our future results of operations.

Off Balance Sheet Arrangements

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


Critical Accounting Policies

              The preparation of our financial statements will require management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and the disclosures of contingent assets and liabilities. Significant items that will be subject to such estimates and assumptions consist of depreciation, long-lived asset impairment and environmental remediation activities. Although management will base its estimates on historical experience and various other assumptions that are believed to be reasonable under the circumstances, actual results may differ to some extent from the estimates on which the our consolidated financial statements are prepared at any point in time.

Depreciation

              The plants and equipment to be contributed to our operating partnership, in which we will have a general partner interest and a 45% limited partner interest, will be recorded at historical cost as it is considered to be a reorganization of entities under common control. These assets have been depreciated on a straight-line basis over their estimated useful lives. Useful lives are based on historical experience and are adjusted when changes in planned use, technological advances or other factors show that a different life would be more appropriate. Changes in useful lives that do not result in the impairment of an asset are recognized prospectively. In connection with the construction and placement of these assets into service during 2013, our parent established the initial useful lives of the assets. There have been no significant changes in the useful lives of the operating partnership's plants and equipment since this determination was made.

Impairment of Long-Lived Assets

              Long-lived assets that are not held for sale, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. Such events and circumstances include, among other factors: operating losses; unused capacity; market value declines; technological developments resulting in obsolescence; changes in demand for our services or in end-use goods manufactured by Refining or others utilizing Refining's products as raw materials; changes in our business plans or those of Refining or our parent, suppliers or other business partners; a decision to dispose of an asset; changes in competition and competitive practices; uncertainties associated with the United States and world economies; changes in the expected level of capital, operating or environmental remediation expenditures; and changes in governmental regulations or actions. Additional factors impacting the economic viability of long-lived assets are described under "Forward-Looking Statements".

              Long-lived assets that are not held for sale are considered impaired when the undiscounted net cash flows expected to be generated by the assets are less than their carrying amount. Such estimated future cash flows are highly subjective and are based on numerous assumptions about future operations and market conditions. The impairment recognized is the amount by which the carrying amount exceeds the fair market value of the impaired asset. It is also difficult to precisely estimate fair market value because quoted market prices for our long-lived assets may not be readily available and offers by

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potential purchasers are subject to uncertainty as to the ultimate likelihood of completing a sale until a binding agreement is executed. Therefore, fair market value is generally based on a combination of the present values of estimated future cash flows using discount rates commensurate with the risks associated with the assets being reviewed for impairment, comparable sales transactions and offers by potential purchasers as adjusted to reflect the probability of completing a sales transaction. Such estimates also reflect potential alternative uses of the facilities, where appropriate.

              A decision to dispose of an asset may necessitate an impairment review. If the criteria of assets held for sale are met, an impairment would be recognized for any excess of the aggregate carrying amount of assets and liabilities included in the disposal group over their fair value less cost to sell.

Environmental Remediation Activities

              We are subject to extensive and frequently changing federal, state and local laws and regulations, including, but not limited to, those relating to the discharge of materials into the environment or that otherwise relate to the protection of the environment and waste management. These laws and regulations may require environmental assessment and/or remediation efforts at our facilities. We believe that neither we nor our affiliates have any environmental liabilities relating to events prior to PES' acquisition of the Philadelphia refinery complex. Our affiliates entered into several agreements, including an August 14, 2012 Consent Order and Agreement by and among the Pennsylvania Department of Environmental Protection, Refining, and Sunoco, Inc. (R&M), and an August 9, 2012 Settlement Agreement and Covenant Not to Sue by and among PES, Refining, EPA, the Department of the Interior, the National Oceanic and Atmospheric Administration, and Sunoco, Inc. (R&M) (collectively, the "Environmental Agreements"), that provide various protections from liabilities associated with historical and legacy environmental contamination relating to the refinery complex prior to its acquisition by PES. These protections extend to our parent and Refining, and can be extended to us. Sunoco, Inc. has also provided an indemnity for environmental conditions existing at the time of PES' acquisition of the Philadelphia refinery complex. Our operating partnership will lease the land on which its assets reside. Accordingly, any environmental liabilities resulting from events occurring after PES' acquisition of the Philadelphia refinery complex but prior to the formation of the operating partnership are liabilities of our parent. Under the omnibus agreement, the operating partnership will provide indemnities to our parent for remediating contamination that occurs as a result of the operations of the contributed assets subsequent to their contribution to the operating partnership.

              Any future accruals for environmental remediation activities will reflect anticipated work at identified sites where an assessment has indicated that cleanup costs are probable and reasonably estimable. Such accruals will be undiscounted and based on currently available information, estimated timing of remedial actions and related inflation assumptions, existing technology and presently enacted laws and regulations. It is often extremely difficult to develop reasonable estimates of future site remediation costs due to changing regulations, changing technologies and their associated costs, and changes in the economic environment. Engineering studies, historical experience and other factors are used to identify and evaluate remediation alternatives and their related costs in determining the estimated accruals for environmental remediation activities. Losses attributable to unasserted claims would also be reflected in the accruals to the extent they are probable of occurrence and reasonably estimable.

              Under various environmental laws, including the Resource Conservation and Recovery Act ("RCRA") (which relates to solid and hazardous waste treatment, storage and disposal), the operating partnership could be subjected to corrective remedial action at its facilities for events occurring subsequent to its formation. Accruals could include amounts to contain the impact on the facility property, as well as to address known, discrete areas requiring remediation within the facilities, mitigation of surface water impacts and prevention of off-site migration.

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              In general, remediation sites/issues would be evaluated individually based upon information available for the site/issue. Estimates of environmental remediation costs could also frequently involve evaluation of a range of estimates. In many cases, it is difficult to determine that one point in the range of loss estimates is more likely than any other. In these situations, existing accounting guidance requires that the minimum of the range be accrued. Accordingly, the low end of the range often represents the amount of loss which would be recorded.

              In summary, total future costs for environmental remediation activities for which we may be responsible will depend upon, among other things, the identification of sites, the determination of the extent of the contamination at each site, the timing and nature of required remedial actions, the technology available and needed to meet the various existing legal requirements, the nature and terms of cost-sharing arrangements with our parent and other potentially responsible parties, the availability of insurance coverage, the nature and extent of future environmental laws and regulations, inflation rates, terms of consent agreements or remediation permits with regulatory agencies and the determination of the operating partnership's liability at the site, if any, in light of the number, participation level and financial viability of the other parties and the Environmental Agreements. The recognition of additional losses, if and when they were to occur, would likely extend over many years. As a result, from time to time, significant charges against income for environmental remediation may occur; however, management does not believe that any such charges would have a material adverse impact on the our consolidated financial position.


Qualitative and Quantitative Disclosures About Market Risk

              Market risk is the risk of loss arising from adverse changes in market rates and prices. Because we will not own the crude oil that is distributed through our facilities, we will not have any direct exposure to risks associated with fluctuating commodity prices.

              We expect that debt we incur under our revolving credit facility will bear interest at a variable rate and will expose us to interest rate risk. A 1.0% change in the interest rate under this facility, assuming we were to borrow all $             million under our revolving credit facility, would result in a $             million change in our interest expense.


New Accounting Pronouncement

              In May 2014, the Financial Accounting Standards Board issued ASU No. 2014-09, Revenues from Contracts with Customers (Topic 606) ("ASU 2014-09") a new standard on the recognition of revenue from contracts with customers that is designed to create greater comparability for financial statement users across industries and jurisdictions. Under ASU 2014-09, companies will recognize revenue to depict the transfer of goods or services to customers in amounts that reflect the payment to which a company expects to be entitled in exchange for those goods or services under a five-step process which includes: identifying the contract with a customer and the contract's separate performance obligations, determining the transaction price, allocating the transaction price to any separate performance obligations in the contract and recognizing the revenue when (or as) the entity satisfies its performance obligation(s). The standard also will require enhanced disclosures and provide more comprehensive guidance for transactions such as service revenue and contract modifications. Guidance for multiple-element arrangements also has been enhanced. The amendments would be effective for us for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. Early application is not permitted. Our management is currently evaluating the impact this new accounting pronouncement will have on its financial statements.

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BUSINESS

Overview

              We are a fee-based, growth oriented traditional master limited partnership recently formed by our parent to own, operate, develop and acquire crude oil, refined product and other logistics assets. Upon the consummation of this offering, we will own the general partner interest and a 45% limited partner interest in the operating partnership, which will own and operate a crude oil rail unloading terminal located at our parent's Philadelphia refinery complex. We have no ownership interest in Refining or the Philadelphia refinery complex. We will generate revenue by charging fees for receiving, handling and transferring crude oil. We will not take ownership of, or receive any payments based on the value of, the crude oil we handle, and as a result, we will not have any direct exposure to the fluctuations in commodity prices.

              All of our revenue and cash flow will be initially derived from our equity ownership in the operating partnership and its ten-year, fee-based commercial agreement with Refining. This commercial agreement with Refining will be supported by quarterly minimum volume commitments and inflation escalators. We believe that the nature of this arrangement will enhance the stability and predictability of our cash flow over time.

              We intend to seek opportunities to grow our business by acquiring additional limited partner interests in the operating partnership from our parent and additional assets from Refining and third parties and through organic growth projects, including our terminal expansion project described below. We believe that the opportunity to acquire additional limited partner interests in the operating partnership will provide us with significant near-term growth. Our parent, through Refining, is an independent petroleum refiner and supplier of unbranded transportation fuels, petrochemical feedstocks and other petroleum products, and we were formed by our parent to be the primary vehicle to expand the logistics assets supporting Refining's business. Refining owns and operates the Philadelphia refinery complex, which is the largest refining complex on the East Coast and is comprised of two oil refineries configured to process light, sweet crude oil, with a combined throughput capacity of approximately 335,000 bpd and a weighted average Nelson Complexity Index of 9.8, as well as a portfolio of associated logistics assets supporting the refineries. We expect that our parent and Refining will serve as critical sources of our future growth by providing us with various acquisition opportunities. Upon consummation of this offering, we will enter into an omnibus agreement with our parent and Refining, pursuant to which our parent will grant us a right of first offer on the limited partner interests that it owns in the operating partnership and Refining will grant us an option to acquire the NGL rail terminal currently under construction at Refining's Philadelphia refinery complex and a right of first offer to purchase from Refining other logistics assets that it will retain or that it may acquire or construct in the future. Please read "Certain Relationships and Related Party Transactions—Agreements Governing the Transactions—Omnibus Agreement."

              Our rail unloading terminal has the capacity to unload two crude oil unit trains, or 140,000 bpd, based on the industry-standard 104-car unit train configuration. Refining has commenced an expansion project, expected to be completed in mid-October 2014, to increase the unloading capacity of our terminal to three unit trains, or 210,000 bpd. Our rail unloading terminal was designed to unload 120-car unit trains and, if the rail industry moves to these more efficient trains, then the expanded capacity of our rail unloading terminal will improve to 240,000 bpd.


Competitive Strengths

              We believe that the following competitive strengths position us to successfully execute our business strategies:

              Our Rail Unloading Terminal is Integral to Refining's Domestic Light Crude Strategy.    Refining has embarked on a strategy by which it seeks to purchase an increasing amount of domestic crude oil that

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currently trades at a discount to foreign crude oil in order to lower the overall cost of the feedstock for its refinery operations. Because our rail unloading terminal is located onsite at the Philadelphia refinery complex and has direct access to a Class I railroad mainline it offers a dedicated, economic means by which Refining can source light, sweet domestic crude oil. In addition, Refining has begun construction on a project to expand the rail unloading capacity from 140,000 bpd to 210,000 bpd to enhance Refining's ability to increase the amount of domestic crude oil run through its refinery operations.

              Newly Constructed, World-Class Facility.    Our rail unloading terminal is a purpose-built, recently completed facility, with 140,000 bpd of unloading capacity. Upon the completion of Refining's expansion project in mid-October 2014, the terminal will have 210,000 bpd capacity, enabling it to unload 63% of Refining's overall capacity, and will be the largest crude oil rail terminal on the East Coast. The terminal is located within Refining's complex, and it connects directly with a Class I railroad mainline. This feature allows us to unload unit trains and transfer crude oil directly into the refineries without additional handling.

              Ten-Year, Fee-Based Contract with Minimum Volume Commitments.    All of our revenue and cash flow will be initially derived from our equity ownership in the operating partnership and its ten-year, fee-based commercial agreement with Refining, which will be supported by minimum quarterly volume commitments and inflation escalators. We believe this agreement with Refining will generate stable and predictable cash flows.

              Relationship with Our Parent.    We will serve as our parent's primary vehicle to expand its logistics business supporting Refining and third parties. As the owner of our general partner interest, all of our incentive distribution rights and a        % limited interest in us, we believe that our parent will be incentivized to grow our business. Additionally, we believe our parent will offer us the opportunity to acquire all or a portion of its 55% limited partner interest in our operating partnership pursuant to the right of first offer under the omnibus agreement.

              Relationship with Our Parent and Refining.    We believe that our parent will be incentivized to grow our business as a result of Refining's stated strategies of increasing its access to domestic crude oil and growing its logistics capabilities. In particular, we expect to benefit from the following aspects of our relationship with our parent and Refining:

    Option to acquire NGL rail terminal.  A third party is currently constructing the NGL rail terminal at Refining's Philadelphia refinery complex, which is expected to be completed in fourth quarter 2014. Refining has agreed to purchase the terminal from the third party on an installment sale basis over time and has an option to accelerate this purchase and acquire the terminal upon its completion at any time from the third party at a pre-determined price. We will have the ability to cause Refining to exercise this option and, upon such exercise, to acquire the NGL rail terminal and associated real estate rights from Refining at their net book value as of the closing date of the acquisition. Prior to causing Refining to exercise the option, we would negotiate a fee-based services agreement with Refining with respect to the use by Refining of the NGL rail terminal on agreed upon terms and enter into a services agreement upon the closing of the acquisition. The NGL rail terminal will include 13 railroad sidings, 36 loading/unloading racks and 100 rail car storage spots.

    Acquisition opportunities.  Under the omnibus agreement, Refining will grant us a right of first offer to acquire certain logistics assets that it will retain or that it may acquire or construct in its existing area of operation in the future. We also may have the opportunity to jointly pursue strategic acquisitions with Refining that complement and grow our asset base. We believe that opportunities for us to acquire assets under the omnibus agreement or participate in strategic acquisitions with Refining will result from Refining's current crude oil sourcing strategy, as well as its opportunity to source natural gas and NGLs in the future, and Refining's downstream activities.

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        Domestic crude oil sourcing strategy.  Refining has made significant progress in executing its strategy of transitioning its feedstock slate from foreign crude oil to less expensive domestic crude oil. The completion of our rail unloading terminal in October 2013, marked a significant step for Refining in implementing its strategy of increasing its domestic crude oil logistics and processing capabilities. The supply chain to deliver domestic crude oil from the midcontinent to the East Coast of the United States is developing and involves exploration and production, gathering, storage, loading terminal operation, rail car fleet ownership and management, unloading terminal operation and the ownership and operation of marine vessels under the Jones Act. Because Refining operates the largest refining complex on the East Coast, with combined crude oil throughput capacity of 335,000 bpd, it is a significant player in the evolving domestic crude oil supply chain. We have the potential opportunity to construct or acquire assets that will advance Refining's domestic crude oil sourcing strategy. Given our relationship with Refining, we would expect to operate these assets under long-term, fee-based agreements.

        Domestic natural gas and NGL sourcing strategy.  Increasing production of natural gas and associated NGLs from the Marcellus shale formation in Pennsylvania has the potential to create opportunities for the development of additional logistics and manufacturing assets to bring these resources to market. Given its proximity, large site availability for new projects and existing industrial infrastructure, Refining's complex is well situated to build complementary businesses that utilize natural gas and NGLs as feedstocks and that are synergistic with its refining operations. Should these opportunities develop, we expect to facilitate this growth by constructing or acquiring logistics assets that provide access to these feedstocks and delivery of the resultant products to end-markets.

        Downstream activities.  Refining benefits from its location in PADD I, which is the largest refined products market in the United States. Downstream of the refinery complex we may have opportunities to participate in Refining's marketing strategy by buying or building midstream logistics assets that handle refined products such as marine vessels, storage and blending terminals and wholesale truck racks.

    Access to operational and industry expertise.  We expect to benefit from Refining's extensive operational, commercial and technical expertise, as well as its industry relationships, as we seek to optimize and expand our existing asset base.

              Experienced Management Team.    Our management team is experienced in the operation of refining logistics assets and the execution of organic growth and acquisition strategies. Our management team averages more than 20 years of industry experience and includes some of the most senior officers of our parent.

              Financial Flexibility.    At the closing of this offering, we expect to enter into a        -year $         million revolving credit facility, which will remain undrawn at closing. We believe we will have the financial flexibility to execute our growth strategy through the available borrowing capacity under our revolving credit facility and our ability to access the debt and equity capital markets.

              We cannot assure you, however, that we will be able to utilize our strengths to successfully execute our business strategies described below. For further discussion of the risks that we face, please read "Risk Factors."

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Strategies

              Our primary business objectives are to maintain stable and predictable cash flows and to increase our quarterly cash distribution per unit over time. We intend to accomplish these objectives by executing the following business strategies:

              Generate Stable, Fee-Based Cash Flow.    We intend to generate stable and predictable cash flows over time by providing fee-based logistics services. All of our revenue and cash flow will be initially derived from our equity ownership in the operating partnership and its ten-year, fee-based agreement with Refining, which will be supported by minimum quarterly volume commitments and inflation escalators. Pursuant to this agreement, we will not have direct exposure to the fluctuations in commodity prices. As we grow our business beyond our current facilities, we will seek to enter into similar fee-based contracts with third parties that generate stable and predictable cash flows.

              Pursue Accretive Acquisitions from Our Parent and Refining.    In connection with this offering, we will enter into an omnibus agreement, pursuant to which our parent and Refining will grant us rights of first offer on several sets of assets as described below that we expect to drive our growth strategy. Specifically, our parent will grant us a right of first offer to purchase the limited partner interests that it owns in the operating partnership. We will also have the option to purchase from Refining the NGL rail terminal, as well as a right of first offer to purchase from Refining other logistics assets that it will retain or that it may acquire or construct in the future.

              Pursue Attractive Organic Growth Opportunities.    We intend to pursue organic growth projects that complement our terminal's existing capacity and our own operational footprint, including extending our reach upstream and downstream of Refining. We expect to collaborate with Refining and other potential third-party customers to identify opportunities to construct assets and build businesses that help them pursue their business strategies, while providing us with stable cash flow through fee-based service agreements.

              Third-Party Acquisitions.    We intend to analyze and expect to pursue acquisitions of complementary assets owned by third parties. In addition, in conjunction with Refining, we expect to monitor the marketplace to identify and pursue asset acquisitions from third parties that complement or diversify our existing operations.

              Maintain Safe, Reliable and Efficient Operations.    We are committed to maintaining and improving the safety, reliability, environmental compliance and efficiency of our operations. We will seek to improve our operating performance through our commitment to our preventive maintenance program and to employee training and development programs. We will continue to emphasize safety in all aspects of our operations. We believe these objectives are integral to maintaining stable cash flows and critical to the success of our business.

              We cannot assure you, however, that we will be able to implement our business strategies described above. For further discussion of the risks that we face, please read "Risk Factors."


Growth Opportunities

              We believe that our relationship with our parent will provide us with substantial future growth opportunities. Upon the consummation of this offering, our parent will own a 55% limited partner interest in the operating partnership and will grant us a right of first offer to purchase all or a portion of this ownership interest in one or more transactions.

              Our relationship with Refining should also provide us with a number of potential future growth opportunities. A third party is currently constructing the NGL rail terminal at Refining's Philadelphia refinery complex, which is expected to be completed in fourth quarter 2014. Refining has agreed to purchase the terminal from the third party on an installment sale basis over time and has an option to

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accelerate this purchase and acquire the terminal upon its completion at any time from the third party at a pre-determined price. We will have the ability to cause Refining to exercise this option and, upon such exercise, to acquire the NGL rail terminal and associated real estate rights from Refining at their net book value as of the closing date of the acquisition. Prior to causing Refining to exercise the option, we would negotiate a fee-based services agreement with Refining with respect to the use by Refining of the NGL rail terminal on agreed upon terms and enter into a services agreement upon the closing of the acquisition. The NGL rail terminal will include 13 railroad sidings, 36 loading/unloading racks and 100 rail car storage spots.

              In addition, Refining will grant us a right of first offer under the omnibus agreement to acquire the following assets for a period of 10 years after the closing of this offering:

    Point Breeze Refinery Terminal and Barge Docks.  The Point Breeze refinery terminal consists of ten tanks with capacity to store 1.8 million barrels of crude oil and 53 tanks with shell capacity of approximately 3.3 million barrels for storage of intermediates, refined products and gasoline blend stock. It also includes a barge dock that transfers gasoline and distillate products to and from the Point Breeze terminal. The barge dock has two berths with a draft of 26 feet. In addition, the Point Breeze terminal has pipeline connections to the Sunoco Logistics Fort Mifflin Crude Terminal.

    Schuylkill River Tank Farm and Girard Point Docks.  The Schuylkill River tank farm consists of 30 tanks with capacity to store 3.2 million barrels of refined products and gasoline blend stock. It also includes pipeline connections to and from the Colonial, Laurel and Harbor pipelines. The tank farm also has capacity to store 15,000 barrels of propane and 250,000 barrels of butane and has facilities to load propane trucks and off load and load butane trucks. Also included are the Girard Point docks, used to transfer refined products to and from the Schuylkill River Tank Farm and the Girard Point refinery. These docks include a vapor recovery system to allow the loading of high VOC liquid components, four berths for barges and ships with a draft of 32 feet.

    Propane/Propylene Rail and Truck Terminal.  This terminal consists of 22 propane storage bullets with a total capacity of 15,000 barrels, a propane/propylene rail loading terminal with 16 railcar stations and a propane/propylene truck loading terminal with four loading spots.

    Other Logistics Assets.  Refining also owns eight cumene storage tanks with a total capacity of 164,000 barrels and a benzene terminal with two storage tanks with total capacity of 58,000 barrels along with capabilities to unload benzene from trucks and railcars and from barges at the Girard Point barge docks.

Under the omnibus agreement, Refining will also grant us a right of first offer, under certain circumstances, to acquire additional logistics assets that it may construct or acquire in the future. We expect that Refining will be the primary customer for these logistics assets after any purchase of such assets by us. The consummation and timing of any acquisition of assets owned by Refining will depend upon, among other things, Refining's willingness to offer the asset for sale and obtain any necessary consents, the determination that the asset is suitable for our business at that particular time, our ability to agree on a mutually acceptable price, our ability to negotiate an acceptable purchase agreement and services agreement with respect to the asset and our ability to obtain financing on acceptable terms. We do not have a current agreement or understanding with Refining to purchase any assets covered by our right of first offer.


Industry Overview

              The United States has historically been the largest consumer of petroleum-based products in the world. According to the U.S. Energy Information Administration's (the "EIA") 2013 Refinery Capacity Report, there were 139 operating oil refineries in the United States, with a total refining

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capacity of approximately 16.8 million bpd and a weighted average Nelson Complexity Index of approximately 10.8. Of the total operating refining capacity in the United States, approximately 59.9%, or 10.1 million bpd, is currently owned and operated by independent refining companies, compared to 2002 when approximately 31.6%, or 5.1 million bpd, was owned by independent refining companies. The remaining capacity is controlled by integrated oil companies. Because of this trend, the refining industry increasingly must rely on its own operations for its profitability.

              Our rail unloading terminal was constructed to deliver lower-cost North American crude oil to Refining's refineries. We believe Refining's two refineries currently benefit from secular growth in North American crude production because of their ability to access and process lower-cost North American crude oil. According to a recent EIA publication, average daily U.S. crude oil production in 2014 is expected to grow by approximately 3.0 million bpd, to 8.5 million bpd from 5.5 million bpd in 2010, an increase of approximately 55%. This level of U.S. crude oil production would represent the highest level since 1986. In addition, the Canadian Association of Petroleum Producers ("CAPP") projects that Canadian crude oil production will increase by approximately 30%, or 850,000 bpd, from 2.8 million bpd in 2010 to 3.7 million bpd in 2014. As a result of the recent and projected growth in North American crude oil production, the United States has reduced its reliance on imported crude oil. The EIA estimates that crude oil imported from foreign sources (crude oil from outside North America) since 2010 will decline by approximately 1.9 million bpd, or 21%, to 7.3 million bpd in 2014.

              Historically, lower 48-state domestic oil production was sourced from fields located principally in Texas and Louisiana. As a result, the U.S. petroleum complex was constructed around a transportation network of pipelines which moved large volumes of domestic crude oil to the major refining centers in the Gulf Coast, Mid-continent and northern tier states. As U.S. domestic production declined, the Gulf Coast became a major hub for importing large volumes of waterborne crude oil. Without the necessary pipeline infrastructure, refineries on the U.S. East Coast came to rely on waterborne imports of crude oil. Recent production growth in Canada and the U.S. Mid-continent has placed considerable stress on the North American crude oil pipeline network, which was designed to transport volumes from south to north with limited capacity to send volumes east or west. Construction of new pipelines has been delayed by commercial and regulatory constraints.

              Crude-by-rail provides crude oil producers access to markets where pipeline connections are unlikely given environmental and permitting hurdles, such as the U.S. East and West Coasts. The Association of American Railroads estimates that crude oil originated carloads on U.S. Class I railroads increased thirteen-fold from 29.6 thousand carloads in 2010 to over 400 thousand in 2013. In 2013, more than 10% of all US domestic crude oil was transported by rail. While crude-by-rail can be more expensive than transporting crude oil by pipeline (ignoring the upfront capital investment), rail offers several advantages over pipelines. Crude-by-rail creates flexibility to move swiftly and capitalize on market imbalances and to redeploy assets as bottlenecks shift. Rail terminals for loading and unloading crude oil can be constructed quickly and connected to an extensive rail network to reach all major processing centers. Crude-by-rail provides optionality to source crude oil from multiple basins without the need for large financial commitments to long-term take-or-pay contracts as is typical with new pipeline construction.


About North Yard Logistics, L.P.

              North Yard Logistics, L.P., our operating partnership, is a Delaware limited partnership in which we will own the general partner interest and a 45% limited partner interest at the completion of this offering. Our parent will own the remaining 55% limited partner interest in the operating partnership. The operating partnership will own and operate the rail unloading terminal located at our parent's Philadelphia refinery complex and a pipeline connection to accept deliveries of crude oil from a nearby third-party terminal. We lease the land on which the rail unloading terminal is located from Refining under a 25-year, long-term lease. Our rail unloading terminal receives, handles and transfers

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crude oil and provides Refining's Point Breeze and Girard Point refineries with their primary access to high quality, lower-cost crude oil from the Bakken region as well as other North American shale oil production regions served by rail.

              Our parent completed the construction of the rail unloading terminal on October 23, 2013. The major components of the terminal include 5.6 miles of track on our parent's property, 1.0 mile of track with rights-of-way on adjacent land owned by a third party, 7,700 feet of 20-inch pipeline and meter station, a 4,000 foot, 24-inch underground pipeline manifold, a 16,000 barrel per hour pumping station and 1,500 feet of 24-inch pipeline and meter station connecting the pumping station to the Point Breeze refinery. The terminal currently has nominal unloading capacity of two unit trains per day, or 140,000 bpd of crude oil, with the current 104-car unit train configuration. Our parent will contribute the rail unloading terminal to the operating partnership at the closing of this offering.

              Based on the successful operations of our terminal since its startup in the fourth quarter of 2013, Refining has undertaken an expansion project that will increase unloading capacity from two to three unit trains per day. This expansion project will include a second 24-inch underground pipeline manifold and 4,000 feet of additional track, and is expected to be completed in mid-October 2014. When the expansion project is completed, unloading capacity will increase to 210,000 bpd. If the rail industry moves to more efficient 120-car unit trains, then the expanded capacity of our rail unloading terminal will improve to 240,000 bpd. After the expansion is completed, the operating partnership will retain the pipeline connection to the nearby third-party terminal, which Refining principally uses for the delivery of domestic crude oil on manifest trains.

              The following table sets forth certain operating information regarding our rail unloading terminal, as well as the volumes received via a third-party connection:

 
  April 1 to
October 23,
2013(1)
  October 23 to
December 31,
2013(2)
  Six Months
Ended
June 30, 2014
 

Our Rail Unloading Terminal

                   

Capacity (bpd)(3)

        140,000     140,000  

Throughput (bpd)

        121,389     127,967  

Utilization

    n/a     87 %   91 %

Third-Party Connection

                   

Throughput (bpd)

    35,281     6,356     7,806  

(1)
The pipeline connection to the third-party terminal was completed on April 21, 2013.

(2)
The rail unloading terminal commenced operations on October 23, 2013.

(3)
Following the completion of the expansion project in mid-October 2014, the capacity of our rail unloading terminal will increase to 210,000 bpd.

              In addition, we will not take ownership of the hydrocarbons that we handle or engage in the trading of any commodities, and accordingly, will not have direct exposure to fluctuations in commodity prices.


Our Relationship with Refining

              We have no ownership interest in Refining or the Philadelphia refinery complex, but our relationship with Refining is one of our principal strengths. Refining operates the East Coast's largest refining complex, which consists of 335,000 bpd of throughput capacity at two refineries located on adjacent properties in Philadelphia, the 190,000 bpd Girard Point refinery and the 145,000 bpd Point Breeze refinery. These refineries are designed to run primarily light, sweet crude oils, and Refining is seeking to increase the amount of this type of crude oil processed at its facilities. For the year ended December 31, 2013 and the six months ended June 30, 2014, Refining processed an average of 294,000 and 295,000 barrels of crude oil per day, respectively. After adjusting processing capacity for scheduled crude unit turnarounds, Refining operated at capacity levels of 94.8% and 92.9%, respectively.

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              Refining's credit rating is currently B1/B+ as assigned by Moody's and Standard & Poor's, respectively. From its inception on September 8, 2012 through December 31, 2012, Refining had operating income of $155 million, and for the year ended December 31, 2013, Refining had an operating loss of $76 million. Refining processed mostly foreign crude oil for which it paid a premium to Brent crude oil from its inception until the rail unloading terminal commenced operations on October 23, 2013. Despite the large amount of higher cost foreign crude oil that was processed, Refining's results in the 2012 period were driven by strong refined product margins, especially for gasoline and distillate products. In 2013, in addition to the large percentage of higher cost foreign crude oil that was processed, Refining's operating income was negatively impacted by the first quarter turnaround of the Girard Point crude unit and FCC unit, high costs for RINs, weaker refined product margins and high costs related to the seasonal storage of butane. For the six months ended June 30, 2013, Refining had an operating loss of $4 million as compared to operating income of $93 million for the six months ended June 30, 2014. Refining believes that the addition of our rail unloading terminal, which commenced operations on October 23, 2013 and allows Refining to purchase, deliver and process lower-priced, domestic crude oil, has been a primary driver of the improvement in Refining's financial results for the six months ended June 30, 2014 as compared to the six months ended June 30, 2013 financial results. These results do not reflect the impact of our formation transactions or the commercial agreement between the operating partnership and Refining that will be entered into at the closing of this offering. Additional summary financial information for Refining is presented below under "—Refining's Summary Financial and Operating Information."

              We expect that our relationship with Refining will provide us the opportunity over time to grow a portfolio of midstream energy logistics assets. The anticipated increase in production in the Bakken region and other shale production regions provides us two distinct opportunities to grow our business:

    Increasing throughput on our existing system.  Our rail unloading terminal was placed into service in October 2013 and is currently undergoing a 70,000 bpd expansion, which is expected to be completed in mid-October 2014 and will increase capacity to 210,000 bpd.

    Expand and integrate crude-by-rail supply chain.  We expect to acquire from Refining or construct additional logistics assets that facilitate transport of crude oil from producing areas such as the Bakken to the Philadelphia refinery complex or third-party refineries. The supply chain to deliver domestic crude oil from the midcontinent to the East Coast of the United States is developing and involves exploration and production, gathering, storage, loading terminal operation, rail car fleet ownership and management, unloading terminal operation and the ownership and operation of marine vessels under the Jones Act. These logistics assets each generate revenue through both fees charged for volumes transported on or through the additional assets, and potentially through increased crude oil volume at our rail unloading terminal.

              The operating partnership will enter into a ten-year, fee-based commercial agreement with Refining at the closing of this offering, pursuant to which Refining will pay an annual fee of $118 million based on minimum volume commitments of 170,000 bpd. This contract will be subject to inflation escalators.

              In conjunction with the offering, Refining will grant us a right of first offer on certain logistics assets that it will retain or that it may acquire or construct in the future, as well as an option to purchase the NGL rail terminal that is currently being constructed by a third party.


Refining's Operations

              Although we do not own or operate any refining assets, our rail unloading terminal is located within our parent's refining and marketing operations. All of our revenue and cash flow will be initially derived from our equity ownership in the operating partnership and its ten-year, fee-based commercial

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agreement with Refining. Therefore, we are providing the following information to help investors assess the operations of Refining.

Overview

              Our parent is an independent petroleum refiner and supplier of unbranded transportation fuels, petrochemical feedstocks and other petroleum products. Through Refining, our parent owns and operates the Philadelphia refinery complex, which is comprised of two oil refineries, the 190,000 bpd Girard Point refinery and the 145,000 bpd Point Breeze refinery, with a combined throughput capacity of approximately 335,000 bpd and a weighted average Nelson Complexity Index of 9.8. These refineries are designed to run primarily light, sweet crude oils and Refining is seeking to increase the amount of this type of crude oil processed at its facilities. The crude oils and other feedstocks are refined into products such as gasoline, diesel, jet fuel, residual fuel oil, propane, propylene, cumene and sulfur. The refineries' products are sold primarily in the northeast United States, a region with currently favorable market dynamics where finished product demand exceeds operating refining capacity. The refineries' products are also sold in other regions of the United States, and Refining is able to ship products to other international destinations.

              Our rail unloading terminal is integral to Refining's efforts to supply its refineries with lower-cost domestic crude oil, particularly from the Bakken region. From Refining's inception on September 8, 2012 until the completion of the terminal on October 23, 2013, Refining processed predominantly foreign waterborne crude oils at its refineries. Since the terminal commenced operations, Refining has converted its crude slate to a majority of domestic crude. Because the terminal is located onsite at the Philadelphia refinery complex and has direct access to Class I railroads, it offers a dedicated, economic means by which Refining can source light, sweet domestic crude oil.

              The following table sets forth the source of crude oil processed by Refining and the average volume of crude oil throughput for Refining at our rail unloading terminal:

 
  September 8
through
December 31, 2012
(bpd)
  January 1 through
October 22, 2013
(bpd)(1)
  October 23 through
December 31, 2013
(bpd)
  Six Months
Ended June 30,
2014 (bpd)(2)
 

Refining Crude Source

                         

U.S. 

    26,362     57,819     179,978     182,866  

Non-U.S. 

    275,107     231,939     129,960     112,187  
                   

Total

    301,469     289,758     309,938     295,053  
                   
                   

Throughput

                         

Our Rail Unloading Terminal

            121,389     127,967  

Third-Party Connection(3)

        22,125     6,356     7,806  
                   

Total

        22,125     127,745     135,773