falsedesktopANDV2018-06-30000005010418000181{"tbl_sim": "https://q10k.com/tbl-sim", "search": "https://q10k.com/search"}{"q10k_tbl_0": "Delaware\t95‑0862768\n(State or other jurisdiction of\t(I.R.S. Employer\nincorporation or organization)\tIdentification No.)\n19100 Ridgewood Pkwy San Antonio Texas 78259-1828\t\n(Address of principal executive offices) (Zip Code)\t\n210-626-6000\t\n(Registrant's telephone number including area code)\t\n", "q10k_tbl_1": "Part I - Financial Information\t\t\n3 Item 1. Financial Statements (Unaudited)\t\t\n3\tCondensed Statements of Consolidated Operations\t\n4\tCondensed Consolidated Balance Sheets\t\n5\tCondensed Statements of Consolidated Cash Flows\t\n6\tNotes to Condensed Consolidated Financial Statements\t\n\t6\tNote 1 - Organization and Basis of Presentation\n\t10\tNote 2 - Acquisitions\n\t12\tNote 3 - Inventories\n\t12\tNote 4 - Investments - Equity Method and Joint Ventures\n\t13\tNote 5 - Derivative Instruments\n\t15\tNote 6 - Fair Value Measurements\n\t16\tNote 7 - Debt\n\t17\tNote 8 - Benefit Plans\n\t17\tNote 9 - Commitments and Contingencies\n\t18\tNote 10 - Stockholders' Equity and Earnings Per Share\n\t19\tNote 11 - Stock-Based Compensation\n\t20\tNote 12 - Revenues\n\t23\tNote 13 - Operating Segments\n25 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations\t\t\n25\tBusiness Strategy and Overview\t\n27\tResults of Operations\t\n\t32\tMarketing Segment\n\t36\tLogistics Segment\n\t41\tRefining Segment\n48\tCapital Resources and Liquidity\t\n52\tNon-GAAP Reconciliations\t\n57\tImportant Information Regarding Forward-Looking Statements\t\n58 Item 3. Quantitative and Qualitative Disclosures About Market Risk\t\t\n58 Item 4. Controls and Procedures\t\t\n", "q10k_tbl_2": "\tThree Months Ended June 30\t\tSix Months Ended June 30\t\n\t2018\t2017\t2018\t2017\n\t(In millions except per share amounts)\t\t\t\nRevenues (a)\t12472\t7849\t22772\t14487\nCosts and Expenses\t\t\t\t\nCost of materials and other (excluding items shown separately below) (a)\t10235\t6217\t18844\t11643\nLower of cost or market inventory valuation adjustment\t0\t209\t0\t209\nOperating expenses (excluding depreciation and amortization)\t918\t740\t1784\t1395\nDepreciation and amortization expenses\t292\t240\t574\t466\nGeneral and administrative expenses\t179\t247\t352\t382\n(Gain) loss on asset disposals and impairments\t1\t(22)\t1\t(21)\nOperating Income\t847\t218\t1217\t413\nInterest and financing costs net\t(109)\t(96)\t(211)\t(194)\nEquity in earnings of equity method investments\t11\t3\t21\t3\nOther income net\t0\t18\t10\t29\nEarnings Before Income Taxes\t749\t143\t1037\t251\nIncome tax expense\t167\t56\t226\t77\nNet Earnings from Continuing Operations\t582\t87\t811\t174\nEarnings from discontinued operations net of tax\t0\t0\t8\t0\nNet Earnings\t582\t87\t819\t174\nLess: Net earnings from continuing operations attributable to noncontrolling interest\t67\t47\t132\t84\nNet Earnings Attributable to Andeavor\t515\t40\t687\t90\nNet Earnings Attributable to Andeavor\t\t\t\t\nContinuing operations\t515\t40\t679\t90\nDiscontinued operations\t0\t0\t8\t0\nTotal\t515\t40\t687\t90\nNet Earnings per Share - Basic\t\t\t\t\nContinuing operations\t3.41\t0.31\t4.47\t0.73\nDiscontinued operations\t0\t0\t0.05\t0\nTotal\t3.41\t0.31\t4.52\t0.73\nWeighted average common shares outstanding - Basic\t151.1\t130.8\t152.0\t124.0\nNet Earnings per Share - Diluted\t\t\t\t\nContinuing operations\t3.38\t0.31\t4.43\t0.72\nDiscontinued operations\t0\t0\t0.05\t0\nTotal\t3.38\t0.31\t4.48\t0.72\nWeighted average common shares outstanding - Diluted\t152.6\t131.7\t153.5\t125.0\nDividends per Share\t0.59\t0.55\t1.18\t1.10\nSupplemental Information\t\t\t\t\n(a) Excise taxes collected by our Marketing segment included in revenues. Refer to Note 12 in the accompanying notes for adoption of revenue recognition standards.\t0\t153\t0\t287\n", "q10k_tbl_3": "\tJune 30 2018\tDecember 31 2017\n\t(In millions except share data)\t\nAssets\t\t\nCurrent Assets\t\t\nCash and cash equivalents (Andeavor Logistics: $44 and $75 respectively)\t388\t543\nReceivables net of allowance for doubtful accounts (Andeavor Logistics: $200 and $219 respectively)\t2623\t1961\nInventories\t3653\t3630\nPrepayments and other current assets\t496\t749\nTotal Current Assets\t7160\t6883\nProperty Plant and Equipment Net\t\t\nProperty plant and equipment at cost\t19834\t18823\nAccumulated depreciation and amortization\t(4389)\t(4081)\nProperty Plant and Equipment Net (Andeavor Logistics: $5625 and $5413 respectively)\t15445\t14742\nGoodwill (Andeavor Logistics: $712 and $692 respectively)\t3288\t3234\nAcquired Intangibles Net (Andeavor Logistics: $1128 and $1153 respectively)\t1709\t1645\nOther Noncurrent Assets Net (Andeavor Logistics: $404 and $406 respectively)\t2472\t2069\nTotal Assets\t30074\t28573\nLiabilities and Equity\t\t\nCurrent Liabilities\t\t\nAccounts payable\t3799\t3330\nCurrent maturities of debt\t28\t17\nOther current liabilities\t1227\t1654\nTotal Current Liabilities\t5054\t5001\nDeferred Income Taxes\t1777\t1591\nDebt Net of Unamortized Issuance Costs (Andeavor Logistics: $4372 and $4127 respectively)\t8698\t7668\nOther Noncurrent Liabilities\t978\t898\nTotal Liabilities\t16507\t15158\nCommitments and Contingencies (Note 9)\t\t\nEquity\t\t\nAndeavor Stockholders' Equity\t\t\nCommon stock par value $0.162/3; authorized 300000000 shares; 200797146 shares issued (200095819 in 2017)\t33\t33\nAdditional paid-in capital\t5269\t5224\nRetained earnings\t8141\t7651\nTreasury stock 49675841 common shares (46810338 in 2017) at cost\t(3123)\t(2841)\nAccumulated other comprehensive loss net of tax\t(252)\t(252)\nTotal Andeavor Stockholders' Equity\t10068\t9815\nNoncontrolling Interest\t3499\t3600\nTotal Equity\t13567\t13415\nTotal Liabilities and Equity\t30074\t28573\n", "q10k_tbl_4": "\tSix Months Ended June 30\t\n\t2018\t2017\n\t(In millions)\t\nCash Flows From (Used In) Operating Activities\t\t\nNet earnings\t819\t174\nAdjustments to reconcile net earnings to net cash from operating activities:\t\t\nDepreciation and amortization expenses\t574\t466\nLower of cost or market inventory valuation adjustment\t0\t209\nAmortization of debt issuance costs and discounts\t10\t10\n(Gain) loss on asset disposals and impairments\t1\t(21)\nGain related to Hawaii Business\t(10)\t0\nStock-based compensation expense\t26\t34\nDeferred income taxes\t171\t50\nTurnaround expenditures\t(237)\t(274)\nMarketing branding costs\t(24)\t(37)\nEquity in earnings of equity method investments net of distributions\t6\t13\nOther operating activities net\t9\t(6)\nChanges in current assets and current liabilities\t(282)\t(4)\nChanges in noncurrent assets and noncurrent liabilities\t34\t156\nNet cash from operating activities\t1097\t770\nCash Flows From (Used In) Investing Activities\t\t\nCapital expenditures\t(852)\t(539)\nAcquisitions net of cash\t(631)\t(938)\nProceeds from asset sales\t7\t44\nInvestments in equity method investments and joint ventures\t(37)\t0\nOther investing activities net\t1\t(15)\nNet cash used in investing activities\t(1512)\t(1448)\nCash Flows From (Used In) Financing Activities\t\t\nBorrowings under revolving credit agreements\t2940\t764\nRepayments on revolving credit agreements\t(1898)\t(514)\nRepayments of debt\t(11)\t(1636)\nProceeds from inventory financing arrangements\t330\t0\nRepayments of inventory financing arrangements\t(446)\t0\nDividend payments\t(181)\t(130)\nNet proceeds from issuance of Andeavor Logistics LP common units\t0\t281\nDistributions to noncontrolling interest\t(189)\t(133)\nPurchases of common stock\t(258)\t(148)\nTaxes paid related to net share settlement of equity awards\t(23)\t(31)\nOther financing activities net\t(4)\t(9)\nNet cash from (used in) financing activities\t260\t(1556)\nDecrease in Cash and Cash Equivalents\t(155)\t(2234)\nCash and Cash Equivalents Beginning of Period\t543\t3295\nCash and Cash Equivalents End of Period\t388\t1061\n", "q10k_tbl_5": "\tThree Months Ended June 30\t\tSix Months Ended June 30\t\n\t2018\t2017\t2018\t2017\nDirect operating expenses\t836\t708\t1664\t1333\nIndirect operating expenses\t82\t32\t120\t62\nOperating expenses (excluding depreciation and amortization)\t918\t740\t1784\t1395\n", "q10k_tbl_6": "Cash\t159\nReceivables\t510\nInventories\t805\nPrepayments and Other Current Assets\t212\nProperty Plant and Equipment (a)\t3486\nGoodwill\t2948\nAcquired Intangibles\t315\nOther Noncurrent Assets\t162\nAccounts Payable\t(688)\nAccrued Liabilities\t(267)\nCurrent Portion of Long-term Debt\t(12)\nDeferred Income Taxes\t(721)\nDebt\t(2092)\nOther Noncurrent Liabilities\t(118)\nNoncontrolling Interest\t(719)\nTotal purchase price\t3980\n", "q10k_tbl_7": "\tThree Months Ended\tSix Months Ended\n\tJune 30 2017\tJune 30 2017\nRevenues\t9591\t18581\nNet earnings\t215\t326\n", "q10k_tbl_8": "\tJune 30 2018\tDecember 31 2017\nDomestic crude oil and refined products\t3219\t3203\nMaterials and supplies\t218\t229\nOxygenates and by-products\t72\t85\nMerchandise\t60\t50\nForeign subsidiary crude oil and refined products\t84\t63\nTotal Inventories\t3653\t3630\n", "q10k_tbl_9": "\tBalance at December 31 2017 (a)\tFair value of acquired interest\tInvestments in joint ventures\tEquity in earnings\tCumulative effect of accounting standard adoption\tDistributions received\tBalance at June 30 2018 (a)\nWatson\t78\t0\t0\t2\t0\t(3)\t77\nGray Oak Pipeline\t0\t0\t23\t0\t0\t0\t23\nSouth Texas Gateway Terminal\t0\t0\t14\t0\t0\t0\t14\nRIO\t0\t159\t0\t4\t0\t0\t163\nPNAC\t0\t27\t0\t0\t0\t0\t27\nMPL\t120\t0\t0\t10\t0\t(10)\t120\nRGS\t268\t0\t0\t3\t0\t(10)\t261\nTRG\t37\t0\t0\t1\t(3)\t(3)\t32\nUBFS\t15\t0\t0\t1\t0\t(1)\t15\nTotal\t518\t186\t37\t21\t(3)\t(27)\t732\n", "q10k_tbl_10": "\t\tDerivative Assets\t\tDerivative Liabilities\t\n\tBalance Sheet Location\tJune 30 2018\tDecember 31 2017\tJune 30 2018\tDecember 31 2017\nCommodity Futures Contracts\tPrepayments and other current assets\t1025\t780\t1012\t807\nCommodity Swap Contracts\tPrepayments and other current assets\t120\t48\t103\t63\nCommodity Swap Contracts\tReceivables\t3\t15\t0\t0\nCommodity Swap Contracts\tAccounts payable\t0\t0\t20\t24\nCommodity Options Contracts\tPrepayments and other current assets\t0\t0\t5\t2\nCommodity Forward Contracts\tReceivables\t1\t2\t0\t0\nCommodity Forward Contracts\tAccounts payable\t0\t0\t1\t0\nTotal Gross Mark-to-Market Derivatives\t\t1149\t845\t1141\t896\nLess: Counterparty Netting\t\t(1102)\t(813)\t(1102)\t(813)\nAdd back: Cash Collateral\t\t7\t67\t0\t0\nTotal Net Fair Value of Derivatives\t\t54\t99\t39\t83\n", "q10k_tbl_11": "\tThree Months Ended June 30\t\tSix Months Ended June 30\t\n\t2018\t2017\t2018\t2017\nCommodity Contracts\t15\t92\t28\t120\nForeign Currency Forward Contracts\t(2)\t0\t(1)\t0\nTotal Net Gain on Mark-to-Market Derivatives\t13\t92\t27\t120\n", "q10k_tbl_12": "\tThree Months Ended June 30\t\tSix Months Ended June 30\t\n\t2018\t2017\t2018\t2017\nRevenues\t1\t1\t2\t9\nCost of materials and other\t14\t91\t26\t111\nOther income net\t(2)\t0\t(1)\t0\nTotal Net Gain on Mark-to-Market Derivatives\t13\t92\t27\t120\n", "q10k_tbl_13": "\tContract Volumes by Year of Maturity\t\t\tUnit of Measure\nMark-to-Market Derivative Instrument\t2018\t2019\t2020\nCrude oil refined products and blending products:\t\t\t\t\nFutures Contracts - long\t2636\t259\t20\tBarrels\nSwap Contracts - long\t1218\t610\t0\tBarrels\nSwap Contracts - short\t(1525)\t(620)\t0\tBarrels\nForwards - short\t(574)\t0\t0\tBarrels\nCorn:\t\t\t\t\nFutures Contracts - short\t(310)\t0\t0\tBushels\nSoybean oil:\t\t\t\t\nFutures Contracts - short\t(5700)\t0\t0\tPounds\n", "q10k_tbl_14": "\tJune 30 2018\t\t\t\t\n\tLevel 1\tLevel 2\tLevel 3\tNetting and Collateral (a)\tTotal\nAssets:\t\t\t\t\t\nCommodity Futures Contracts\t1025\t0\t0\t(996)\t29\nCommodity Swap Contracts\t0\t123\t0\t(99)\t24\nCommodity Options Contracts\t0\t0\t0\t0\t0\nCommodity Forward Contracts\t0\t1\t0\t0\t1\nTotal Assets\t1025\t124\t0\t(1095)\t54\nLiabilities:\t\t\t\t\t\nCommodity Futures Contracts\t1012\t0\t0\t(1003)\t9\nCommodity Swap Contracts\t0\t123\t0\t(99)\t24\nCommodity Options Contracts\t0\t5\t0\t0\t5\nCommodity Forward Contracts\t0\t1\t0\t0\t1\nEnvironmental Credit Obligations\t0\t204\t0\t0\t204\nTotal Liabilities\t1012\t333\t0\t(1102)\t243\n", "q10k_tbl_15": "\tDecember 31 2017\t\t\t\t\n\tLevel 1\tLevel 2\tLevel 3\tNetting and Collateral (a)\tTotal\nAssets:\t\t\t\t\t\nCommodity Futures Contracts\t780\t0\t0\t(707)\t73\nCommodity Swap Contracts\t0\t63\t0\t(39)\t24\nCommodity Forward Contracts\t0\t2\t0\t0\t2\nTotal Assets\t780\t65\t0\t(746)\t99\nLiabilities:\t\t\t\t\t\nCommodity Futures Contracts\t807\t0\t0\t(774)\t33\nCommodity Swap Contracts\t0\t87\t0\t(39)\t48\nCommodity Options Contracts\t0\t2\t0\t0\t2\nEnvironmental Credit Obligations\t0\t43\t0\t0\t43\nTotal Liabilities\t807\t132\t0\t(813)\t126\n", "q10k_tbl_16": "\tJune 30 2018\tDecember 31 2017\nTotal debt (a)\t8832\t7799\nUnamortized issuance costs and premiums\t(106)\t(114)\nCurrent maturities\t(28)\t(17)\nDebt Net of Current Maturities and Unamortized Issuance Costs\t8698\t7668\n", "q10k_tbl_17": "\tTotal Capacity\tAmount Borrowed as of June 30 2018\tOutstanding Letters of Credit\tAvailable Capacity as of June 30 2018\tWeighted Average Interest Rate\tExpiration\nAndeavor Revolving Credit Facility\t3000\t855\t17\t2128\t3.88%\tSeptember 30 2020\nAndeavor Logistics Revolving Credit Facility\t1100\t665\t0\t435\t3.83%\tJanuary 29 2021\nAndeavor Logistics Dropdown Credit Facility\t1000\t0\t0\t1000\t-%\tJanuary 29 2021\nLetter of Credit Facilities\t975\t0\t123\t852\t\t\nTotal Credit Facilities\t6075\t1520\t140\t4415\t\t\n", "q10k_tbl_18": "\tPension Benefits\t\t\t\n\tThree Months Ended June 30\t\tSix Months Ended June 30\t\n\t2018\t2017\t2018\t2017\nService cost\t17\t13\t34\t26\nInterest cost\t8\t8\t17\t16\nExpected return on plan assets\t(7)\t(7)\t(15)\t(14)\nRecognized net actuarial loss\t7\t6\t15\t11\nNet Periodic Benefit Expense (a)\t25\t20\t51\t39\n\tOther Postretirement Benefits\t\t\t\n\tThree Months Ended June 30\t\tSix Months Ended June 30\t\n\t2018\t2017\t2018\t2017\nService cost\t0\t0\t1\t1\nInterest cost\t0\t1\t1\t1\nAmortization of prior service credit\t(7)\t(9)\t(15)\t(17)\nRecognized net actuarial loss\t1\t1\t2\t2\nNet Periodic Benefit Income (a)\t(6)\t(7)\t(11)\t(13)\n", "q10k_tbl_19": "\tAndeavor Stockholders' Equity\tNoncontrolling Interest\tTotal Equity\nBalance at December 31 2017 (a)\t9815\t3600\t13415\nNet earnings\t687\t132\t819\nPurchases of common stock\t(258)\t0\t(258)\nDividend payments\t(181)\t0\t(181)\nNet effect of amounts related to equity-based compensation\t23\t3\t26\nTaxes paid related to net share settlement of equity awards\t(23)\t0\t(23)\nDistributions to noncontrolling interest\t0\t(189)\t(189)\nTransfers to (from) Andeavor paid-in capital related to:\t\t\t\nAndeavor Logistics' issuance of common units\t21\t(35)\t(14)\nCumulative effect of accounting standard adoption\t(16)\t(9)\t(25)\nOther\t0\t(3)\t(3)\nBalance at June 30 2018 (a)\t10068\t3499\t13567\n", "q10k_tbl_20": "\tThree Months Ended June 30\t\tSix Months Ended June 30\t\n\t2018\t2017\t2018\t2017\nWeighted average common shares outstanding\t151.1\t130.8\t152.0\t124.0\nCommon stock equivalents\t1.5\t0.9\t1.5\t1.0\nTotal Diluted Shares\t152.6\t131.7\t153.5\t125.0\n", "q10k_tbl_21": "\tThree Months Ended June 30\t\tSix Months Ended June 30\t\n\t2018\t2017\t2018\t2017\nMarket stock units (a)\t7\t7\t14\t14\nPerformance share awards (b)\t3\t3\t5\t8\nOther stock-based awards (c)\t4\t20\t7\t22\nTotal Stock-Based Compensation Expense\t14\t30\t26\t44\n", "q10k_tbl_22": "\tDecember 31 2017\tAdjustments for ASC 606\tBalance at January 1 2018\tJune 30 2018\nReceivables from contracts with customers\t1875\t(34)\t1841\t2184\nOther contract assets\t0\t34\t34\t26\nDeferred branding costs net of amortization\t213\t0\t213\t224\nDeferred income current\t9\t10\t19\t13\nDeferred income noncurrent\t36\t22\t58\t54\nGift card liability\t26\t(4)\t22\t20\n", "q10k_tbl_23": "\tThree Months Ended June 30 2018\t\t\tSix Months Ended June 30 2018\t\t\n\tMarketing\tLogistics\tRefining\tMarketing\tLogistics\tRefining\nProduct Revenues\t\t\t\t\t\t\nRefined products (see further breakout below)\t6608\t0\t4162\t12059\t0\t7609\nMerchandise\t204\t0\t0\t380\t0\t0\nCrude NGL products and other\t25\t27\t1280\t56\t97\t2236\nTotal product revenues\t6837\t27\t5442\t12495\t97\t9845\nService revenues (see further breakout below)\t10\t137\t19\t15\t284\t36\nTotal Revenues\t6847\t164\t5461\t12510\t381\t9881\n", "q10k_tbl_24": "\tThree Months Ended June 30 2018\t\t\t\n\t\tLogistics\t\t\n\tMarketing\tGathering and Processing\tTerminalling and Transportation\tRefining\nService Revenues\t\t\t\t\nNatural gas\t0\t84\t0\t0\nCrude oil and water\t0\t28\t0\t0\nRefined products\t0\t0\t20\t0\nOther\t10\t5\t0\t19\nTotal Service Revenues\t10\t117\t20\t19\n\tSix Months Ended June 30 2018\t\t\t\n\t\tLogistics\t\t\n\tMarketing\tGathering and Processing\tTerminalling and Transportation\tRefining\nService Revenues\t\t\t\t\nNatural gas\t0\t182\t0\t0\nCrude oil and water\t0\t53\t0\t0\nRefined products\t0\t0\t38\t0\nOther\t15\t11\t0\t36\nTotal Service Revenues\t15\t246\t38\t36\n", "q10k_tbl_25": "\tThree Months Ended June 30 2018\t\tSix Months Ended June 30 2018\t\n\tMarketing\tRefining\tMarketing\tRefining\nRefined Products Revenues\t\t\t\t\nTransportation fuels:\t\t\t\t\nRetail and Branded\t3555\t0\t6479\t0\nUnbranded\t3053\t3434\t5580\t6508\nOther refined products\t0\t728\t0\t1101\nTotal Refined Products Revenues\t6608\t4162\t12059\t7609\n", "q10k_tbl_26": "\tThree Months Ended June 30\t\tSix Months Ended June 30\t\n\t2018\t2017\t2018\t2017\nRevenues\t\t\t\t\nMarketing:\t\t\t\t\nFuel (a)\t6608\t4873\t12059\t8956\nMerchandise\t204\t71\t380\t77\nOther\t42\t27\t80\t42\nIntersegment sales\t(7)\t0\t(9)\t0\nLogistics:\t\t\t\t\nTerminalling and transportation\t249\t194\t480\t369\nGathering and processing\t294\t242\t589\t487\nIntersegment sales\t(379)\t(202)\t(688)\t(405)\nRefining:\t\t\t\t\nRefined products\t10362\t6658\t19033\t12470\nCrude oil resales and other\t1299\t391\t2272\t635\nIntersegment sales\t(6200)\t(4405)\t(11424)\t(8144)\nTotal Revenues\t12472\t7849\t22772\t14487\nSegment Operating Income\t\t\t\t\nMarketing\t209\t240\t337\t373\nLogistics\t193\t163\t381\t313\nRefining\t607\t45\t812\t79\nTotal Segment Operating Income\t1009\t448\t1530\t765\nCorporate and unallocated costs\t(162)\t(228)\t(313)\t(350)\nIntersegment eliminations\t0\t(2)\t0\t(2)\nOperating Income\t847\t218\t1217\t413\nInterest and financing costs net\t(109)\t(96)\t(211)\t(194)\nEquity in earnings of equity method investments\t11\t3\t21\t3\nOther income net\t0\t18\t10\t29\nEarnings Before Income Taxes\t749\t143\t1037\t251\n", "q10k_tbl_27": "\tThree Months Ended June 30\t\tSix Months Ended June 30\t\n\t2018\t2017\t2018\t2017\nDepreciation and Amortization Expenses\t\t\t\t\nMarketing\t21\t15\t43\t28\nLogistics\t83\t68\t162\t126\nRefining\t175\t153\t348\t301\nCorporate\t13\t6\t21\t13\nIntersegment eliminations\t0\t(2)\t0\t(2)\nTotal Depreciation and Amortization Expenses\t292\t240\t574\t466\nCapital Expenditures\t\t\t\t\nMarketing\t17\t7\t30\t13\nLogistics\t104\t49\t187\t94\nRefining\t253\t154\t565\t286\nCorporate\t8\t57\t20\t100\nTotal Capital Expenditures\t382\t267\t802\t493\n", "q10k_tbl_28": "\tHigh-Performing Culture\t\t\t\n\tOperational Efficiency & Effectiveness\tValue Chain Optimization\tFinancial Discipline\tValue Driven Growth\nSafety. Our Dickinson and Mandan refineries were named winners of American Fuel & Petrochemical Manufacturers Elite Silver Safety Award which recognizes the top 5 percent of refineries in the industry for safety performance.\tü\t\t\t\nAndeavor Logistics Safety. Andeavor Logistics received the Safety Excellence Award from the International Liquid Terminals Association for the fifth consecutive year. The Safety Excellence Award recognizes member companies that achieve an average total recordable incident rate of 0.75 or less in a reporting year.\tü\t\t\t\nRangeland Energy Acquisition. On January 19 2018 we completed the acquisition of Rangeland which owns and operates assets in the Delaware and Midland Basins in New Mexico and Texas and has a 67% joint interest in the RIO pipeline.\t\tü\t\tü\nGray Oak Pipeline and South Texas Gateway Terminal Joint Ventures. On April 24 2018 we announced our participation in a 25% joint venture in Gray Oak Pipeline and a 25% joint venture in the South Texas Gateway Terminal.\t\tü\t\tü\nSLC Core Pipeline Acquisition. On May 1 2018 Andeavor Logistics completed its acquisition of the SLC Core Pipeline System which consists of active pipelines that transport Inland crude oil to Salt Lake City refineries including our Salt Lake City Refinery.\t\tü\t\tü\nWest Coast Asphalt Terminal Acquisition. On May 21 2018 we acquired five asphalt terminals on the west coast including a 50% joint venture in one asphalt terminal.\t\tü\t\tü\nMarketing Growth. We added 54 Branded stations in Mexico 22 Branded stations in the U.S. and converted 51 Retail MSO sites to company operated bringing the total converted MSO sites to 101 since the beginning of the fourth quarter of 2017.\t\tü\t\tü\nMexico Investment. We announced plans to build a refined products terminal at a storage facility in Baja California. For a total investment of approximately $100 million we will construct and operate the facility which is expected to reduce our cost to directly import fuels into Northwest Mexico.\tü\tü\t\tü\nMexico Growth. We announced we have been awarded additional refined product pipeline and storage capacity by Pemex Logística in Baja California Sur Sinaloa and Chihuahua. Additionally we were awarded marine terminal use at three facilities in Baja California Sur and Sinaloa.\tü\tü\t\tü\nDickinson Refinery Renewable Diesel Project. We announced a project to convert the Dickinson Refinery to process 12000 barrels per day of renewable feedstocks into renewable diesel fuel.\tü\tü\t\tü\nReturning Capital to Shareholders. We returned approximately $439 million to shareholders through the repurchase of 2.6 million shares of our common stock for approximately $258 million and $181 million in dividends in the first half of 2018.\t\t\tü\t\nAndeavor Logistics Revolving Credit Facility. On January 5 2018 Andeavor Logistics increased the aggregate commitments under the Andeavor Logistics Revolving Credit Agreement from $600 million to $1.1 billion.\t\t\tü\t\nEnterprise Resource Planning (\"ERP\") Project Completion. On April 1 2018 we implemented the first phases of our new ERP system which has simplified and standardized our business processes and also streamlined our operations. In addition we expect it to reduce costs and provide a platform for future growth.\tü\t\t\t\n", "q10k_tbl_29": "\tThree Months Ended June 30\t\t\t\n\t2018\t\t2017\t\nRevenues\t6854\t\t4971\t\nExpenses\t\t\t\t\nCost of fuels and other (excluding items shown separately below)\t6431\t\t4606\t\nOperating expenses (excluding depreciation and amortization)\t178\t\t105\t\nDepreciation and amortization expense\t21\t\t15\t\nSelling general and administrative expenses\t14\t\t5\t\nLoss on asset disposals and impairments\t1\t\t0\t\nSegment Operating Income\t209\t\t240\t\nSegment EBITDA (a)\t227\t\t255\t\nMarketing Margin (a)\t\t\t\t\nRetail and Branded fuel margin\t296\t\t282\t\nUnbranded fuel margin\t42\t\t40\t\nTotal Fuel Margin\t338\t\t322\t\nMerchandise margin\t58\t\t20\t\nOther margin\t27\t\t23\t\nTotal Convenience Margin\t85\t\t43\t\nTotal Marketing Margin\t423\t\t365\t\nFuel Margin (¢/gallon) (a)\t\t\t\t\nRetail and Branded Fuel Margin\t21.1\t¢\t23.2\t¢\nUnbranded Fuel Margin\t2.9\t¢\t3.2\t¢\nTotal Fuel Margin\t11.6\t¢\t13.2\t¢\nMerchandise Margin % (a)\t28.9%\t\t28.3%\t\n", "q10k_tbl_30": "\tSix Months Ended June 30\t\t\t\n\t2018\t\t2017\t\nRevenues\t12519\t\t9075\t\nExpenses\t\t\t\t\nCost of fuels and other (excluding items shown separately below)\t11770\t\t8491\t\nOperating expenses (excluding depreciation and amortization)\t345\t\t173\t\nDepreciation and amortization expense\t43\t\t28\t\nSelling general and administrative expenses\t23\t\t10\t\nLoss on asset disposals and impairments\t1\t\t0\t\nSegment Operating Income\t337\t\t373\t\nSegment EBITDA (a)\t379\t\t401\t\nMarketing Margin (a)\t\t\t\t\nRetail and Branded fuel margin\t510\t\t471\t\nUnbranded fuel margin\t80\t\t52\t\nTotal Fuel Margin\t590\t\t523\t\nMerchandise margin\t108\t\t23\t\nOther margin\t51\t\t38\t\nTotal Convenience Margin\t159\t\t61\t\nTotal Marketing Margin\t749\t\t584\t\nFuel Margin (¢/gallon) (a)\t\t\t\t\nRetail and Branded Fuel Margin\t18.7\t¢\t20.5\t¢\nUnbranded Fuel Margin\t2.7\t¢\t2.3\t¢\nTotal Fuel Margin\t10.4\t¢\t11.6\t¢\nMerchandise Margin % (a)\t28.5%\t\t28.8%\t\n", "q10k_tbl_31": "\tThree Months Ended June 30\t\n\t2018\t2017\nRevenues\t\t\nTerminalling and Transportation\t\t\nTerminalling\t208\t159\nPipeline transportation\t40\t33\nOther revenues\t1\t2\nGathering and Processing\t\t\nNGL sales (a)\t95\t81\nGas gathering and processing\t82\t87\nCrude oil and water gathering\t69\t41\nPass-thru and other revenue\t48\t33\nTotal Revenues\t543\t436\nCosts and Expenses\t\t\nTerminalling and Transportation\t\t\nOperating expenses (excluding depreciation and amortization) (b)\t79\t62\nGathering and Processing\t\t\nNGL expense (excluding items shown separately below) (a)\t45\t56\nOperating expenses (excluding depreciation and amortization) (b)\t116\t83\nDepreciation and amortization expenses\t83\t68\nGeneral and administrative expenses (b)\t26\t29\n(Gain) loss on asset disposals and impairments\t1\t(25)\nSegment Operating Income\t193\t163\nSegment EBITDA (c)\t282\t236\nAverage terminalling revenue per barrel\t1.29\t1.39\nAverage pipeline transportation revenue per barrel\t0.43\t0.40\nAverage margin on NGL sales per barrel (a)(c)(d)\t59.77\t37.45\nAverage gas gathering and processing revenue per MMBtu (d)\t1.16\t1.00\nAverage crude oil and water gathering revenue per barrel\t2.55\t1.64\n", "q10k_tbl_32": "\tSix Months Ended June 30\t\n\t2018\t2017\nRevenues\t\t\nTerminalling and Transportation\t\t\nTerminalling\t406\t304\nPipeline transportation\t71\t63\nOther revenues\t3\t2\nGathering and Processing\t\t\nNGL sales (a)\t199\t164\nGas gathering and processing\t167\t167\nCrude oil and water gathering\t134\t80\nPass-thru and other revenue\t89\t76\nTotal Revenues\t1069\t856\nCosts and Expenses\t\t\nTerminalling and Transportation\t\t\nOperating expenses (excluding depreciation and amortization) (b)\t153\t111\nGathering and Processing\t\t\nNGL expense (excluding items shown separately below) (a)\t93\t115\nOperating expenses (excluding depreciation and amortization) (b)\t227\t160\nDepreciation and amortization expenses\t162\t126\nGeneral and administrative expenses (b)\t52\t56\n(Gain) loss on asset disposals\t1\t(25)\nSegment Operating Income\t381\t313\nSegment EBITDA (c)\t553\t448\nAverage terminalling revenue per barrel\t1.30\t1.47\nAverage pipeline transportation revenue per barrel\t0.41\t0.40\nAverage margin on NGL sales per barrel (a)(c)(d)\t55.81\t38.30\nAverage gas gathering and processing revenue per MMBtu (d)\t1.14\t0.97\nAverage crude oil and water gathering revenue per barrel\t2.46\t1.68\n", "q10k_tbl_33": "\tThree Months Ended June 30\t\n\t2018\t2017\nRefining Revenues\t\t\nRefined products\t10362\t6658\nCrude oil resales and other\t1299\t391\nTotal Revenues\t11661\t7049\nRefining Cost of Materials and Expenses\t\t\nCost of materials and other (excluding items shown separately below)\t10225\t6072\nLCM\t0\t209\nTotal Cost of Sales\t10225\t6281\nExpenses\t\t\nOperating expenses (excluding depreciation and amortization):\t\t\nManufacturing costs (a)\t511\t460\nOther operating expenses\t141\t104\nTotal operating expenses\t652\t564\nDepreciation and amortization expenses\t175\t153\nGeneral and administrative expenses\t3\t3\n(Gain) loss on asset disposals and impairments\t(1)\t3\nSegment Operating Income\t607\t45\nSegment EBITDA (b)\t782\t206\nRefining margin (b)\t1436\t768\nRefining margin per throughput barrel (b)\t14.26\t9.45\nManufacturing costs (excluding depreciation and amortization) per throughput barrel (a)(b)\t5.07\t5.67\n", "q10k_tbl_34": "\tThree Months Ended June 30\t\t\t\t\t\n\t2018\t2017\t2018\t2017\t2018\t2017\n\tCalifornia (Los Angeles and Martinez)\t\tInland (Texas Minnesota North Dakota Utah and New Mexico)\t\tPacific Northwest (Washington and Alaska)\t\nRevenues\t\t\t\t\t\t\nRefined products\t5128\t4048\t3730\t1436\t1504\t1174\nCrude oil resales and other\t267\t77\t942\t249\t90\t65\nTotal Revenues\t5395\t4125\t4672\t1685\t1594\t1239\nRefining Cost of Materials and Expenses\t\t\t\t\t\t\nCost of materials and other (excluding items shown separately below)\t4781\t3506\t3927\t1446\t1517\t1120\nLCM\t0\t98\t0\t65\t0\t46\nTotal Cost of Sales\t4781\t3604\t3927\t1511\t1517\t1166\nOperating expenses (excluding depreciation and amortization):\t\t\t\t\t\t\nManufacturing costs\t284\t291\t171\t96\t56\t73\nOther operating expenses\t74\t59\t50\t25\t17\t20\nTotal operating expenses\t358\t350\t221\t121\t73\t93\nDepreciation and amortization expenses\t95\t93\t59\t33\t21\t27\nGeneral and administrative expenses\t1\t2\t2\t1\t0\t0\n(Gain) loss on asset disposals and impairments\t(1)\t3\t0\t0\t0\t0\nOperating Income (Loss)\t161\t73\t463\t19\t(17)\t(47)\nRefining throughput (Mbpd)\t555\t531\t418\t192\t133\t170\nRefining margin (a)\t614\t521\t745\t174\t77\t73\nRefining margin per throughput barrel (a)\t12.18\t10.78\t19.56\t9.96\t6.31\t4.72\nManufacturing costs (excluding depreciation and amortization) per throughput barrel (a)\t5.62\t6.02\t4.48\t5.49\t4.66\t4.72\n", "q10k_tbl_35": "\tSix Months Ended June 30\t\n\t2018\t2017\nRefining Revenues\t\t\nRefined products\t19033\t12470\nCrude oil resales and other\t2272\t635\nTotal Revenues\t21305\t13105\nRefining Cost of Materials and Expenses\t\t\nCost of materials and other (excluding items shown separately below)\t18856\t11427\nLCM\t0\t209\nTotal Cost of Sales\t18856\t11636\nExpenses\t\t\nOperating expenses (excluding depreciation and amortization):\t\t\nManufacturing costs (a)\t1033\t881\nOther operating expenses\t250\t199\nTotal operating expenses\t1283\t1080\nDepreciation and amortization expenses\t348\t301\nGeneral and administrative expenses\t7\t5\n(Gain) loss on asset disposals and impairments\t(1)\t4\nSegment Operating Income\t812\t79\nSegment EBITDA (b)\t1169\t387\nRefining margin (b)\t2449\t1469\nRefining margin per throughput barrel (b)\t12.62\t9.45\nManufacturing costs (excluding depreciation and amortization) per throughput barrel (a)(b)\t5.32\t5.67\n", "q10k_tbl_36": "\tSix Months Ended June 30\t\t\t\t\t\n\t2018\t2017\t2018\t2017\t2018\t2017\n\tCalifornia (Los Angeles and Martinez)\t\tInland (Texas Minnesota North Dakota Utah and New Mexico)\t\tPacific Northwest (Washington and Alaska)\t\nRevenues\t\t\t\t\t\t\nRefined products\t9430\t7972\t6913\t2232\t2690\t2266\nCrude oil resales and other\t403\t221\t1732\t296\t137\t118\nTotal Revenues\t9833\t8193\t8645\t2528\t2827\t2384\nRefining Cost of Materials and Expenses\t\t\t\t\t\t\nCost of materials and other (excluding items shown separately below)\t8839\t7100\t7387\t2190\t2630\t2137\nLCM\t0\t98\t0\t65\t0\t46\nTotal Cost of Sales\t8839\t7198\t7387\t2255\t2630\t2183\nOperating expenses (excluding depreciation and amortization):\t\t\t\t\t\t\nManufacturing costs\t565\t586\t345\t155\t123\t140\nOther operating expenses\t133\t115\t78\t46\t39\t38\nTotal operating expenses\t698\t701\t423\t201\t162\t178\nDepreciation and amortization expenses\t186\t187\t116\t60\t46\t54\nGeneral and administrative expenses\t2\t4\t5\t1\t0\t0\n(Gain) loss on asset disposals and impairments\t(1)\t4\t0\t0\t0\t0\nOperating Income (Loss)\t109\t99\t714\t11\t(11)\t(31)\nRefining throughput (Mbpd)\t497\t516\t412\t165\t163\t178\nRefining margin (a)\t994\t995\t1258\t273\t197\t201\nRefining margin per throughput barrel (a)\t11.05\t10.65\t16.85\t9.14\t6.70\t6.24\nManufacturing costs (excluding depreciation and amortization) per throughput barrel (a)\t6.28\t6.27\t4.61\t5.19\t4.20\t4.35\n", "q10k_tbl_37": "\tJune 30 2018\tDecember 31 2017\nDebt including current maturities:\t\t\nAndeavor\t\t\nCredit Facility\t855\t55\nSenior Notes\t3374\t3375\nTerm Loan Facility\t51\t56\nCapital Lease Obligations and Other\t129\t131\nAndeavor Debt\t4409\t3617\nAndeavor Logistics\t\t\nCredit Facilities\t665\t423\nSenior Notes\t3750\t3750\nCapital Lease Obligations and Other\t8\t9\nAndeavor Logistics Debt\t4423\t4182\nTotal Debt\t8832\t7799\nUnamortized Issuance Costs and Premiums (a)\t(106)\t(114)\nDebt Net of Unamortized Issuance Costs\t8726\t7685\nTotal Equity\t13567\t13415\nTotal Capitalization\t22293\t21100\n", "q10k_tbl_38": "\tTotal Capacity\tAmount Borrowed as of June 30 2018\tOutstanding Letters of Credit\tAvailable Capacity as of June 30 2018\tWeighted Average Interest Rate\tExpiration\nAndeavor Revolving Credit Facility\t3000\t855\t17\t2128\t3.88%\tSeptember 30 2020\nAndeavor Logistics Revolving Credit Facility\t1100\t665\t0\t435\t3.83%\tJanuary 29 2021\nAndeavor Logistics Dropdown Credit Facility\t1000\t0\t0\t1000\t-%\tJanuary 29 2021\nLetter of Credit Facilities\t975\t0\t123\t852\t\t\nTotal Credit Facilities\t6075\t1520\t140\t4415\t\t\n", "q10k_tbl_39": "Credit Facility\t30 Day Eurodollar (LIBOR) Rate at June 30 2018\tEurodollar Margin\tBase Rate\tBase Rate Margin\tCommitment Fee (unused portion)\nAndeavor Revolving Credit Facility ($3.0 billion)\t2.09%\t1.50%\t5.00%\t0.50%\t0.225%\nAndeavor Logistics Revolving Credit Facility ($1.1 billion)\t2.09%\t1.75%\t5.00%\t0.75%\t0.300%\nAndeavor Logistics Dropdown Credit Facility ($1.0 billion)\t2.09%\t1.76%\t5.00%\t0.76%\t0.300%\n", "q10k_tbl_40": "\tSix Months Ended June 30\t\n\t2018\t2017\nCash Flows From (Used in):\t\t\nOperating activities\t1097\t770\nInvesting activities\t(1512)\t(1448)\nFinancing activities\t260\t(1556)\nDecrease in Cash and Cash Equivalents\t(155)\t(2234)\n", "q10k_tbl_41": "\tThree Months Ended June 30 2018\t\tSix Months Ended June 30 2018\t\t2018 Expected (a)\t\nCapital Expenditure Category\tAndeavor (b)\tAndeavor Logistics\tAndeavor (b)\tAndeavor Logistics\tAndeavor (b)\tAndeavor Logistics\nGrowth\t167\t91\t341\t162\t480\t475\nMaintenance\t76\t14\t193\t26\t410\t105\nRegulatory\t34\t0\t80\t0\t180\t0\nTotal 2018 Capital Expenditures\t277\t105\t614\t188\t1070\t580\n", "q10k_tbl_42": "\tThree Months Ended June 30 2018\tSix Months Ended June 30 2018\t2018 Expected (a)\nTurnaround expenditures\t156\t359\t575\nMarketing branding costs\t13\t23\t75\nTotal Expenditures\t169\t382\t650\n", "q10k_tbl_43": "\tThree Months Ended June 30\t\tSix Months Ended June 30\t\n\t2018\t2017\t2018\t2017\nNet Earnings\t582\t87\t819\t174\nAdd back:\t\t\t\t\nDepreciation and amortization expenses\t292\t240\t574\t466\nInterest and financing costs net\t109\t96\t211\t194\nIncome tax expense\t167\t56\t226\t77\nEBITDA\t1150\t479\t1830\t911\nMarketing Segment Operating Income\t209\t240\t337\t373\nDepreciation and amortization expenses\t21\t15\t43\t28\nOther expense net\t(3)\t0\t(1)\t0\nMarketing Segment EBITDA\t227\t255\t379\t401\nLogistics Segment Operating Income\t193\t163\t381\t313\nDepreciation and amortization expenses\t83\t68\t162\t126\nEquity in earnings of equity method investments\t5\t3\t8\t5\nOther income net\t1\t2\t2\t4\nLogistics Segment EBITDA\t282\t236\t553\t448\nRefining Segment Operating Income\t607\t45\t812\t79\nDepreciation and amortization expenses\t175\t153\t348\t301\nEquity in earnings (loss) of equity method investments\t6\t0\t13\t(2)\nOther income (expense) net\t(6)\t8\t(4)\t9\nRefining Segment EBITDA\t782\t206\t1169\t387\n", "q10k_tbl_44": "\tThree Months Ended June 30\t\t\t\tSix Months Ended June 30\t\t\t\n\t2018\t\t2017\t\t2018\t\t2017\t\nSegment Operating Income\t209\t\t240\t\t337\t\t373\t\nAdd back:\t\t\t\t\t\t\t\t\nOperating expenses\t178\t\t105\t\t345\t\t173\t\nDepreciation and amortization expenses\t21\t\t15\t\t43\t\t28\t\nGeneral and administrative expenses\t14\t\t5\t\t23\t\t10\t\nLoss on asset disposals\t1\t\t0\t\t1\t\t0\t\nMarketing Margin\t423\t\t365\t\t749\t\t584\t\nRevenues\t\t\t\t\t\t\t\t\nRetail and Branded fuel sales\t3555\t\t2676\t\t6479\t\t5000\t\nUnbranded fuel sales\t3053\t\t2197\t\t5580\t\t3956\t\nTotal fuel sales\t6608\t\t4873\t\t12059\t\t8956\t\nMerchandise\t204\t\t71\t\t380\t\t77\t\nOther sales\t42\t\t27\t\t80\t\t42\t\nTotal Revenues\t6854\t\t4971\t\t12519\t\t9075\t\nCost of Fuel and Other (excluding depreciation and amortization)\t\t\t\t\t\t\t\t\nRetail and Branded fuel costs\t3259\t\t2394\t\t5969\t\t4529\t\nUnbranded fuel costs\t3011\t\t2157\t\t5500\t\t3904\t\nTotal fuel costs\t6270\t\t4551\t\t11469\t\t8433\t\nPurchases of merchandise\t146\t\t51\t\t272\t\t54\t\nOther costs\t15\t\t4\t\t29\t\t4\t\nTotal Cost of Fuel and Other\t6431\t\t4606\t\t11770\t\t8491\t\nMarketing Margin\t\t\t\t\t\t\t\t\nRetail and Branded fuel margin\t296\t\t282\t\t510\t\t471\t\nUnbranded fuel margin\t42\t\t40\t\t80\t\t52\t\nTotal fuel margin\t338\t\t322\t\t590\t\t523\t\nMerchandise margin\t58\t\t20\t\t108\t\t23\t\nOther margin\t27\t\t23\t\t51\t\t38\t\nMarketing Margin\t423\t\t365\t\t749\t\t584\t\nMerchandise Margin Percentage (a)\t28.9%\t\t28.3%\t\t28.5%\t\t28.8%\t\nFuel Sales (millions of gallons)\t\t\t\t\t\t\t\t\nRetail and Branded fuel sales\t1402\t\t1220\t\t2726\t\t2311\t\nUnbranded fuel sales\t1509\t\t1217\t\t2941\t\t2223\t\nTotal Fuel Sales\t2911\t\t2437\t\t5667\t\t4534\t\nRetail and Branded Fuel Margin (¢/gallon) (a)\t21.1\t¢\t23.2\t¢\t18.7\t¢\t20.5\t¢\nUnbranded Fuel Margin (¢/gallon) (a)\t2.9\t¢\t3.2\t¢\t2.7\t¢\t2.3\t¢\nTotal Fuel Margin (¢/gallon) (a)\t11.6\t¢\t13.2\t¢\t10.4\t¢\t11.6\t¢\n", "q10k_tbl_45": "\tThree Months Ended June 30\t\tSix Months Ended June 30\t\n\t2018\t2017\t2018\t2017\nSegment Operating Income\t193\t163\t381\t313\nAdd back:\t\t\t\t\nOperating expenses\t195\t145\t380\t271\nDepreciation and amortization expenses\t83\t68\t162\t126\nGeneral and administrative expenses\t26\t29\t52\t56\n(Gain) loss on asset disposals and impairments\t1\t(25)\t1\t(25)\nOther commodity purchases (a)\t0\t0\t0\t2\nSubtract:\t\t\t\t\nTerminalling revenues\t(208)\t(159)\t(406)\t(304)\nPipeline transportation revenues\t(40)\t(33)\t(71)\t(63)\nOther terminalling revenues\t(1)\t(2)\t(3)\t(2)\nGas gathering and processing revenues\t(82)\t(87)\t(167)\t(167)\nCrude oil gathering revenues\t(69)\t(41)\t(134)\t(80)\nPass-thru and other revenues\t(48)\t(33)\t(89)\t(76)\nMargin on NGL Sales\t50\t25\t106\t51\nDivided by Total Volumes for the Period:\t\t\t\t\nNGLs sales volumes (Mbpd)\t9.1\t7.3\t10.4\t7.4\nNumber of days in the period\t91\t91\t181\t181\nTotal volumes for the period (thousands of barrels) (b)\t828\t664\t1882\t1339\nAverage Margin on NGL Sales per Barrel (b)\t59.77\t37.45\t55.81\t38.30\n", "q10k_tbl_46": "\tThree Months Ended June 30\t\tSix Months Ended June 30\t\n\t2018\t2017\t2018\t2017\nSegment Operating Income\t607\t45\t812\t79\nAdd back:\t\t\t\t\nManufacturing costs (excluding depreciation and amortization)\t511\t460\t1033\t881\nOther operating expenses (excluding depreciation and amortization)\t141\t104\t250\t199\nDepreciation and amortization expenses\t175\t153\t348\t301\nGeneral and administrative expenses\t3\t3\t7\t5\n(Gain) loss on asset disposals and impairments\t(1)\t3\t(1)\t4\nRefining Margin\t1436\t768\t2449\t1469\nDivided by Total Volumes for the Period:\t\t\t\t\nTotal refining throughput (Mbpd)\t1106\t893\t1072\t859\nNumber of days in the period\t91\t91\t181\t181\nTotal volumes for the period (millions of barrels) (a)\t100.6\t81.3\t194.0\t155.5\nRefining Margin per Throughput Barrel (a)\t14.26\t9.45\t12.62\t9.45\n", "q10k_tbl_47": "\tThree Months Ended June 30\t\t\t\t\t\n\t2018\t2017\t2018\t2017\t2018\t2017\n\tCalifornia (Los Angeles and Martinez)\t\tInland (Texas Minnesota North Dakota Utah and New Mexico)\t\tPacific Northwest (Washington and Alaska)\t\nSegment Operating Income\t161\t73\t463\t19\t(17)\t(47)\nAdd back:\t\t\t\t\t\t\nManufacturing costs (excluding depreciation and amortization)\t284\t291\t171\t96\t56\t73\nOther operating expenses (excluding depreciation and amortization)\t74\t59\t50\t25\t17\t20\nDepreciation and amortization expenses\t95\t93\t59\t33\t21\t27\nGeneral and administrative expenses\t1\t2\t2\t1\t0\t0\n(Gain) loss on asset disposals and impairments\t(1)\t3\t0\t0\t0\t0\nRefining Margin\t614\t521\t745\t174\t77\t73\nDivided by Total Volumes for the Period:\t\t\t\t\t\t\nTotal refining throughput (Mbpd)\t555\t531\t418\t192\t133\t170\nNumber of days in the period\t91\t91\t91\t91\t91\t91\nTotal volumes for the period (millions of barrels) (a)\t50.5\t48.3\t38.0\t17.5\t12.1\t15.5\nRefining Margin per Throughput Barrel (a)\t12.18\t10.78\t19.56\t9.96\t6.31\t4.72\n\tSix Months Ended June 30\t\t\t\t\t\n\t2018\t2017\t2018\t2017\t2018\t2017\n\tCalifornia (Los Angeles and Martinez)\t\tInland (Texas Minnesota North Dakota Utah and New Mexico)\t\tPacific Northwest (Washington and Alaska)\t\nSegment Operating Income (Loss)\t109\t99\t714\t11\t(11)\t(31)\nAdd back:\t\t\t\t\t\t\nManufacturing costs (excluding depreciation and amortization)\t565\t586\t345\t155\t123\t140\nOther operating expenses (excluding depreciation and amortization)\t133\t115\t78\t46\t39\t38\nDepreciation and amortization expenses\t186\t187\t116\t60\t46\t54\nGeneral and administrative expenses\t2\t4\t5\t1\t0\t0\n(Gain) loss on asset disposals and impairments\t(1)\t4\t0\t0\t0\t0\nRefining Margin\t994\t995\t1258\t273\t197\t201\nDivided by Total Volumes for the Period:\t\t\t\t\t\t\nTotal refining throughput (Mbpd)\t497\t516\t412\t165\t163\t178\nNumber of days in the period\t181\t181\t181\t181\t181\t181\nTotal volumes for the period (millions of barrels) (a)\t90.0\t93.4\t74.6\t29.9\t29.5\t32.2\nRefining Margin per Throughput Barrel (a)\t11.05\t10.65\t16.85\t9.14\t6.70\t6.24\n", "q10k_tbl_48": "\tThree Months Ended June 30\t\tSix Months Ended June 30\t\n\t2018\t2017\t2018\t2017\nTotal Refining Segment operating expenses (excluding depreciation and amortization)\t652\t564\t1283\t1080\nSubtract:\t\t\t\t\nOther operating expenses (excluding depreciation and amortization)\t(141)\t(104)\t(250)\t(199)\nManufacturing Costs (excluding depreciation and amortization)\t511\t460\t1033\t881\nDivided by Total Volumes for the Period:\t\t\t\t\nTotal refining throughput (Mbpd)\t1106\t893\t1072\t859\nNumber of days in the period\t91\t91\t181\t181\nTotal volumes for the period (millions of barrels) (a)\t100.6\t81.3\t194.0\t155.5\nManufacturing Costs (excluding depreciation and amortization) per Throughput Barrel (a)\t5.07\t5.67\t5.32\t5.67\n", "q10k_tbl_49": "\tThree Months Ended June 30\t\t\t\t\t\n\t2018\t2017\t2018\t2017\t2018\t2017\n\tCalifornia (Los Angeles and Martinez)\t\tInland (Texas Minnesota North Dakota Utah and New Mexico)\t\tPacific Northwest (Washington and Alaska)\t\nTotal operating expenses\t358\t350\t221\t121\t73\t93\nSubtract:\t\t\t\t\t\t\nOther operating expenses (excluding depreciation and amortization)\t(74)\t(59)\t(50)\t(25)\t(17)\t(20)\nManufacturing Costs (excluding depreciation and amortization)\t284\t291\t171\t96\t56\t73\nDivided by Total Volumes for the Period:\t\t\t\t\t\t\nTotal refining throughput (Mbpd)\t555\t531\t418\t192\t133\t170\nNumber of days in the period\t91\t91\t91\t91\t91\t91\nTotal volumes for the period (millions of barrels) (a)\t50.5\t48.3\t38.0\t17.5\t12.1\t15.5\nManufacturing Costs (excluding depreciation and amortization) per Throughput Barrel (a)\t5.62\t6.02\t4.48\t5.49\t4.66\t4.72\n(a) Amounts may not recalculate due to rounding of dollar and volume information.\t\t\t\t\t\t\n", "q10k_tbl_50": "\tSix Months Ended June 30\t\t\t\t\t\n\t2018\t2017\t2018\t2017\t2018\t2017\n\tCalifornia (Los Angeles and Martinez)\t\tInland (Texas Minnesota North Dakota Utah and New Mexico)\t\tPacific Northwest (Washington and Alaska)\t\nTotal operating expenses\t698\t701\t423\t201\t162\t178\nSubtract:\t\t\t\t\t\t\nOther operating expenses (excluding depreciation and amortization)\t(133)\t(115)\t(78)\t(46)\t(39)\t(38)\nManufacturing Costs (excluding depreciation and amortization)\t565\t586\t345\t155\t123\t140\nDivided by Total Volumes for the Period:\t\t\t\t\t\t\nTotal refining throughput (Mbpd)\t497\t516\t412\t165\t163\t178\nNumber of days in the period\t181\t181\t181\t181\t181\t181\nTotal volumes for the period (millions of barrels) (a)\t90.0\t93.4\t74.6\t29.9\t29.5\t32.2\nManufacturing Costs (excluding depreciation and amortization) per Throughput Barrel (a)\t6.28\t6.27\t4.61\t5.19\t4.20\t4.35\n", "q10k_tbl_51": "Period\tTotal Number of Shares Purchased (a)\tAverage Price Paid per Share\tTotal Number of Shares Purchased as Part of Publicly Announced Plans or Programs (b)\tApproximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (in Millions) (b)\nApril 2018\t24554\t100.82\t23088\t1156\nMay 2018\t329\t138.77\t0\t1156\nJune 2018\t507\t149.03\t0\t1156\nTotal\t25390\t\t23088\t\n", "q10k_tbl_52": "\t\tIncorporated by Reference (File No. 1-3473 unless otherwise indicated)\t\t\nExhibit Number\tDescription of Exhibit\tForm\tExhibit\tFiling Date\n‡ 2.1\tAgreement and Plan of Merger among Western Refining Inc. Tesoro Corporation Tahoe Merger Sub 1 Inc. and Tahoe Merger Sub 2 LLC dated as of November 16 2016\t8-K\t2.1\t11/18/2016\n‡ 2.2\tAgreement and Plan of Merger dated as of August 13 2017 by and among Andeavor Logistics LP Tesoro Logistics GP LLC Western Refining Logistics LP Western Refining Logistics GP LLC WNRL Merger Sub LLC and WNRL GP Merger Sub LLC\t8-K\t2.1\t08/14/2017\n‡ 2.3\tContribution Conveyance and Assumption Agreement dated as of November 8 2017 by and among Andeavor Logistics LP Tesoro Logistics GP LLC Tesoro Logistics Operations LLC Andeavor and Tesoro Refining & Marketing Company LLC\t8-K\t2.1\t11/8/2017\n‡ 2.4\tFirst Amendment to Contribution Conveyance and Assumption Agreement dated January 1 2018 among Andeavor Logistics LP Tesoro Logistics GP LLC Tesoro Logistics Operations LLC Andeavor and Tesoro Refining & Marketing Company LLC\t10-Q\t2.4\t5/7/18\n‡ 2.5\tAgreement and Plan of Merger dated as of April 29 2018 by and among Andeavor Marathon Petroleum Corporation Mahi Inc. and Mahi LLC\t8-K\t2.1\t5/1/2018\n*2.6\tAmendment to Agreement and Plan of Merger dated as of July 3 2018 by and among Andeavor Marathon Petroleum Corporation Mahi Inc. and Mahi LLC\t\t\t\n3.1\tRestated Certificate of Incorporation of Andeavor dated as of August 10 2012 as amended\t8-K\t3.1\t8/1/2017\n3.2\tAmended and Restated Bylaws of Andeavor effective November 1 2016 as amended\t8-K\t3.2\t8/1/2017\n*10.1\tAmendment No. 1 to Kenai Storage Services Agreement dated as of July 1 2016 among Tesoro Alaska Company LLC Tesoro Logistics Operations LLC Tesoro Logistics GP LLC and Tesoro Logistics LP\t\t\t\n", "q10k_tbl_53": "\t\tIncorporated by Reference (File No. 1-3473 unless otherwise indicated)\t\t\nExhibit Number\tDescription of Exhibit\tForm\tExhibit\tFiling Date\n*10.2\tAmendment No. 1 to Avon Marine Terminal Use and Throughput Agreement dated as of November 21 2016 by and among Tesoro Logistics Operations LLC Tesoro Logistics GP LLC Tesoro Logistics LP and Tesoro Refining & Marketing Company LLC\t\t\t\n*10.3\tAmendment No. 1 to Martinez Storage Services Agreement dated as of November 21 2016 by and among Tesoro Refining & Marketing Company LLC Tesoro Logistics Operations LLC Tesoro Logistics GP LLC and Tesoro Logistics LP\t\t\t\n*10.4\tAmendment No. 1 to Alaska Terminalling Services Agreement dated as of September 16 2016 by and among Tesoro Alaska Company LLC Tesoro Logistics Operations LLC Tesoro Alaska Terminals LLC Tesoro Logistics GP LLC and Tesoro Logistics LP\t\t\t\n10.5\tVoting and Support Agreement dated as of April 29 2018 by and among Marathon Petroleum Corporation Andeavor Mahi Inc. Mahi LLC Paul L. Foster and Franklin Mountain Investments LP\t8-K\t99.1\t5/1/2018\n10.6\tAndeavor 2018 Long-Term Incentive Plan\tS-8 (File No. 333-224688)\t99.1\t5/4/2018\n*31.1\tCertification by Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002\t\t\t\n*31.2\tCertification by Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002\t\t\t\n*32.1\tCertification by Chief Executive Officer Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002\t\t\t\n*32.2\tCertification by Chief Financial Officer Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002\t\t\t\n**101.INS\tXBRL Instance Document\t\t\t\n**101.SCH\tXBRL Taxonomy Extension Schema Document\t\t\t\n**101.CAL\tXBRL Taxonomy Extension Calculation Linkbase Document\t\t\t\n**101.DEF\tXBRL Taxonomy Extension Definition Linkbase Document\t\t\t\n**101.LAB\tXBRL Taxonomy Extension Label Linkbase Document\t\t\t\n**101.PRE\tXBRL Taxonomy Extension Presentation Linkbase Document\t\t\t\n"}{"bs": "q10k_tbl_3", "is": "q10k_tbl_2", "cf": "q10k_tbl_4"}None
Note 4 - Investments - Equity Method and Joint Ventures
Note 5 - Derivative Instruments
Note 6 - Fair Value Measurements
Note 7 - Debt
Note 8 - Benefit Plans
Note 9 - Commitments and Contingencies
Note 10 - Stockholders' Equity and Earnings per Share
Note 11 - Stock-Based Compensation
Note 12 - Revenues
Note 13 - Operating Segments
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Note 13 Within Item 1 for Intercompany Revenue. These Business Lines Generate Revenue By Charging Fees For:
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II - Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 6. Exhibits
Exhibits
EX-2.6
andv2q201810-qex26xamendme.htm
EX-10.1
andv2q201810-qex101xkenais.htm
EX-10.2
andv2q201810-qex102xavonmt.htm
EX-10.3
andv2q201810-qex103xmartin.htm
EX-10.4
andv2q201810-qex104xalaska.htm
EX-31.1
andv2q201810-qex311.htm
EX-31.2
andv2q201810-qex312.htm
EX-32.1
andv2q201810-qex321.htm
EX-32.2
andv2q201810-qex322.htm
Andeavor Earnings 2018-06-30
Balance Sheet
Income Statement
Cash Flow
10-Q 1 andv2q201810-q.htm 10-Q Document
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10‑Q
(Mark One)
þ
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2018
or
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from_____________________to__________
Commission File Number 1‑3473
ANDEAVOR
(Exact name of registrant as specified in its charter)
Delaware
95‑0862768
(State or other jurisdiction of
(I.R.S. Employer
incorporation or organization)
Identification No.)
19100 Ridgewood Pkwy, San Antonio, Texas 78259-1828
(Address of principal executive offices) (Zip Code)
210-626-6000
(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þ No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
þ
Accelerated filer
o
Non-accelerated filer
o (Do not check if a smaller reporting company)
Smaller reporting company
o
Emerging growth company
o
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ
There were 151,125,987 shares of the registrant’s Common Stock outstanding at August 2, 2018.
This Quarterly Report on Form 10-Q (including documents incorporated by reference herein) contains statements with respect to our expectations or beliefs as to future events. These types of statements are “forward-looking” and subject to uncertainties. See “Important Information Regarding Forward-Looking Statements” in Management’s Discussion and Analysis of Financial Condition and Results of Operations in Part I, Item 2.
2 |
Financial Statements
Part I - Financial Statements
Item 1. Financial Statements
Andeavor
Condensed Statements of Consolidated Operations
(Unaudited)
Three Months Ended June 30,
Six Months Ended June 30,
2018
2017
2018
2017
(In millions, except per share amounts)
Revenues (a)
$
12,472
$
7,849
$
22,772
$
14,487
Costs and Expenses
Cost of materials and other (excluding items shown separately below) (a)
10,235
6,217
18,844
11,643
Lower of cost or market inventory valuation adjustment
—
209
—
209
Operating expenses (excluding depreciation and amortization)
918
740
1,784
1,395
Depreciation and amortization expenses
292
240
574
466
General and administrative expenses
179
247
352
382
(Gain) loss on asset disposals and impairments
1
(22
)
1
(21
)
Operating Income
847
218
1,217
413
Interest and financing costs, net
(109
)
(96
)
(211
)
(194
)
Equity in earnings of equity method investments
11
3
21
3
Other income, net
—
18
10
29
Earnings Before Income Taxes
749
143
1,037
251
Income tax expense
167
56
226
77
Net Earnings from Continuing Operations
582
87
811
174
Earnings from discontinued operations, net of tax
—
—
8
—
Net Earnings
582
87
819
174
Less: Net earnings from continuing operations attributable to noncontrolling interest
67
47
132
84
Net Earnings Attributable to Andeavor
$
515
$
40
$
687
$
90
Net Earnings Attributable to Andeavor
Continuing operations
$
515
$
40
$
679
$
90
Discontinued operations
—
—
8
—
Total
$
515
$
40
$
687
$
90
Net Earnings per Share - Basic
Continuing operations
$
3.41
$
0.31
$
4.47
$
0.73
Discontinued operations
—
—
0.05
—
Total
$
3.41
$
0.31
$
4.52
$
0.73
Weighted average common shares outstanding - Basic
151.1
130.8
152.0
124.0
Net Earnings per Share - Diluted
Continuing operations
$
3.38
$
0.31
$
4.43
$
0.72
Discontinued operations
—
—
0.05
—
Total
$
3.38
$
0.31
$
4.48
$
0.72
Weighted average common shares outstanding - Diluted
152.6
131.7
153.5
125.0
Dividends per Share
$
0.59
$
0.55
$
1.18
$
1.10
Supplemental Information
(a) Excise taxes collected by our Marketing segment included in revenues. Refer to Note 12 in the accompanying notes for adoption of revenue recognition standards.
$
—
$
153
$
—
$
287
The accompanying notes are an integral part of these condensed consolidated financial statements.
June 30, 2018 | 3
Financial Statements
Andeavor
Condensed Consolidated Balance Sheets
(Unaudited)
June 30, 2018
December 31, 2017
(In millions, except share data)
Assets
Current Assets
Cash and cash equivalents (Andeavor Logistics: $44 and $75, respectively)
$
388
$
543
Receivables, net of allowance for doubtful accounts (Andeavor Logistics: $200 and $219, respectively)
2,623
1,961
Inventories
3,653
3,630
Prepayments and other current assets
496
749
Total Current Assets
7,160
6,883
Property, Plant and Equipment, Net
Property, plant and equipment, at cost
19,834
18,823
Accumulated depreciation and amortization
(4,389
)
(4,081
)
Property, Plant and Equipment, Net (Andeavor Logistics: $5,625 and $5,413, respectively)
15,445
14,742
Goodwill (Andeavor Logistics: $712 and $692, respectively)
3,288
3,234
Acquired Intangibles, Net (Andeavor Logistics: $1,128 and $1,153, respectively)
1,709
1,645
Other Noncurrent Assets, Net (Andeavor Logistics: $404 and $406, respectively)
2,472
2,069
Total Assets
$
30,074
$
28,573
Liabilities and Equity
Current Liabilities
Accounts payable
$
3,799
$
3,330
Current maturities of debt
28
17
Other current liabilities
1,227
1,654
Total Current Liabilities
5,054
5,001
Deferred Income Taxes
1,777
1,591
Debt, Net of Unamortized Issuance Costs (Andeavor Logistics: $4,372 and $4,127, respectively)
8,698
7,668
Other Noncurrent Liabilities
978
898
Total Liabilities
16,507
15,158
Commitments and Contingencies (Note 9)
Equity
Andeavor Stockholders’ Equity
Common stock, par value $0.162/3; authorized 300,000,000 shares; 200,797,146 shares issued (200,095,819 in 2017)
33
33
Additional paid-in capital
5,269
5,224
Retained earnings
8,141
7,651
Treasury stock, 49,675,841 common shares (46,810,338 in 2017), at cost
(3,123
)
(2,841
)
Accumulated other comprehensive loss, net of tax
(252
)
(252
)
Total Andeavor Stockholders’ Equity
10,068
9,815
Noncontrolling Interest
3,499
3,600
Total Equity
13,567
13,415
Total Liabilities and Equity
$
30,074
$
28,573
The accompanying notes are an integral part of these condensed consolidated financial statements.
4 |
Financial Statements
Andeavor
Condensed Statements of Consolidated Cash Flows
(Unaudited)
Six Months Ended June 30,
2018
2017
(In millions)
Cash Flows From (Used In) Operating Activities
Net earnings
$
819
$
174
Adjustments to reconcile net earnings to net cash from operating activities:
Depreciation and amortization expenses
574
466
Lower of cost or market inventory valuation adjustment
—
209
Amortization of debt issuance costs and discounts
10
10
(Gain) loss on asset disposals and impairments
1
(21
)
Gain related to Hawaii Business
(10
)
—
Stock-based compensation expense
26
34
Deferred income taxes
171
50
Turnaround expenditures
(237
)
(274
)
Marketing branding costs
(24
)
(37
)
Equity in earnings of equity method investments, net of distributions
6
13
Other operating activities, net
9
(6
)
Changes in current assets and current liabilities
(282
)
(4
)
Changes in noncurrent assets and noncurrent liabilities
34
156
Net cash from operating activities
1,097
770
Cash Flows From (Used In) Investing Activities
Capital expenditures
(852
)
(539
)
Acquisitions, net of cash
(631
)
(938
)
Proceeds from asset sales
7
44
Investments in equity method investments and joint ventures
(37
)
—
Other investing activities, net
1
(15
)
Net cash used in investing activities
(1,512
)
(1,448
)
Cash Flows From (Used In) Financing Activities
Borrowings under revolving credit agreements
2,940
764
Repayments on revolving credit agreements
(1,898
)
(514
)
Repayments of debt
(11
)
(1,636
)
Proceeds from inventory financing arrangements
330
—
Repayments of inventory financing arrangements
(446
)
—
Dividend payments
(181
)
(130
)
Net proceeds from issuance of Andeavor Logistics LP common units
—
281
Distributions to noncontrolling interest
(189
)
(133
)
Purchases of common stock
(258
)
(148
)
Taxes paid related to net share settlement of equity awards
(23
)
(31
)
Other financing activities, net
(4
)
(9
)
Net cash from (used in) financing activities
260
(1,556
)
Decrease in Cash and Cash Equivalents
(155
)
(2,234
)
Cash and Cash Equivalents, Beginning of Period
543
3,295
Cash and Cash Equivalents, End of Period
$
388
$
1,061
The accompanying notes are an integral part of these condensed consolidated financial statements.
June 30, 2018 | 5
Notes to Condensed Consolidated Financial Statements (Unaudited)
Note 1 - Organization and Basis of Presentation
Organization
As used in this report, the terms “Andeavor,” the “Company,” “we,” “us” or “our” may refer to Andeavor, one or more of its consolidated subsidiaries or all of them taken as a whole. The words “we,” “us” or “our” generally include Andeavor Logistics LP (“Andeavor Logistics”), a publicly-traded limited partnership, and its subsidiaries as consolidated subsidiaries of Andeavor with certain exceptions where there are transactions or obligations between Andeavor Logistics and Andeavor or its other subsidiaries.
Marathon Petroleum Corporation Merger
Andeavor and Marathon Petroleum Corporation (“MPC”) entered into an Agreement and Plan of Merger, dated as of April 29, 2018 (the “MPC Merger Agreement”), under which MPC will acquire all of our outstanding shares (the “MPC Merger”). Our shareholders will have the option to receive in exchange for their shares of Andeavor common stock shares of MPC stock, cash, or a combination of both, subject to a proration mechanism that will result in 15 percent of the shares of our common stock being exchanged for cash, and the remaining shares being exchanged for MPC stock. The transaction was unanimously approved by the boards of directors of both companies and subject to regulatory and other customary closing conditions, including approvals from the shareholders of each company.
On July 3, 2018, we were notified that the waiting period with respect to the notification and report forms filed under the
U.S. Hart-Scott-Rodino Antitrust Improvements Act of 1976 expired. In addition, we have received the necessary regulatory clearance in Canada. These matters satisfy certain conditions to the closing of the MPC Merger, but others remain.
Andeavor stockholders as of the close of business on August 1, 2018 (the “Record Date”) were invited to attend a special meeting on September 24, 2018 to consider and vote upon a proposal to adopt the MPC Merger Agreement and other matters related to the MPC Merger. MPC stockholders as of the close of business on the Record Date were invited to attend a special meeting on September 24, 2018 to consider and vote upon a proposal to approve the issuance of MPC common stock in connection with the MPC Merger and other matters related to the MPC Merger.
Western Refining
On June 1, 2017, pursuant to the Agreement and Plan of Merger, dated as of November 16, 2016, by and among Western Refining, Inc. (“Western Refining”), the Company, and our wholly-owned subsidiaries, a wholly-owned subsidiary was merged with and into Western Refining, with Western Refining surviving such merger as a wholly-owned subsidiary of the Company (the “Merger” or the “Western Refining Acquisition”). Refer to Note 2 for more information on the Merger.
Principles of Consolidation and Basis of Presentation
Principles of Consolidation
These interim condensed consolidated financial statements and notes hereto of Andeavor and its subsidiaries have been prepared by management without audit according to the rules and regulations of the Securities and Exchange Commission (“SEC”) and reflect all adjustments that, in the opinion of management, are necessary for a fair presentation of results for the periods presented. Such adjustments are of a normal recurring nature, unless otherwise disclosed. We prepare our condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”). However, certain information and notes normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to the SEC’s rules and regulations. The consolidated balance sheet at December 31, 2017 has been condensed from the audited consolidated financial statements at that date. Management believes that the disclosures presented herein are adequate to present the information fairly. The accompanying condensed consolidated financial statements and notes should be read in conjunction with the Andeavor Annual Report on Form 10-K for the year ended December 31, 2017.
Basis of Presentation
We are required under U.S. GAAP to make estimates and assumptions that affect the reported amounts and disclosures of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the periods presented. We review our estimates on an ongoing basis. Changes in facts and circumstances may result in revised estimates and actual results could differ from those estimates. The results of operations for any interim period are not necessarily indicative of results for the full year. Certain prior year balances have been aggregated or disaggregated to conform to the current year presentation, including the adoption of recent accounting standards discussed further below.
The consolidated statements of comprehensive income for the six months ended June 30, 2018 and 2017 have been omitted, as there was no material change to accumulated other comprehensive income in either period.
Cost Classifications
Cost of materials and other includes the purchase cost of commodities sold within our Refining and Logistics segments along with the cost of inbound transportation and outbound distribution costs incurred to transport product to our customers, gains and
6 |
Notes to Condensed Consolidated Financial Statements (Unaudited)
losses related to our commodity hedging activities and the cost of merchandise sold through our Marketing segment. Additionally, lower of cost or market valuation adjustments impact our cost of materials and other but are separately presented in our statements of consolidated operations.
Operating expenses are comprised of direct and indirect operating costs. Direct operating expenses reflect costs incurred for direct labor, repairs and maintenance, outside services, chemicals and catalysts, utility costs, including the purchase of electricity and natural gas used by our facilities, property taxes, environmental compliance costs related to current period operations, rent expense and other direct operating expenses incurred in the production of refined products sold through our Marketing or Refining segments or towards the provision of services in our Logistics segment. Indirect operating expenses represent allocated labor and other administrative costs for centralized personnel that influence our underlying operations, environmental remediation costs unrelated to current period operations, and other costs that are related, but not directly, to our segment operations.
Operating Expenses (in millions)
Three Months Ended June 30,
Six Months Ended June 30,
2018
2017
2018
2017
Direct operating expenses
$
836
$
708
$
1,664
$
1,333
Indirect operating expenses
82
32
120
62
Operating expenses (excluding depreciation and amortization)
$
918
$
740
$
1,784
$
1,395
Depreciation and amortization expenses consist of the depreciation and amortization of property, plant and equipment, deferred turnaround expenditures, marketing branding costs and intangible assets related to our operating segments along with our corporate operations. General and administrative expenses represent costs that are not directly or indirectly related to or otherwise are not allocated to our marketing, logistics or refining operations. Cost of materials and other, any lower of cost or market valuation adjustments, direct operating expenses incurred across our operating segments, and depreciation and amortization expenses recognized by our Marketing, Logistics and Refining segments (refer to amounts disclosed in Note 13) constitute costs of revenue as defined by U.S. GAAP.
Variable Interest Entities
Our condensed consolidated financial statements include a variable interest entity, Andeavor Logistics, which is part of our Marketing and Logistics segments. Andeavor Logistics is a publicly traded limited partnership that we formed to own, operate, develop and acquire logistics assets. Its assets are integral to the success of Andeavor’s refining and marketing operations and are used to gather crude oil, natural gas, and water, process natural gas and distribute, transport and store crude oil and refined products. Andeavor Logistics provides us with various pipeline transportation, trucking, terminal distribution, gathering and processing, storage and petroleum-coke handling services under long-term, fee-based commercial agreements. Each of these agreements, apart from the storage and transportation services agreement, contain minimum volume commitments. We do not provide financial or equity support through any liquidity arrangements or financial guarantees to Andeavor Logistics.
Tesoro Logistics GP, LLC (“TLGP”), our wholly-owned subsidiary, serves as the general partner of Andeavor Logistics. As the general partner of Andeavor Logistics, we have the sole ability to direct the activities of Andeavor Logistics that most significantly impact its economic performance. We are considered to be the primary beneficiary for accounting purposes and are Andeavor Logistics’ primary customer. We held an approximate 59% interest in Andeavor Logistics at both June 30, 2018 and December 31, 2017. In the event Andeavor Logistics incurs a loss, our operating results will reflect Andeavor Logistics’ loss, net of intercompany eliminations. Andeavor Logistics’ transactions with us under our various long-term, fee-based commercial agreements accounted for 68% and 64% of Andeavor Logistics’ total revenues for the three and six months ended June 30, 2018, respectively, and 45% and 46% of Andeavor Logistics’ total revenues for the three and six months ended June 30, 2017, respectively.
In January 2018, Andeavor acquired Rangeland Energy II, LLC, (“Rangeland”), which included the acquisition of Rangeland’s 67% interest in Rangeland RIO Pipeline, LLC (“RIO”), a variable interest entity that owns assets in the Delaware and Midland Basins. Andeavor’s interests in RIO include its initial equity investment of $159 million, which is subject to adjustment during the one-year measurement period, and a service agreement through one of its wholly-owned subsidiaries to operate, maintain and repair the assets. Andeavor is not the primary beneficiary of RIO, under the partnership agreement, because Andeavor and the other minor shareholder jointly direct the activities of RIO that most significantly impact its economic performance. In addition, Andeavor Logistics has a 78% interest in Rendezvous Gas Services, L.L.C (“RGS”).
In April 2018, Andeavor announced participation in two new joint ventures under development, Gray Oak Pipeline, LLC (“Gray Oak Pipeline”) and South Texas Terminal LLC (“South Texas Gateway Terminal”). The Gray Oak Pipeline will support the transportation of crude oil from the Permian Basin to Corpus Christi, Texas. We own a 25% interest in the pipeline that is expected to be placed in service by the end of the fourth quarter of 2019 and is backed by long-term third-party, take-or-pay commitments with primarily investment grade customers. We own a 25% participation in the South Texas Gateway Terminal, a
June 30, 2018 | 7
Notes to Condensed Consolidated Financial Statements (Unaudited)
planned deep-water, open access marine terminal in Ingleside, Texas. RIO, RGS, Gray Oak Pipeline and the South Texas Gateway Terminal are unconsolidated variable interest entities and we use the equity method of accounting with respect to our investments in each entity.
Discontinued Operations
On September 25, 2013, we completed the sale of all of our interest in Tesoro Hawaii, LLC, which operated a 94 thousand barrels per day Hawaii refinery, retail sites and associated logistics assets (the “Hawaii Business”). The sale of the Hawaii Business was subject to an earn-out provision based on the annual gross margin (as defined in sale agreement) in the three annual periods beginning with the year ended December 31, 2014 and ending with the year ended December 31, 2016. Additionally, we retained liability for certain regulatory improvements required at the Hawaii refinery and tank replacement efforts at certain retail sites. The results of operations for this business have been presented as discontinued operations in the condensed statements of consolidated operations. There were no revenues for the three or six months ended June 30, 2018 and 2017. We recorded $10 million in pre-tax earnings ($8 million after-tax) during the six months ended June 30, 2018 primarily related to final adjustments to previous earn-out periods. No additional earn-outs related to the sale of the Hawaii Business remain to be paid to Andeavor. There were no earnings or loss recorded for the three months ended June 30, 2018 or 2017 and the six months ended June 30, 2017. Cash flows from discontinued operations were $8 million for the six months ended June 30, 2018 and cash flows used in discontinued operations were $6 million for the six months ended June 30, 2017. Unless otherwise noted, the information in the notes to the condensed consolidated financial statements relates to our continuing operations.
New Accounting Standards and Disclosures
Revenue Recognition
In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Updated (“ASU”) 2014-09, “Revenue from Contracts with Customers” to replace existing revenue recognition rules with a single comprehensive model to use in accounting for revenue arising from contracts with customers. Under this ASU and the associated subsequent amendments (collectively, “ASC 606”), revenue is recognized when a customer obtains control of promised goods or services for an amount that reflects the consideration the entity expects to receive in exchange for those goods or services. In addition, ASC 606 requires expanded disclosure of the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers.
We adopted ASC 606 on January 1, 2018 utilizing the modified retrospective method. We recognized a $16 million reduction to retained earnings and a $9 million reduction to noncontrolling interest on January 1, 2018 for the cumulative effect adjustment related to contracts in process but not substantially complete as of that date. We reflected the aggregate impact of all modifications executed and effective as of January 1, 2018 in applying the new standard to these contracts. The cumulative effect adjustment is primarily related to the period over which revenue is recognized on contracts within our Logistics segment for which our customers pay minimum throughput volume commitments and clawback provisions apply. We also made immaterial adjustments associated with our gift card program and franchise fees. Additionally, upon the adoption of ASC 606, the gross versus net presentation of certain contractual arrangements and taxes has changed as further described in Note 12. The current period results and balances are presented in accordance with ASC 606, while comparative periods continue to be presented in accordance with the accounting standards in effect for those periods.
For the three and six months ended June 30, 2018, we recorded lower revenues of $315 million and $566 million, respectively, and correspondingly $315 million and $566 million lower cost of materials and other, respectively, for presentation impacts of applying ASC 606. These presentation impacts were primarily associated with netting excise and other related taxes in our Marketing segment as described in Note 12. We recorded an additional $3 million and $5 million in revenues during the three and six months ended June 30, 2018, respectively, primarily related to the minimum throughput volume commitments in our Logistics segment discussed above as a result of applying the new standard. There were no material impacts during the period to the condensed consolidated balance sheet or condensed statement of consolidated cash flows, as a result of the adoption.
Leases
In February 2016, the FASB issued ASU 2016-02, “Leases” (“ASU 2016-02”), which amends existing accounting standards for lease accounting and adds additional disclosures about leasing arrangements. Under the new guidance, lessees are required to recognize right-of-use assets and lease liabilities on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either a financing lease or operating lease, with classification affecting the pattern of expense recognition in the income statement and presentation of cash flows in the statement of cash flows. The new standard also requires additional disclosures to help financial statement users better understand the amount, timing, and uncertainty of cash flows arising from leases. ASU 2016-02 is effective for annual reporting periods beginning after December 15, 2018, and interim reporting periods within those annual reporting periods. Early adoption is permitted and in the original guidance the modified retrospective application was required, however, in July 2018 the FASB issued ASU 2018-11 which permits entities with another transition method in which the effective date would be the date of initial application of transition. Under this optional transition method, we would recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. We expect to elect the optional transition method.
8 |
Notes to Condensed Consolidated Financial Statements (Unaudited)
We are progressing through our implementation plan, which includes the following activities; designing and implementing a new lease accounting system, designing new business processes and related internal controls, extracting the required accounting and reporting data from our lease agreements as well as the continued assessment and documentation of the accounting impacts related to the new standard. In addition, we continue to work with the industry group on certain areas and assess the impacts as consensus continues to be formed. While we are still working through our implementation plan, we do expect that the recognition of right-of-use assets and lease liabilities, which are not currently reflected on our condensed consolidated balance sheets, will have a material impact on total assets and liabilities. However, we do not expect the adoption of the standard to have a material impact on our condensed statements of consolidated operations or liquidity. At this time, we are unable to estimate the full impact of the standard until we progress further through our plan and the industry reaches a consensus on certain industry specific issues.
Credit Losses
In June 2016, the FASB issued ASU 2016-13, “Measurement of Credit Losses on Financial Instruments” (“ASU 2016-13”), which amends guidance on the impairment of financial instruments. The ASU requires the estimation of credit losses based on expected losses and provides for a simplified accounting model for purchased financial assets with credit deterioration. ASU 2016-13 is effective for annual reporting periods beginning after December 15, 2019, and interim reporting periods within those annual reporting periods. Early adoption is permitted for annual reporting periods beginning after December 15, 2018. While we are still evaluating the impact of ASU 2016-13, we do not expect the adoption of this standard to have a material impact on our financial statements.
Pension and Postretirement Costs
In March 2017, the FASB issued ASU 2017-07, “Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost” (“ASU 2017-07”), which requires the current service-cost component of net benefit costs to be presented similarly with other current compensation costs for related employees on the statements of consolidated operations, and stipulates that only the service cost component of net benefit costs is eligible for capitalization. The Company will present other components of net benefit costs elsewhere on the statements of consolidated operations as discussed further in Note 8. The amendments to the presentation of the statements of consolidated operations in this update should be applied retrospectively while the change in capitalized benefit cost is to be applied prospectively. We adopted ASU 2017-07 as of January 1, 2018. Adoption of the standard resulted in an increase to operating expenses of $1 million and $2 million respectively, and interest and financing costs of $9 million and $18 million respectively, with a corresponding decrease to general and administrative expenses of $1 million and $2 million, respectively, and an increase to other income of $9 million and $18 million, respectively, for the three and six months ended June 30, 2017. There was no impact to net earnings and ASU 2017-07 does not impact the consolidated balance sheets or statements of consolidated cash flows.
Stock-based Compensation
In May 2017, the FASB issued ASU 2017-09, “Compensation - Stock Compensation (Topic 718): Scope of Modification Accounting” (“ASU 2017-09”), which provides guidance about which changes to the terms or conditions of a share-based payment awarded require an entity to apply modification accounting. The amendments in ASU 2017-09 are to be applied prospectively to an award modified on or after the adoption date. As such, the impact of ASU 2017-09 is dependent on whether we modify any share-based payment awards and the nature of such modifications. We adopted ASU 2017-09 as of January 1, 2018 with no impact on our financial statements.
Derivatives and Hedging
In August 2017, the FASB issued ASU 2017-12, “Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities” (“ASU 2017-12”), which amends and simplifies existing guidance to more accurately present the economic effects of risk management activities in the financial statements. ASU 2017-12 is effective for interim and annual reporting periods beginning after December 15, 2018. Early adoption is permitted. While we are still evaluating the impact of ASU 2017-12, we do not expect the adoption of this standard to have a material impact on our financial statements.
Comprehensive Income
In February 2018, the FASB issued ASU 2018-02, “Income Statement-Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income” (“ASU 2018-02”), which allows a reclassification of recorded amounts from accumulated other comprehensive income to retained earnings for the adjustment of deferred taxes due to the reduction of the historical corporate income tax rate to the newly enacted corporate income tax rate resulting from the U.S. tax law changes enacted in December 2017. It also requires certain disclosures about these reclassifications. ASU 2018-02 is effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years, with early adoption permitted. The new guidance must be applied either on a prospective basis in the period of adoption or retrospectively to each period (or periods) in which the effect of the change in the U.S. federal corporate income tax rate in the U.S. tax law changes are recognized. While we are still evaluating the impact of ASU 2018-02, we do not expect the adoption of this standard to have a material impact on our financial statements.
June 30, 2018 | 9
Notes to Condensed Consolidated Financial Statements (Unaudited)
Note 2 - Acquisitions
Western Refining Acquisition
On June 1, 2017, we completed the Western Refining Acquisition. Based on our $83.25 per share closing stock price on June 1, 2017, the aggregate value of consideration paid to Western Refining shareholders was $4.0 billion, including approximately $3.6 billion of our stock and approximately $424 million of cash, including cash payable upon accelerated vesting of Western Refining equity awards. The cash portion of the purchase price, along with the settlement of $1.6 billion of certain Western Refining debt and other transaction related costs, was funded using cash on hand and $575 million of funds drawn on the Andeavor Revolving Credit Facility.
We accounted for the Western Refining Acquisition using the acquisition method of accounting, which requires, among other things, that assets acquired at their fair values and liabilities assumed be recognized on the balance sheet as of the acquisition date. The purchase price allocation for the Western Refining Acquisition is complete and has been allocated based on the fair values of the assets acquired and liabilities assumed at the acquisition date. During the six months ended June 30, 2018, we recorded adjustments to our allocation to increase other noncurrent liabilities by $32 million, property, plant and equipment by $22 million and deferred income taxes by $3 million offset by decreases in accounts payable of $13 million and accrued liabilities of $3 million.
Acquisition Date Purchase Price Allocation (in millions)
Cash
$
159
Receivables
510
Inventories
805
Prepayments and Other Current Assets
212
Property, Plant and Equipment (a)
3,486
Goodwill
2,948
Acquired Intangibles
315
Other Noncurrent Assets
162
Accounts Payable
(688
)
Accrued Liabilities
(267
)
Current Portion of Long-term Debt
(12
)
Deferred Income Taxes
(721
)
Debt
(2,092
)
Other Noncurrent Liabilities
(118
)
Noncontrolling Interest
(719
)
Total purchase price
$
3,980
(a)
Estimated useful lives ranging from 3 to 28 years have been assumed based on the valuation.
Goodwill
Andeavor evaluated several factors that contributed to the amount of goodwill presented above. These factors include the acquisition of an existing integrated refining, marketing and logistics business located in areas with access to cost-advantaged feedstocks with an assembled workforce that cannot be duplicated at the same costs by a new entrant. Further, the Western Refining Acquisition provides a platform for future growth through operating efficiencies Andeavor expects to gain from the application of best practices across the combined company and an ability to realize synergies from the geographic diversification of Andeavor’s business and rationalization of general and administrative costs. The amount of goodwill by reportable segment is as follows: Marketing $282 million, Logistics $707 million and Refining $1.96 billion. Approximately $1.98 billion of the $2.95 billion in goodwill resulting from the tax-free merger with Western Refining is non-deductible for tax purposes. As a result of prior acquisitions, Western Refining has tax-deductible goodwill, in which we received carryover basis, providing tax deductibility for approximately $970 million of the $2.95 billion in goodwill that otherwise would not be deductible.
10 |
Notes to Condensed Consolidated Financial Statements (Unaudited)
Property, Plant and Equipment
The fair value of property, plant and equipment is $3.5 billion. This fair value is based on the valuation using a combination of the income, cost and market approaches. The useful lives of acquired assets have been aligned to similar assets at Andeavor.
Acquired Intangible Assets
The fair value of the acquired identifiable intangible assets is $315 million. This fair value is based on the valuation completed for the business enterprise, along with the related tangible assets, using a combination of the income method, cost method and comparable market transactions. We recognized intangible assets associated with customer relationships, franchise rights and favorable leases, all of which will be amortized over a definite-life. We also recognized an intangible asset of $38 million related to liquor licenses and $113 million related to trade names, both of which have indefinite lives. We considered the assets' historical accounting by Western Refining, our plans for the continued use and marketing of the assets, and how a market participant would use the assets in determining whether the intangible assets have an indefinite or definite life. We amortize acquired intangibles with finite lives on a straight-line basis over a weighted average useful life of 13 years, and we include the amortization in depreciation and amortization expenses on our condensed statement of consolidated operations. The gross carrying value of our finite life intangibles acquired from the Western Refining Acquisition was $164 million and the accumulated amortization was $14 million as of June 30, 2018. Amortization expense is expected to be $13 million per year for the next five years related to the Western Refining acquired intangible assets.
Contingencies
We assumed environmental, legal and asset retirement obligation liabilities of $49 million in the Western Refining Acquisition. This represents an increase of $30 million during the six months ended June 30, 2018.
Interests in Western Refining Logistics and Minnesota Pipe Line Company
With the Western Refining Acquisition, we acquired a controlling interest in Western Refining Logistics, LP (“WNRL”). The fair value of the non-controlling interest in WNRL is based on the unit price, units outstanding and the percent of public unitholders of WNRL on June 1, 2017. The October 30, 2017 merger between Andeavor Logistics and WNRL in which all WNRL outstanding common units were exchanged for common units in Andeavor Logistics did not impact the fair value of non-controlling interest. Additionally, we acquired a 17% common equity interest in Minnesota Pipe Line Company, LLC (“MPL”). We are accounting for our investment in MPL under the equity method of accounting given our ability to exercise significant influence over MPL.
Acquisition Costs
There were no material acquisition, severance or retention costs incurred in the three and six and months ended June 30, 2018 related to the Western Refining Acquisition. As it relates to severance and retention costs, we had $13 million recognized in accrued liabilities remaining to be paid at June 30, 2018.
Western Refining Revenues and Earnings Before Income Taxes
For the period from January 1, 2018 through June 30, 2018, we recognized $6.8 billion in revenues and $343 million of earnings before income taxes related to the business acquired. The earnings before income taxes for the period include related acquisition and severance costs along with interest expense incurred related to the acquisition.
Pro Forma Financial Information
The following unaudited pro forma information combines the historical operations of Andeavor and Western Refining, giving effect to the Merger and related transactions as if they had been consummated on January 1, 2017, the beginning of the earliest period presented.
Pro Forma Consolidated Revenues and Consolidated Net Earnings (in millions)
Three Months Ended
Six Months Ended
June 30, 2017
June 30, 2017
Revenues
$
9,591
$
18,581
Net earnings
215
326
June 30, 2018 | 11
Notes to Condensed Consolidated Financial Statements (Unaudited)
Rangeland Energy
On January 19, 2018, Andeavor completed its announced acquisition of 100% of the equity of Rangeland. Rangeland, which includes a 67% interest in RIO, owns and operates assets in the Delaware and Midland Basins in New Mexico and Texas, including the recently constructed RIO crude oil pipeline, three crude oil storage terminals, a frac sand storage and truck loading facility. Andeavor funded the acquisition using the Andeavor Revolving Credit Facility. This acquisition is not material to our consolidated financial statements and its operating results are recognized in our Logistics segment.
SLC Core Pipeline System
On May 1, 2018, Andeavor Logistics completed its acquisition of the SLC Core Pipeline System (formerly referred to as the Wamsutter Pipeline System) from Plains All American Pipeline, L.P. The system consists of pipelines that transport crude oil to another third-party pipeline system that supplies the Salt Lake City area refineries, including our Salt Lake City refinery. Andeavor Logistics financed the acquisition using the Andeavor Logistics Revolving Credit Facility. This acquisition is not material to our consolidated financial statements and its operating results are recognized in our Logistics segment.
West Coast Asphalt Terminals
On May 21, 2018, Andeavor acquired the West Coast asphalt terminals of Delek US Holdings, Inc. The assets acquired include four wholly-owned asphalt terminals in California and Arizona as well as a terminal in Nevada that is held in a 50% joint venture. Andeavor financed the acquisition using the Andeavor Revolving Credit Facility. This acquisition is not material to our consolidated financial statements and its operating results are recognized in our Refining segment.
Note 3 - Inventories
Components of Inventories (in millions)
June 30, 2018
December 31, 2017
Domestic crude oil and refined products
$
3,219
$
3,203
Materials and supplies
218
229
Oxygenates and by-products
72
85
Merchandise
60
50
Foreign subsidiary crude oil and refined products
84
63
Total Inventories
$
3,653
$
3,630
At June 30, 2018 and December 31, 2017, the replacement cost of our crude oil and refined product inventories exceeded carrying value, both in the aggregate, by approximately $1.2 billion and $703 million, respectively.
Note 4 - Investments - Equity Method and Joint Ventures
We have the ability to exercise significant influence over each of the following investments through our participation in the management committees, which have the ability to make decisions that are significant to the entities. However, since we have equal or proportionate influence over each committee as a joint interest partner, we have determined that these entities should not be consolidated and apply the equity method of accounting with respect to our investments in each entity.
We own a 51% interest in Watson Cogeneration Company (“Watson”), which produces steam and electricity at a facility located at our Los Angeles refinery. We also own a 17% interest in MPL, which owns and operates a crude oil pipeline in Minnesota. Following the acquisition of Rangeland in early 2018, we own a 67% interest in RIO, a recently constructed crude oil pipeline located in the Delaware and Midland basins in west Texas. On May 21, 2018, we acquired the West Coast asphalt terminals, which included a 50% interest in the Paramount Nevada Asphalt Company (“PNAC”) joint venture.
Andeavor Logistics has a 78% interest in RGS, which owns and operates the infrastructure that transports gas from certain fields to several re-delivery points in southwestern Wyoming, including natural gas processing facilities that are owned by Andeavor Logistics or a third party. Andeavor Logistics also owns a 50% interest in Three Rivers Gathering, LLC (“TRG”), which operates natural gas gathering assets in the southeastern Uinta Basin, as well as a 38% interest in Uintah Basin Field Services, L.L.C. (“UBFS”), which owns and operates the natural gas gathering infrastructure located in the southeastern Uinta Basin and is operated by Andeavor Logistics.
12 |
Notes to Condensed Consolidated Financial Statements (Unaudited)
On April 24, 2018, we announced a 25% participation in the Gray Oak Pipeline joint venture. The Gray Oak Pipeline will provide crude oil transportation from West Texas to destinations in the Corpus Christi, Sweeny and Freeport areas. In addition, we announced a 25% participation in the South Texas Gateway Terminal with Buckeye Partners, LP to develop a deep-water, open access marine terminal in Ingleside, Texas. The South Texas Gateway Terminal includes crude oil storage capacity and will serve as an outlet for crude oil and condensate volumes delivered from the Gray Oak Pipeline.
Equity Method Investments (in millions)
Balance at December 31, 2017 (a)
Fair value of acquired interest
Investments in joint ventures
Equity in earnings
Cumulative effect of accounting standard adoption
Distributions received
Balance at June 30, 2018 (a)
Watson
$
78
$
—
$
—
$
2
$
—
$
(3
)
$
77
Gray Oak Pipeline
—
—
23
—
—
—
23
South Texas Gateway Terminal
—
—
14
—
—
—
14
RIO
—
159
—
4
—
—
163
PNAC
—
27
—
—
—
—
27
MPL
120
—
—
10
—
(10
)
120
RGS
268
—
—
3
—
(10
)
261
TRG
37
—
—
1
(3
)
(3
)
32
UBFS
15
—
—
1
—
(1
)
15
Total
$
518
$
186
$
37
$
21
$
(3
)
$
(27
)
$
732
(a)
The carrying amount of our investments in Watson, RIO, PNAC, MPL, RGS, TRG and UBFS exceeded the underlying equity in net assets by $61 million, $75 million, $18 million, $34 million, $128 million, $15 million and $6 million, respectively, at June 30, 2018. There was no difference between the carrying amount of our investments and the underlying equity in net assets for the Gray Oak Pipeline and the South Texas Gateway Terminal joint ventures at June 30, 2018. The carrying amount of our investments in Watson, MPL, RGS, TRG and UBFS exceeded the underlying equity in net assets by $62 million, $35 million $130 million, $15 million and $6 million, respectively, at December 31, 2017. The carrying amounts of our investments allocated to tangible assets that exceed the underlying equity in net assets are amortized over the useful life of the underlying fixed assets and included in equity in earnings.
Note 5 - Derivative Instruments
In the ordinary course of business, our profit margins, earnings and cash flows are impacted by the timing, direction and overall change in pricing for commodities used throughout our operations. We use non-trading derivative instruments to manage our exposure to the following:
•
price risks associated with the purchase or sale of feedstocks, refined products and energy supplies related to our refineries, terminals, marketing fuel inventory and customers;
•
price risks associated with inventories above or below our target levels;
•
future emission credit requirements; and
•
exchange rate fluctuations on our purchases of Canadian crude oil.
Our accounting for derivative instruments depends on whether the underlying commodity will be used or sold in the normal course of business. For contracts where the crude oil or refined products are expected to be used or sold in the normal course of business, we apply the normal purchase normal sale exception and follow the accrual method of accounting. All other derivative instruments are recorded at fair value using mark-to-market accounting. We did not designate any of our derivatives for hedge accounting during the six months ended June 30, 2018 and 2017.
Our derivative instruments can include Forward Contracts, Futures Contracts, Over-the-Counter swaps, including Swap Contracts, Options, and OTC Option Contracts. Forward Contracts are agreements to buy or sell the commodity at a predetermined price at a specified future date. Futures Contracts are standardized agreements, traded on a futures exchange, to buy or sell the commodity at a predetermined price at a specified future date. Options provide the right, but not the obligation to buy or sell the commodity at a specified price in the future. Swap Contracts and OTC Option Contracts require cash settlement for the commodity based on the difference between a contracted fixed or floating price and the market price on the settlement date. Certain of these contracts require cash collateral to be received or paid if our asset or liability position, respectively, exceeds specified thresholds. We believe that we have minimal credit risk with respect to our counterparties.
June 30, 2018 | 13
Notes to Condensed Consolidated Financial Statements (Unaudited)
The following table presents the fair value of our derivative instruments as of June 30, 2018 and December 31, 2017. The fair value amounts below are presented on a gross basis and do not reflect the netting of asset and liability positions permitted under the terms of our master netting arrangements including cash collateral on deposit with, or received from, brokers. We offset the recognized fair value amounts for multiple derivative instruments executed with the same counterparty in our financial statements when a legal right of offset exists. As a result, the asset and liability amounts below will not agree with the amounts presented in our consolidated balance sheets.
Derivative Assets and Liabilities (in millions)
Derivative Assets
Derivative Liabilities
Balance Sheet Location
June 30, 2018
December 31, 2017
June 30, 2018
December 31, 2017
Commodity Futures Contracts
Prepayments and other current assets
$
1,025
$
780
$
1,012
$
807
Commodity Swap Contracts
Prepayments and other current assets
120
48
103
63
Commodity Swap Contracts
Receivables
3
15
—
—
Commodity Swap Contracts
Accounts payable
—
—
20
24
Commodity Options Contracts
Prepayments and other current assets
—
—
5
2
Commodity Forward Contracts
Receivables
1
2
—
—
Commodity Forward Contracts
Accounts payable
—
—
1
—
Total Gross Mark-to-Market Derivatives
1,149
845
1,141
896
Less: Counterparty Netting
(1,102
)
(813
)
(1,102
)
(813
)
Add back: Cash Collateral
7
67
—
—
Total Net Fair Value of Derivatives
$
54
$
99
$
39
$
83
Net Gains on Mark-to-Market Derivatives (in millions)
Three Months Ended June 30,
Six Months Ended June 30,
2018
2017
2018
2017
Commodity Contracts
$
15
$
92
$
28
$
120
Foreign Currency Forward Contracts
(2
)
—
(1
)
—
Total Net Gain on Mark-to-Market Derivatives
$
13
$
92
$
27
$
120
Income Statement Location of Net Gains on Mark-to-Market Derivatives (in millions)
Three Months Ended June 30,
Six Months Ended June 30,
2018
2017
2018
2017
Revenues
$
1
$
1
$
2
$
9
Cost of materials and other
14
91
26
111
Other income, net
(2
)
—
(1
)
—
Total Net Gain on Mark-to-Market Derivatives
$
13
$
92
$
27
$
120
14 |
Notes to Condensed Consolidated Financial Statements (Unaudited)
Open Long (Short) Positions
Outstanding Commodity and other Contracts (units in thousands)
Contract Volumes by Year of Maturity
Unit of Measure
Mark-to-Market Derivative Instrument
2018
2019
2020
Crude oil, refined products and blending products:
Futures Contracts - long
2,636
259
20
Barrels
Swap Contracts - long
1,218
610
—
Barrels
Swap Contracts - short
(1,525)
(620)
—
Barrels
Forwards - short
(574)
—
—
Barrels
Corn:
Futures Contracts - short
(310)
—
—
Bushels
Soybean oil:
Futures Contracts - short
(5,700)
—
—
Pounds
Note 6 - Fair Value Measurements
We classify financial assets and liabilities according to the fair value hierarchy. Financial assets and liabilities classified as level 1 instruments are valued based on quoted prices in active markets for identical assets and liabilities. Level 2 instruments are valued based on quoted prices for similar assets and liabilities in active markets, and inputs other than quoted prices, such as liquidity, that are observable for the asset or liability. Our level 2 instruments include derivatives valued using market quotations from independent price reporting agencies, third-party brokers and commodity exchange price curves that are corroborated with market data. Level 3 instruments are valued using significant unobservable inputs that are not supported by sufficient market activity. We do not have any financial assets or liabilities classified as level 3 at June 30, 2018 or December 31, 2017.
Our financial assets and liabilities measured at fair value on a recurring basis include derivative instruments. Additionally, our financial liabilities include obligations for Renewable Identification Numbers (“RINs”) and cap and trade emission credits for the state of California (together with RINs, our “Environmental Credit Obligations”). See Note 5 for further information on our derivative instruments. Amounts presented below for Environmental Credit Obligations represent the estimated fair value amount at each balance sheet date for which we do not have sufficient RINs and California cap and trade credits to satisfy our obligations to the U.S. Environmental Protection Agency (“EPA") and the state of California, respectively.
Financial Assets and Liabilities at Fair Value (in millions)
June 30, 2018
Level 1
Level 2
Level 3
Netting and Collateral (a)
Total
Assets:
Commodity Futures Contracts
$
1,025
$
—
$
—
$
(996
)
$
29
Commodity Swap Contracts
—
123
—
(99
)
24
Commodity Options Contracts
—
—
—
—
—
Commodity Forward Contracts
—
1
—
—
1
Total Assets
$
1,025
$
124
$
—
$
(1,095
)
$
54
Liabilities:
Commodity Futures Contracts
$
1,012
$
—
$
—
$
(1,003
)
$
9
Commodity Swap Contracts
—
123
—
(99
)
24
Commodity Options Contracts
—
5
—
—
5
Commodity Forward Contracts
—
1
—
—
1
Environmental Credit Obligations
—
204
—
—
204
Total Liabilities
$
1,012
$
333
$
—
$
(1,102
)
$
243
June 30, 2018 | 15
Notes to Condensed Consolidated Financial Statements (Unaudited)
December 31, 2017
Level 1
Level 2
Level 3
Netting and Collateral (a)
Total
Assets:
Commodity Futures Contracts
$
780
$
—
$
—
$
(707
)
$
73
Commodity Swap Contracts
—
63
—
(39
)
24
Commodity Forward Contracts
—
2
—
—
2
Total Assets
$
780
$
65
$
—
$
(746
)
$
99
Liabilities:
Commodity Futures Contracts
$
807
$
—
$
—
$
(774
)
$
33
Commodity Swap Contracts
—
87
—
(39
)
48
Commodity Options Contracts
—
2
—
—
2
Environmental Credit Obligations
—
43
—
—
43
Total Liabilities
$
807
$
132
$
—
$
(813
)
$
126
(a)
Certain of our derivative contracts, under master netting arrangements, include both asset and liability positions. We offset both the fair value amounts and any related cash collateral amounts recognized for multiple derivative instruments executed with the same counterparty when there is a legally enforceable right and an intention to settle net or simultaneously. As of June 30, 2018 and December 31, 2017, we had provided cash collateral amounts of $7 million and $67 million, respectively, related to our unrealized derivative positions. Cash collateral amounts are netted with mark-to-market derivative assets.
We believe the carrying value of our other financial instruments, including cash and cash equivalents, receivables, accounts payable and certain accrued liabilities approximate fair value. Our fair value assessment incorporates a variety of considerations, including the short-term duration of the instruments and the expected future insignificance of bad debt expense, which includes an evaluation of counterparty credit risk. The borrowings under the Revolving Credit Facility, the Andeavor Logistics Revolving Credit Facility and our Term Loan Credit Facility, which include variable interest rates, approximate fair value. The fair value of our fixed rate debt is based on prices from recent trade activity and is categorized in level 2 of the fair value hierarchy. The carrying value and fair value of our debt were $8.8 billion and $8.9 billion as of June 30, 2018, respectively, and $7.8 billion and $8.1 billion at December 31, 2017, respectively. These carrying and fair values of our debt do not consider the unamortized issuance costs, which are netted against our total debt.
Note 7 - Debt
Debt Balance, Net of Current Maturities and Unamortized Issuance Costs (in millions)
June 30, 2018
December 31, 2017
Total debt (a)
$
8,832
$
7,799
Unamortized issuance costs and premiums
(106
)
(114
)
Current maturities
(28
)
(17
)
Debt, Net of Current Maturities and Unamortized Issuance Costs
$
8,698
$
7,668
(a)
Total debt related to Andeavor Logistics, which is non-recourse to Andeavor, except for TLGP, was $4.4 billion and $4.2 billion at June 30, 2018 and December 31, 2017, respectively.
Available Capacity Under Credit Facilities (in millions)
Total Capacity
Amount Borrowed as of June 30, 2018
Outstanding Letters of Credit
Available Capacity as of June 30, 2018
Weighted Average Interest Rate
Expiration
Andeavor Revolving Credit Facility
$
3,000
$
855
$
17
$
2,128
3.88
%
September 30, 2020
Andeavor Logistics Revolving Credit Facility
1,100
665
—
435
3.83
%
January 29, 2021
Andeavor Logistics Dropdown Credit Facility
1,000
—
—
1,000
—
%
January 29, 2021
Letter of Credit Facilities
975
—
123
852
Total Credit Facilities
$
6,075
$
1,520
$
140
$
4,415
16 |
Notes to Condensed Consolidated Financial Statements (Unaudited)
Andeavor Logistics Revolving Credit Facility
On January 5, 2018, Andeavor Logistics amended the existing Andeavor Logistics Revolving Credit Facility and Andeavor Logistics Dropdown Credit Facility to increase the aggregate commitments under the Andeavor Logistics Revolving Credit Agreement from $600 million to $1.1 billion, add certain financial institutions as additional lenders under the Andeavor Logistics Revolving Credit Agreement and make certain changes to both the Andeavor Logistics Revolving Credit Facility and the Andeavor Logistics Dropdown Credit Facility to permit the incurrence of an additional $500 million of incremental loans (in the aggregate) under such facility agreements subject to the satisfaction of certain conditions.
Inventory Financing Arrangement
During the six months ended June 30, 2018, we entered into a $330 million financing arrangement with a third party that was secured by our crude oil inventory (“Inventory Financing Arrangement”). The Inventory Financing Arrangement was repaid in early April and had an effective interest rate of 6.7%. The Inventory Financing Arrangement is included within our financing activities on the condensed statements of consolidated cash flows for the six months ended June 30, 2018.
MPC Merger Agreement
Among other things, the MPC Merger Agreement prohibits the Company from incurring any additional indebtedness outside the ordinary course of business.
Note 8 - Benefit Plans
Components of Pension and Other Postretirement Benefit Expense (Income) (in millions)
Pension Benefits
Three Months Ended June 30,
Six Months Ended June 30,
2018
2017
2018
2017
Service cost
$
17
$
13
$
34
$
26
Interest cost
8
8
17
16
Expected return on plan assets
(7
)
(7
)
(15
)
(14
)
Recognized net actuarial loss
7
6
15
11
Net Periodic Benefit Expense (a)
$
25
$
20
$
51
$
39
Other Postretirement Benefits
Three Months Ended June 30,
Six Months Ended June 30,
2018
2017
2018
2017
Service cost
$
—
$
—
$
1
$
1
Interest cost
—
1
1
1
Amortization of prior service credit
(7
)
(9
)
(15
)
(17
)
Recognized net actuarial loss
1
1
2
2
Net Periodic Benefit Income (a)
$
(6
)
$
(7
)
$
(11
)
$
(13
)
(a)
Service cost is included in operating and general and administrative expenses and interest cost is included in interest and financing costs on the condensed statement of consolidated operations. The remaining components of net periodic benefit expense are included in other income.
Western Refining Benefit Plans
We assumed all of Western Refining’s existing defined contribution and benefit plans as a result of the Merger. Effective January 1, 2018, Western Refining employees began participating in the Andeavor 401(k) and pension plans. Defined contribution assets from Western Refining plans have been moved to respective Andeavor defined contribution plans as of June 30, 2018. Andeavor has also received IRS approval to move forward with termination of the Northern Tier Energy Retirement Plan. The impact of the Western Refining benefit plans is immaterial to our financial statements.
Note 9 - Commitments and Contingencies
Litigation Matters
In the ordinary course of business, we may become party to lawsuits, administrative proceedings and governmental investigations, including environmental, regulatory and other matters. The outcome of these matters cannot always be predicted accurately, but we accrue liabilities for these matters if we have determined that it is probable a loss has been incurred and the
June 30, 2018 | 17
Notes to Condensed Consolidated Financial Statements (Unaudited)
loss can be reasonably estimated. While it is not possible to predict the outcome of such proceedings, if one or more of them were decided against us, we believe there would be no material impact on our consolidated financial statements.
Environmental Matters
We are incurring and expect to continue to incur expenses for environmental remediation liabilities at a number of currently and previously owned or operated refining, pipeline, terminal and retail properties. While it is not possible to predict the outcome of such proceedings, if one or more of them were decided against us, we believe there would be no material impact on our consolidated financial statements.
On July 18, 2016, the U.S. Department of Justice (“DOJ”) lodged a complaint on behalf of the EPA and a Consent Decree with the Western District Court of Texas. Among other things, the Consent Decree required our Martinez refinery meet certain annual emission limits for NOx by July 1, 2018. In February 2018, we informed the EPA that we will need additional time to satisfy requirements of the Consent Decree. We are currently negotiating a resolution of this matter with the DOJ and the EPA, including the required timing to complete the project. These expenditures associated with the Consent Decree will not have a material impact on our liquidity, financial position or results of operations.
Tax Matters
We are subject to federal, state and foreign tax laws and regulations. Newly enacted tax laws and regulations, and changes in existing tax laws and regulations, could result in increased or decreased expenditures in the future. We are also subject to audits by federal, state and foreign taxing authorities in the normal course of business. It is possible that tax audits could result in claims against us in excess of recorded liabilities. However, we believe that resolution of any such claim(s) would not have a material impact on our consolidated financial statements.
As of June 30, 2018, we have not completed our accounting for the tax effects of enactment of the tax reform legislation (the “Tax Act”) enacted on December 22, 2017 (the “Enactment Date”); however, we have made a reasonable estimate of the effects on our existing deferred tax balances. The SEC issued Staff Accounting Bulletin No. 118 (“SAB 118”) in December 2017 to address the application of U.S. GAAP in situations when a registrant does not have the necessary information available, prepared or analyzed in reasonable detail to complete the accounting for certain income tax effects of the Tax Act. Among other things, SAB 118 provides for a period of up to twelve months from the Enactment Date to record the effects of the Tax Act. During the six months ended June 30, 2018, adjustments to the provisional income tax benefit recorded in December 2017 from the enactment of the Tax Act were not material. We may make adjustments to the provisional amount during the SAB 118 measurement period, which could result from future changes in interpretation of the Tax Act, changes to estimates made by us and/or issuance of additional regulatory guidance.
Note 10 - Stockholders’ Equity and Earnings Per Share
Changes to Equity (in millions)
Andeavor
Stockholders’
Equity
Noncontrolling
Interest
Total Equity
Balance at December 31, 2017 (a)
$
9,815
$
3,600
$
13,415
Net earnings
687
132
819
Purchases of common stock
(258
)
—
(258
)
Dividend payments
(181
)
—
(181
)
Net effect of amounts related to equity-based compensation
23
3
26
Taxes paid related to net share settlement of equity awards
(23
)
—
(23
)
Distributions to noncontrolling interest
—
(189
)
(189
)
Transfers to (from) Andeavor paid-in capital related to:
Andeavor Logistics’ issuance of common units
21
(35
)
(14
)
Cumulative effect of accounting standard adoption
(16
)
(9
)
(25
)
Other
—
(3
)
(3
)
Balance at June 30, 2018 (a)
$
10,068
$
3,499
$
13,567
(a)
We have 5.0 million shares of preferred stock authorized with no par value per share. No shares of preferred stock were outstanding as of June 30, 2018 and December 31, 2017.
18 |
Notes to Condensed Consolidated Financial Statements (Unaudited)
Earnings per share
We compute basic earnings per share by dividing net earnings attributable to Andeavor stockholders by the weighted average number of common shares outstanding during the period. Diluted earnings per share include the effects of potentially dilutive shares outstanding during the period.
Share Calculations (in millions)
Three Months Ended June 30,
Six Months Ended June 30,
2018
2017
2018
2017
Weighted average common shares outstanding
151.1
130.8
152.0
124.0
Common stock equivalents
1.5
0.9
1.5
1.0
Total Diluted Shares
152.6
131.7
153.5
125.0
Potentially dilutive common stock equivalents are excluded from the calculation of diluted earnings per share if the effect of including such securities in the calculation would have been anti-dilutive. Anti-dilutive securities were 0.4 million and 0.3 million for the three and six months ended June 30, 2017, respectively. There were no material anti-dilutive securities for the three and six months ended June 30, 2018.
Share Repurchases
We are authorized by our Board of Directors (the “Board”) to purchase shares of our common stock in open market transactions at our discretion. The Board’s authorization has no time limit and may be suspended or discontinued at any time. Purchases of our common stock can also be made to offset the dilutive effect of stock-based compensation awards and to meet our obligations under employee benefit and compensation plans, including the exercise of stock options and vesting of restricted stock units and to fulfill other stock compensation requirements. During the six months ended June 30, 2018 and 2017, we repurchased approximately 2.6 million and 1.6 million shares of our common stock for approximately $258 million and $148 million, respectively. Among other things, the MPC Merger Agreement restricts the Company from issuing shares and purchasing any of our capital stock.
Cash Dividends
We paid cash dividends totaling $89 million and $181 million for the three and six months ended June 30, 2018, respectively, based on a $0.59 per share quarterly cash dividend on common stock. We paid cash dividends totaling $65 million and $130 million for the three and six months ended June 30, 2017, respectively, based on a $0.55 per share quarterly cash dividend on common stock. On August 3, 2018, our Board declared a cash dividend of $0.59 per share payable on September 14, 2018 to shareholders of record on August 31, 2018. Among other things, the MPC Merger Agreement allows the Company to continue paying a regular dividend up to $0.59 per share.
Note 11 - Stock-Based Compensation
Stock-Based Compensation Expense (Benefit) (in millions)
Three Months Ended June 30,
Six Months Ended June 30,
2018
2017
2018
2017
Market stock units (a)
$
7
$
7
$
14
$
14
Performance share awards (b)
3
3
5
8
Other stock-based awards (c)
4
20
7
22
Total Stock-Based Compensation Expense
$
14
$
30
$
26
$
44
(a)
We granted 0.5 million market stock units at a weighted average grant date fair value of $103.07 per unit under the amended and restated 2011 Long-Term Incentive Plan (“2011 Plan”) during the six months ended June 30, 2018.
(b)
We granted 0.2 million market condition performance share awards at a weighted average grant date fair value of $107.51 per share under the 2011 Plan during the six months ended June 30, 2018.
(c)
We have aggregated expense for certain award types as they are not considered significant, including awards issued by Andeavor Logistics.
The income tax effect recognized in the income statement for stock-based compensation was a benefit of $4 million and $13 million for the three months ended June 30, 2018 and 2017, respectively, and $11 million and $33 million for the six months
June 30, 2018 | 19
Notes to Condensed Consolidated Financial Statements (Unaudited)
ended June 30, 2018 and 2017, respectively. Included in the tax benefits were $1 million and $3 million of excess tax benefits from exercises and vestings for the three months ended June 30, 2018 and 2017, respectively, and $5 million and $17 million for the six months ended June 30, 2018 and 2017, respectively. The reduction in current taxes payable recognized from tax deductions resulting from exercises and vestings under all of our stock-based compensation arrangements totaled $1 million and $7 million for the three months ended June 30, 2018 and 2017, respectively, and $20 million and $32 million for the six months ended June 30, 2018 and 2017, respectively.
All outstanding equity awards from Western Refining and Northern Tier Energy LP (“NTI”) stock-based compensation plans were converted to Andeavor shares but remain under their respective Western Refining and NTI plans.
Note 12 - Revenues
We recognize revenue upon transfer of control of promised products or services to customers in an amount that reflects the consideration to which we expect to be entitled in exchange for those products or services. Revenue is recognized net of amounts collected from customers for taxes assessed by governmental authorities on, and concurrent with, specific revenue-producing transactions. This net presentation represents a change upon adoption of ASC 606 as we previously recognized excise and other related taxes associated with sales of gasoline and diesel within our Marketing segment on a gross basis.
Product Revenue
We generate product revenue from sales of transportation fuels and other refined products, crude oil and other feedstocks, residual products, and convenience store merchandise. Our sales of transportation fuels include gasoline and gasoline blendstocks, jet fuel, diesel fuel, heavy fuel oils, and other residual products that are produced primarily at our refineries. Within our Marketing segment, we sell gasoline and diesel fuel through retail, branded and unbranded channels of trade. Retail product revenues include sales of transportation fuels and convenience store merchandise to end consumers at company-owned or leased sites. Branded fuel sales are conducted through jobber/dealers with which we have a contract to sell fuels marketed under one of the various brands we use. Unbranded fuel sales are made under contract through third-party distributors or operators with no associated brand. Within our Logistics segment, we generate product revenue through the sale of natural gas liquids (“NGLs”), residue gas and condensate, using natural gas we acquire and process from producers. We record revenues for the sale of these NGLs and related products at market prices, and record the payments to producers at an agreed-upon percentage of the total sales proceeds as NGL expense, net of certain charges, which is presented within cost of materials and other in our condensed statements of consolidated operations. Within our Refining segment, we record transportation fuel sales, crude oil resales and other residual products through bulk arrangements and to export markets.
Our product sales arrangements are for specified goods for which enforceable rights and obligations are created when sales volumes are established, which typically occur as orders are issued or spot sales are made, but may be determined at contract inception. Each gallon, or other unit of measure of product, is separately identifiable and represents a distinct performance obligation to which the transaction price is allocated based on stand-alone selling price. We use observable market prices for fuel, feedstock and other fuel products, and cost-plus margin for convenience store merchandise, to determine the stand-alone selling price of each separate performance obligation. Product revenues are recognized at a point-in-time, which generally occurs upon delivery and transfer of title to the customer. Product sales are primarily generated from either spot sales or point-of-sale transactions for which variability associated with the transaction price is resolved at the time of sale, or from short term duration contracts for which any variability in transaction price is resolved within the reporting period. Payments for product sales are generally received either immediately or within 30 days from when control has transferred.
Service Revenue
Within our Logistics segment, we generate service revenue for gathering and transporting crude oil, natural gas and water; processing and fractionating natural gas and NGLs; and terminalling, transporting, and storing crude oil and refined products. We perform these services under various contractual arrangements with our customers, including fee-based arrangements, for which we receive fixed rate per unit of service we provide, and keep-whole arrangements, for which we receive a combination of fixed rate-per unit of cash consideration and non-cash consideration in the form of NGLs. For many of our fee-based arrangements where we gather or transport crude oil, refined products or natural gas for our customers, we require deficiency payments from our customers when they do not meet their minimum throughput volume commitments. Some of these contracts allow our customers to clawback all or a portion of prior deficiency payments over future periods.
We recognize service revenue over time, as customers simultaneously receive and consume the related benefits that we stand ready to provide. Revenue is recognized using an output measure, such as the throughput volume or capacity utilization, as these measures most accurately depict the satisfaction of our performance obligations. Where contracts contain variable pricing terms, the variability is either resolved within the reporting period, or the variable consideration is allocated to the specific unit of service to which it relates. Deficiency payments under contracts with clawback provisions are deferred and recognized as revenue as customers reclaim amounts by throughputting excess volumes. To the extent it is probable a customer will not recover all or a portion of the deficiency payment, the estimated residual deficiency is recognized ratably over the clawback period. Payments for services rendered are generally received no later than 60 days from month of service, with the exception of deficiency payments described above.
Within certain of our Logistics contracts, we are entitled to receive non-cash consideration for rendering services. For natural gas keep-whole arrangements, we have concluded that we control the NGL inventory extracted through our processing services,
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Notes to Condensed Consolidated Financial Statements (Unaudited)
have inventory risk, discretion in establishing price, and the ability to direct the use and ultimate disposition of the NGLs. Thus, beginning January 1, 2018, we recognize service revenue for non-cash consideration received in the form of NGLs on a gross basis within revenues, and correspondingly, record NGL expense for the replacement gas we provide to our customers. The amounts are recognized at fair value at the date we obtain control of the respective unit of NGL. We assess fair value using the monthly average of published price reports for specific NGL products with consideration given to receipt point and grade of product.
Within our Marketing segment, we recognize franchise and royalty fee revenue from granting the license to use ARCO®, ampm® and SUPERAMERICA® retail convenience store brands. Franchise and royalty fee revenues are not material to our condensed consolidated financial statements.
Other Arrangements
We execute certain nonmonetary crude oil and refined product exchange transactions to optimize our refinery supply and enter into purchase and sale transactions with the same counterparty that are in contemplation of one another. These transactions are excluded from the scope of the new revenue standard and are recorded in cost of materials and other on a net basis.
We recognize rental revenue for retail sites we own or lease that are then leased and operated by third parties. These amounts are excluded from the scope of the new revenue standard and are not material to our condensed consolidated financial statements.
Customer Contract Assets
Our receivables are generated primarily from contracts with customers. Our payment terms vary by product or service type and channel of distribution. The period between invoicing and payment is not significant, and our assets associated with contracts with customers consist primarily of billed accounts receivable, which are included in Receivables, net of allowance for doubtful accounts in our condensed consolidated balance sheets. Our assets also include customer incentives, consisting primarily of branding payments made to owners of third party-owned retail sites. These customer incentives are included in other noncurrent assets in our condensed consolidated balance sheets and are amortized to revenue over the term of each contract, which generally ranges from 10 to 20 years.
Customer Contract Liabilities
For certain products or services, we receive payment in advance of when performance obligations are satisfied. These liabilities from contracts with customers consist primarily of payments for minimum volume commitments within our Logistics segment, receipts of cash for gift cards in our retail business, and other customer advances. Payments received from customers for minimum volume commitments and other customer advances are included in deferred income within other current liabilities and other noncurrent liabilities based on timing of expected recognition, which may extend up to fifteen years. Amounts received from gift card sales are included in accounts payable in the condensed consolidated balance sheets. During the three and six months ended June 30, 2018, we recognized $8 million and $28 million, respectively, in revenue from contract liabilities existing as of January 1, 2018.
Summary of Customer Contract Assets and Liabilities (in millions)