Business and Basis of Presentation

Business

BP Midstream Partners LP (either individually or together with its subsidiaries, as the context requires, the “Partnership”) is a Delaware limited partnership formed on May 22, 2017 by BP Pipelines (North America) Inc. (“BPPLNA”), an indirect wholly owned subsidiary of BP p.l.c. (“BP”), a “foreign private issuer” within the meaning of the Securities Exchange Act of 1934, as amended, to own, operate, develop and acquire pipelines and other midstream assets. On October 30, 2017 the Partnership completed its initial public offering (“IPO”) of common units representing limited partner interests. See Note 2 - Initial Public Offering for the discussion of the IPO.

BP Midstream Partners LP Predecessor consists of three pipeline businesses (as described in more detail below). Unless otherwise stated or the context otherwise indicates, all references to “we,” “our,” “us,” “Predecessor Assets,” “Predecessor,” or similar expressions for time periods prior to the IPO refer to BP Midstream Partners LP Predecessor. For time periods subsequent to the IPO, “we,” “our,” “us,” or similar expressions refer to the legal entity BP Midstream Partners LP.

The term “our Parent” refers to BPPLNA, any entity that wholly owns BPPLNA, indirectly or directly, including BP and BP America Inc. (“BPA”), an indirect wholly owned subsidiary of BP, and any entity that is wholly owned by the aforementioned entities, excluding BP Midstream Partners LP Predecessor. Our operations consist of one reportable segment. All of our operations are conducted in the United States, and all our long-lived assets are located in the United States.

The Predecessor Assets consist of the following three pipeline businesses:


•	BP Two Pipeline Company LLC, which owns the BP#2 crude oil pipeline system (“BP2”) comprising 12 miles of pipeline transporting crude oil from Griffith Station, Indiana, to BPA’s refinery in Whiting, Indiana (the “Whiting Refinery”). The BP2 pipeline has a capacity of approximately 475,000 barrels per day.


•	BP River Rouge Pipeline Company LLC, which owns the Whiting to River Rouge refined products pipeline system (“River Rouge”) comprising 244 miles of pipeline and related assets transporting refined petroleum products from the Whiting Refinery to the refined products terminal at River Rouge, Michigan. The River Rouge pipeline has a capacity of approximately 80,000 barrels per day.


•	BP D-B Pipeline Company LLC, which owns the Diamondback diluent pipeline system (“Diamondback”) comprising 42 miles of pipeline and related assets transporting diluent from Black Oak Junction, Indiana, to a third-party owned pipeline in Manhattan, Illinois. The Diamondback pipeline has a capacity of approximately 135,000 barrels per day.

Certain of BP Midstream Partners LP Predecessor’s businesses are subject to regulation by various authorities including, but not limited to the Federal Energy Regulatory Commission. Regulatory bodies exercise statutory authority over matters such as common carrier tariffs, construction, rates and ratemaking and agreements with customers.

Basis of Presentation

Our accompanying unaudited condensed combined financial statements have been prepared under the rules and regulations of the Securities and Exchange Commission (“SEC”). These rules and regulations conform to the accounting principles contained in the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification, the single source of accounting principles generally accepted in the United States (“U.S. GAAP”). As permitted under the rules and regulations of the SEC, certain information and footnote disclosures normally included in the annual financial statements prepared in conformity with U.S. GAAP have been condensed or omitted from these condensed combined financial statements.

These financial statements were derived from the consolidated financial statements and accounting records of our Parent. These financial statements reflect the condensed combined historical results of operations, financial position and cash flows of the Predecessor as if such business had been a separate entity for all periods presented. For ease of reference, these financial statements are referred to as those of the Predecessor Assets. These condensed combined financial statements should be read in conjunction with the combined financial statements and related notes included in the prospectus of the Partnership dated October 25, 2017, as filed with the SEC on October 27, 2017 (the “Prospectus”).

These financial statements are presented as if the operations of the Predecessor Assets had been combined for all periods presented. The assets and liabilities in these condensed combined financial statements have been reflected on the historical cost basis, as immediately prior to the closing of the IPO, all of the assets and liabilities presented were transferred to the Partnership within our Parent’s consolidated group in a transaction under common control. All intercompany accounts and transactions within the Predecessor have been eliminated.

The accompanying condensed combined statements of operations also include expense allocations for certain functions historically performed by our Parent and not allocated to the Predecessor Assets, including allocations of general corporate expenses related to finance, accounting, treasury, legal, information technology, human resources, shared services, government affairs, insurance, health, safety, security, employee benefits, incentives, severance and environmental functional support. The portion of expenses that are specifically identifiable to the Predecessor Assets are directly recorded to the Predecessor, with the remainder allocated on the basis of headcount, throughput volumes, miles of pipe and other measures. Our management believes the assumptions underlying the financial statements, including the assumptions regarding the allocation of general corporate expenses from our Parent, are reasonable. Nevertheless, the financial statements may not include all of the expenses that would have been incurred, had we been a stand-alone company during the periods presented and may not reflect our financial position, results of operations and cash flows, had we been a stand-alone company during the periods presented. See Note 6 - Related Party Transactions.

Prior to the IPO, we did not own or maintain separate bank accounts. Our Parent uses a centralized approach to cash management and historically funded our operating and investing activities as needed within the boundaries of a documented funding agreement. Accordingly, cash held by our Parent at the corporate level was not allocated to us for any of the periods presented. We reflected the cash generated by our operations and expenses paid by our Parent on our behalf as a component of “Net parent investment” on our condensed combined balance sheets, and as a net distribution to our Parent in our condensed combined statements of cash flows. We have also not included any interest income on the net cash transfers to our Parent.

The financial statements as of and for the periods ended September 30, 2017 and 2016, included herein, are unaudited. These financial statements include all known accruals and adjustments necessary, in the opinion of management, for a fair presentation of the results of operations, the condensed combined financial position of the Predecessor Assets and cash flows. Unless otherwise specified, all such adjustments are of a normal and recurring nature. The unaudited results of operations for the interim periods reported are not necessarily indicative of results to be expected for the full year.

Summary of Significant Accounting Policies

There have been no updates to our accounting policies disclosed in the Prospectus. Please refer to the footnotes to the audited annual combined financial statements included in the Prospectus for a summary of our significant accounting policies.

Recent Accounting Pronouncements

For additional information on accounting pronouncements issued prior to December 2016, refer to Note 3 - Recent Accounting Pronouncements in the notes to the audited combined financial statements included in the Prospectus.

In September 2017, the FASB issued Accounting Standards Update (“ASU”) 2017-13 “Revenue Recognition (Topic 605), Revenue from Contracts with Customers (Topic 606), Leases (Topic 840), and Leases (Topic 842).” This ASU delays the mandatory adoption of Topic 606 and Topic 842 for public business entities that otherwise would not meet the definition of a public business entity except for a requirement to include or the inclusion of its financial statements or financial information in another entity’s filing with the SEC. This ASU also revises the guidance related to performance-based incentive fees in Topic 605 and revises the guidance related to leases in Topics 840 and 842. The revisions to the lease guidance eliminate language specific to certain sale-leaseback arrangements, guarantees of lease residual assets and loans made by lessees to owner-lessors. Also included is an amendment to Topic 842 to retain the guidance in Topic 840 covering the impact of changes in tax rates on investments in leveraged leases. This guidance is effective immediately. We do not expect ASU 2017-13 to impact our condensed combined financial statements. However, we together with our Parent are currently evaluating the impact that the adoption of the other provisions under Topic 606 and 842 will have on our condensed combined financial statements and notes to the condensed combined financial statements.

In January 2017, the FASB issued ASU 2017-03, “Accounting Changes and Error Corrections (Topic 250).” The amendments to Topic 250 included in this update expand required qualitative disclosures when registrants cannot reasonably estimate the impact that adoption of the ASUs related to revenue (ASU 2014-09), leases (ASU 2016-02) and credit losses (ASU 2016-13) will have on the financial statements. Such qualitative disclosures would include a comparison of the registrant’s new accounting policies, if determined, to current accounting policies, a description of the status of the registrant’s process to implement the new standard and a description of the significant implementation matters yet to be addressed by the registrant. Other than enhancements to the qualitative disclosures regarding future adoption of new ASUs, adoption of the provisions of this standard is not expected to have any impact on our condensed combined financial statements.