Company Quick10K Filing
BP Midstream Partners
Closing Price ($) Shares Out (MM) Market Cap ($MM)
$0.00 -0 $-0
10-Q 2019-11-12 Quarter: 2019-09-30
10-Q 2019-08-08 Quarter: 2019-06-30
10-Q 2019-05-09 Quarter: 2019-03-31
10-K 2019-02-28 Annual: 2018-12-31
10-Q 2018-11-14 Quarter: 2018-09-30
10-Q 2018-08-09 Quarter: 2018-06-30
10-Q 2018-05-10 Quarter: 2018-03-31
10-K 2018-03-22 Annual: 2017-12-31
10-Q 2017-12-06 Quarter: 2017-09-30
8-K 2019-11-12 Earnings, Regulation FD, Exhibits
8-K 2019-08-08 Earnings, Regulation FD, Exhibits
8-K 2019-08-06 Enter Agreement, Officers, Exhibits
8-K 2019-06-19 Officers
8-K 2019-05-09 Earnings, Regulation FD, Exhibits
8-K 2019-02-28 Earnings, Regulation FD, Exhibits
8-K 2018-11-14 Earnings, Regulation FD, Exhibits
8-K 2018-10-01 Enter Agreement, M&A, Regulation FD, Exhibits
8-K 2018-08-09 Earnings, Regulation FD, Exhibits
8-K 2018-05-10
8-K 2018-05-08 Enter Agreement, Officers, Exhibits
8-K 2018-03-22 Earnings, Regulation FD, Exhibits
8-K 2018-03-09 Accountant, Exhibits
BPMP 2019-09-30
Part I - Financial Information
Item 1. Financial Statements (Unaudited)
Item 2. Management's Discussion and Analysis of Financial Conditions and Results of Operations
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
Note 12 - Commitments and Contingencies To Our Condensed and Consolidated Financial Statements.
Item 5. Other Information
Item 6. Exhibits
EX-31.1 ex311-q3x2019.htm
EX-31.2 ex312-q3x2019.htm
EX-32 ex32-q3x2019.htm

BP Midstream Partners Earnings 2019-09-30

BPMP 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

Comparables ($MM TTM)
Ticker M Cap Assets Liab Rev G Profit Net Inc EBITDA EV G Margin EV/EBITDA ROA
CNXM 1,128 703 231 0 157 186 382 0% 2.1 14%
NBLX 2,499 1,000 582 428 222 314 863 74% 2.7 9%
MPLX 23,746 15,872 6,702 0 1,952 2,836 14,023 0% 4.9 8%
WES 9,236 5,705 1,944 1,204 453 980 4,750 62% 4.8 5%
NS 6,380 3,978 1,859 0 -182 120 3,432 0% 28.5 -3%
PAGP 29,033 14,691 34,206 5,120 3,078 4,230 8,706 15% 2.1 11%
BPMP 700 481 120 0 168 168 393 0% 2.3 24%
SHLX 2,004 2,771 548 0 558 558 -257 0% -0.5 28%
BPL 8,491 4,407 3,805 1,549 -91 180 3,724 41% 20.7 -1%
AMID 1,716 1,278 773 144 -7 205 451 19% 2.2 -0%

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

FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2019
or
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: 001-38260
bpmplogoa09.jpg
BP Midstream Partners LP
(Exact name of registrant as specified in its charter)
Delaware
 
82-1646447
(State or other jurisdiction of incorporation or organization)
 
(I.R.S. Employer Identification No.)
501 Westlake Park Boulevard, Houston, Texas 77079
(Address of principal executive offices) (Zip Code)
(281) 366-2000
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol
Name of each exchange on which registered
Common Units, Representing Limited Partner Interests
BPMP
New York Stock Exchange

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      No  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the 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
  
Accelerated filer
Non-accelerated filer
  
Smaller reporting company
 
 
 
Emerging growth company
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.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes      No  

As of November 11, 2019, the registrant had 52,387,740 common units and 52,375,535 subordinated units outstanding.
 





BP MIDSTREAM PARTNERS LP

TABLE OF CONTENTS
Item
Page
 
 
 
 
 
 






PART I - FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS (UNAUDITED)

BP MIDSTREAM PARTNERS LP
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
 
 
September 30, 2019
 
December 31, 2018
 
 
(in thousands of dollars)
ASSETS
Current assets
 
 

 
 

Cash and cash equivalents
 
$
92,405

 
$
56,970

Accounts receivable – third parties
 
491

 
325

Accounts receivable – related parties
 
10,843

 
9,769

Prepaid expenses
 
103

 
4,667

Other current assets
 
3,207

 
629

Total current assets
 
107,049

 
72,360

Equity method investments (Note 4)
 
537,575

 
549,039

Property, plant and equipment, net (Note 5)
 
64,866

 
68,580

Other assets
 
3,621

 
3,224

Total assets
 
$
713,111

 
$
693,203

 
 
 
 
 
LIABILITIES
Current liabilities
 
 

 
 

Accounts payable – third parties
 
$
556

 
$
607

Accounts payable – related parties
 
1,696

 
2,553

Deferred revenue and credits
 
3,026

 
1,067

Other current liabilities (Note 6)
 
6,747

 
6,900

Total current liabilities
 
12,025

 
11,127

Long-term debt (Note 7)
 
468,000

 
468,000

Other liabilities
 
3,567

 
3,224

Total liabilities
 
483,592

 
482,351

 
 
 
 
 
Commitments and contingencies (Note 12)
 


 


 
 
 
 
 
EQUITY
Common unitholders – public (2019 – 47,806,563 issued and outstanding; 2018 – 47,802,826 units issued and outstanding)
 
846,386

 
836,789

Common unitholders – BP Holdco (2019 and 2018 – 4,581,177 units issued and outstanding)
 
(60,781
)
 
(61,684
)
Subordinated unitholders – BP Holdco (2019 and 2018 – 52,375,535 units issued and outstanding)
 
(694,904
)
 
(705,227
)
General partner
 
743

 

Total partners' capital
 
91,444

 
69,878

Non-controlling interests
 
138,075

 
140,974

Total equity
 
229,519

 
210,852

Total liabilities and equity
 
$
713,111

 
$
693,203




The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.

3




BP MIDSTREAM PARTNERS LP
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
 
2019
 
2018
 
2019
 
2018
 
 
(in thousands of dollars, unless otherwise indicated)
Revenue
 
 
 
 
 
 

 
 
Third parties
 
$
725

 
$
508

 
$
2,238

 
$
2,072

Related parties
 
33,836

 
31,566

 
91,164

 
85,556

Total revenue
 
34,561

 
32,074

 
93,402

 
87,628

Costs and expenses
 
 
 
 
 
 

 
 
Operating expenses – third parties
 
3,907

 
2,877

 
10,615

 
8,513

Operating expenses – related parties
 
1,423

 
1,506

 
4,317

 
3,494

Maintenance expenses – third parties
 
303

 
640

 
1,186

 
1,523

Maintenance expenses – related parties
 
66

 
31

 
139

 
75

General and administrative – third parties
 
529

 
1,596

 
1,959

 
2,799

General and administrative – related parties
 
3,476

 
3,691

 
10,597

 
10,556

Lease expense
 
17

 
15

 
53

 
45

Depreciation
 
656

 
663

 
1,970

 
1,987

Impairment and other, net
 

 

 
1,000

 

Property and other taxes
 
111

 
165

 
361

 
388

Total costs and expenses
 
10,488

 
11,184

 
32,197

 
29,380

Operating income
 
24,073

 
20,890

 
61,205

 
58,248

Income from equity method investments
 
30,104

 
22,581

 
83,312

 
66,262

Interest expense (income), net
 
3,784

 
(20
)
 
11,310

 
119

Income before income taxes
 
50,393

 
43,491

 
133,207

 
124,391

Income tax expense
 

 

 

 

Net income
 
50,393

 
43,491

 
133,207

 
124,391

Less: Net income attributable to non-controlling interests
 
4,639

 
8,272

 
12,969

 
28,163

Net income attributable to the Partnership
 
$
45,754

 
$
35,219

 
$
120,238

 
$
96,228

 
 
 
 
 
 
 
 
 
Net income attributable to the Partnership per limited partner unit  basic and diluted (in dollars):
 
 
 
 
 
 

 
 
Common units
 
$
0.43

 
$
0.34

 
$
1.13

 
$
0.92

Subordinated units
 
$
0.43

 
$
0.34

 
$
1.13

 
$
0.92

 
 
 
 
 
 
 
 
 
Weighted average number of limited partner units outstanding - basic and diluted (in millions):
 
 
 
 
 
 

 
 
Common units – public
 
47.8

 
47.8

 
47.8

 
47.8

Common units – BP Holdco
 
4.6

 
4.6

 
4.6

 
4.6

Subordinated units – BP Holdco
 
52.4

 
52.4

 
52.4

 
52.4





The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.

4




BP MIDSTREAM PARTNERS LP
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(UNAUDITED)
 
 
Nine Month Period Ended September 30, 2019
 
 
Partners' Capital
 
 
 
 
(in thousands of dollars)
Common Unitholders Public
 
Common Unitholders BP Holdco
 
Subordinated Unitholders BP Holdco
 
General Partner
 
Non-controlling Interests
 
Total
Balance at December 31, 2018
$
836,789

 
$
(61,684
)
 
$
(705,227
)
 
$

 
$
140,974

 
$
210,852

 
Net income
16,863

 
1,616

 
18,476

 
198

 
3,466

 
40,619

 
Distributions to unitholders ($0.3015 per unit) and general partner
(14,413
)
 
(1,382
)
 
(15,791
)
 

 

 
(31,586
)
 
Unit-based compensation
40

 

 

 

 

 
40

 
Distributions to non-controlling interests

 

 

 

 
(4,569
)
 
(4,569
)
Balance at March 31, 2019
839,279

 
(61,450
)
 
(702,542
)
 
198

 
139,871

 
215,356

 
Net income
16,851

 
1,615

 
18,462

 
403

 
4,864

 
42,195

 
Distributions to unitholders ($0.3126 per unit) and general partner
(14,944
)
 
(1,431
)
 
(16,373
)
 
(198
)
 

 
(32,946
)
 
Unit-based compensation
71

 

 

 

 

 
71

 
Distributions to non-controlling interests

 

 

 

 
(6,032
)
 
(6,032
)
Balance at June 30, 2019
841,257

 
(61,266
)
 
(700,453
)
 
403

 
138,703

 
218,644

 
Net income
20,540

 
1,968

 
22,503

 
743

 
4,639

 
50,393

 
Distributions to unitholders ($0.3237 per unit) and general partner
(15,475
)
 
(1,483
)
 
(16,954
)
 
(403
)
 

 
(34,315
)
 
Unit-based compensation
64

 

 

 

 

 
64

 
Distributions to non-controlling interests

 

 

 

 
(5,267
)
 
(5,267
)
Balance at September 30, 2019
$
846,386

 
$
(60,781
)
 
$
(694,904
)
 
$
743

 
$
138,075

 
$
229,519


(continued)






















The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.

5




BP MIDSTREAM PARTNERS LP
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(UNAUDITED)
 
 
Nine Month Period Ended September 30, 2018
 
 
Partners' Capital
 
 
 
 
(in thousands of dollars)
Common Unitholders Public
 
Common Unitholders BP Holdco
 
Subordinated Unitholders BP Holdco
 
General Partner
 
Non-controlling Interests
 
Total
Balance at December 31, 2017
$
824,613

 
$
(47,141
)
 
$
(538,947
)
 
$

 
$
342,330

 
$
580,855

 
Cumulative effect of accounting change (Note 4)
(1,253
)
 
(120
)
 
(1,373
)
 

 

 
(2,746
)
 
Net income
13,934

 
1,336

 
15,269

 

 
10,169

 
40,708

 
Distributions to unitholders ($0.1798 per unit) and general partner
(8,592
)
 
(823
)
 
(9,415
)
 

 

 
(18,830
)
 
Unit-based compensation
39

 

 

 

 

 
39

 
Distributions to non-controlling interests

 

 

 

 
(15,026
)
 
(15,026
)
Balance at March 31, 2018
828,741

 
(46,748
)
 
(534,466
)
 

 
337,473

 
585,000

 
Net income
13,902

 
1,333

 
15,235

 

 
9,722

 
40,192

 
Distributions to unitholders ($0.2675 per unit) and general partner
(12,785
)
 
(1,225
)
 
(14,011
)
 

 

 
(28,021
)
 
Unit-based compensation
45

 

 

 

 

 
45

 
Distributions to non-controlling interests

 

 

 

 
(13,708
)
 
(13,708
)
Balance at June 30, 2018
829,903

 
(46,640
)
 
(533,242
)
 

 
333,487

 
583,508

 
Net income
16,070

 
1,539

 
17,610

 

 
8,272

 
43,491

 
Distributions to unitholders ($0.2725 per unit) and general partner
(13,023
)
 
(1,249
)
 
(14,271
)
 

 

 
(28,543
)
 
Unit-based compensation
56

 

 

 

 

 
56

 
Distributions to non-controlling interests

 

 

 

 
(11,719
)
 
(11,719
)
Balance at September 30, 2018
$
833,006

 
$
(46,350
)
 
$
(529,903
)
 
$

 
$
330,040

 
$
586,793

























The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.

6


BP MIDSTREAM PARTNERS LP
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS 
(UNAUDITED)
 
 
Nine Months Ended September 30,
 
 
2019
 
2018
 
 
(in thousands of dollars)
Cash flows from operating activities
 
 

 
 
Net income
 
$
133,207

 
$
124,391

Adjustments to reconcile net income to net cash provided by operating activities
 
 

 
 
Depreciation
 
1,970

 
1,987

Impairment and other, net
 
1,000

 

Non-cash expenses
 
212

 
140

Income from equity method investments
 
(83,312
)
 
(66,262
)
Distributions of earnings received from equity method investments
 
86,481

 
71,314

Changes in operating assets and liabilities
 
 

 
 
Accounts receivable – third parties
 
(166
)
 
62

Accounts receivable – related parties
 
(1,074
)
 
(380
)
Prepaid expenses and other current assets
 
4,546

 
(23
)
Accounts payable – third parties
 
(809
)
 
494

Accounts payable – related parties
 
(1,071
)
 
327

Deferred revenue and credits
 
1,959

 
729

Other current liabilities
 
(713
)
 
707

Net cash provided by operating activities
 
142,230

 
133,486

Cash flows from investing activities
 
 

 
 

Capital expenditures
 
(375
)
 
(1,341
)
Distributions in excess of earnings from equity method investments
 
8,295

 
15,362

Net cash provided by investing activities
 
7,920

 
14,021

Cash flows from financing activities
 
 

 
 

Repayment of debt
 

 
(15,000
)
Distributions to unitholders and general partner
 
(98,847
)
 
(75,394
)
Distributions to non-controlling interests
 
(15,868
)
 
(40,453
)
Net cash used in financing activities
 
(114,715
)
 
(130,847
)
Net change in cash and cash equivalents
 
35,435

 
16,660

Cash and cash equivalents at beginning of the period
 
56,970

 
32,694

Cash and cash equivalents at end of the period
 
$
92,405

 
$
49,354

Supplemental cash flow information
 
 

 
 
Cash paid for interest
 
$
12,331

 
$
581

Cash paid for lease liabilities
 
47

 

Non-cash investing transactions
 
 
 
 
Accrued capital expenditures
 
346

 
169












The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.

7



BP MIDSTREAM PARTNERS LP  
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(in thousands of dollars, unless otherwise indicated)



1. Business and Basis of Presentation

BP Midstream Partners LP (either individually or together with its subsidiaries, as the context requires, the “Partnership”) is a Delaware limited partnership formed on May 22, 2017 by BP Pipelines (North America) Inc. (“BP Pipelines”), an indirect wholly owned subsidiary of BP p.l.c. (“BP”), a “foreign private issuer” within the meaning of the Securities Exchange Act of 1934, as amended.

Unless otherwise stated or the context otherwise indicates, all references to “we,” “our,” “us,” or similar expressions for time periods refer to BP Midstream Partners LP. The term “our Parent” refers to BP Pipelines; any entity that wholly owns BP Pipelines, indirectly or directly, including BP and BP America Inc. (“BPA”), an indirect wholly owned subsidiary of BP; and any entity that is wholly owned by the aforementioned entities, excluding BP Midstream Partners LP.

Business

We are a fee-based, growth-oriented master limited partnership formed by BP Pipelines to own, operate, develop and acquire pipelines and other midstream assets. Our assets consist of interests in entities that own crude oil, natural gas, refined products and diluent pipelines serving as key infrastructure for BP and other customers to transport onshore crude oil production to BP’s refinery in Whiting, Indiana (the “Whiting Refinery”) and offshore crude oil and natural gas production to key refining markets and trading and distribution hubs. Certain of our assets deliver refined products and diluent from the Whiting Refinery and other U.S. supply hubs to major demand centers.

Acquisition of Equity Interests

On October 1, 2018, pursuant to the Interest Purchase Agreement (the “Interest Purchase Agreement”) that we entered into with BP Products North America Inc. (“BP Products”), BP Offshore Pipelines Company LLC (“BP Offshore”), and BP Pipelines, we completed the acquisition of (i) an additional 45% interest in Mardi Gras Transportation System Company, LLC ("Mardi Gras"), from BP Pipelines, (ii) a 25% interest in KM Phoenix Holdings LLC, ("KM Phoenix") a Delaware limited liability company, from BP Products, and (iii) a 22.7% interest in URSA Oil Pipeline Company LLC, ("Ursa") a Delaware limited liability company, from BP Offshore, in exchange for aggregate consideration of $468 million funded with borrowings under our Credit Facility (as defined below). The purchase was accounted for as a transaction between entities under common control; as a result, we recognized the acquired assets at their historical carrying value.

As of September 30, 2019, our assets consisted of the following:

BP Two Pipeline Company LLC, which owns the BP#2 crude oil pipeline system (“BP2”).
BP River Rouge Pipeline Company LLC, which owns the Whiting to River Rouge refined products pipeline system (“River Rouge”).
BP D-B Pipeline Company LLC, which owns the Diamondback diluent pipeline system (“Diamondback”). BP2, River Rouge, and Diamondback, together, are referred to as the "Wholly Owned Assets".
A 28.5% ownership interest in Mars Oil Pipeline Company, LLC (“Mars”), which owns a major corridor crude oil pipeline system in the Gulf of Mexico. 
A 65% managing member interest in Mardi Gras, which holds the following investments in joint ventures located in the Gulf of Mexico:
A 56% ownership interest in Caesar Oil Pipeline Company, LLC (“Caesar”),
A 53% ownership interest in Cleopatra Gas Gathering Company, LLC (“Cleopatra”),
A 65% ownership interest in Proteus Oil Pipeline Company, LLC (“Proteus”), and,
A 65% ownership interest in Endymion Oil Pipeline Company, LLC (“Endymion”).
Together Endymion, Caesar, Cleopatra and Proteus are referred to as the “Mardi Gras Joint Ventures.”
A 25% ownership interest in KM Phoenix.
A 22.7% ownership interest in Ursa.

We generate the majority of our revenue by charging fees for the transportation of crude oil, refined products and diluent through our pipelines under long-term agreements with minimum volume commitments ("MVC"). We do not engage in the marketing and trading of any commodities. All operations are conducted in the United States, and all our long-lived assets are in the United States. Our operations consist of one reportable segment.

8



BP MIDSTREAM PARTNERS LP  
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(in thousands of dollars, unless otherwise indicated)



Certain businesses of ours are subject to regulation by various authorities including, but not limited to the Federal Energy Regulatory Commission ("FERC"). Regulatory bodies exercise statutory authority over matters such as common carrier tariffs, construction, rates and ratemaking and agreements with customers.

Basis of Presentation

Our condensed consolidated financial statements have been prepared under the rules and regulations of the Securities and Exchange Commission (“SEC”). These rules and regulations conform to the accounting principles contained in the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification, the single source of accounting principles generally accepted in the United States (“GAAP”).

Certain information and footnote disclosures normally included in the annual consolidated financial statements have been condensed or omitted from these condensed consolidated financial statements. The condensed consolidated financial statements as of September 30, 2019, and for the three and nine months ended September 30, 2019 and 2018, included herein, are unaudited. These financial statements include all known accruals and adjustments necessary, in the opinion of management, for a fair presentation of our condensed consolidated financial position, results of operations and cash flows. Unless otherwise specified, all such adjustments are of a normal and recurring nature. The unaudited results of operations for the interim periods reported are not necessarily indicative of results to be expected for the full year. These unaudited condensed consolidated financial statements and other information included in this quarterly report on Form 10-Q should be read in conjunction with our audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2018 (the "2018 Annual Report").

Our financial position, results of operations and cash flows consist of consolidated BP Midstream Partners LP activities and balances. All intercompany accounts and transactions within the financial statements have been eliminated for all periods presented.

Summary of Significant Accounting Policies

Other than the adoption of ASU 2016-02 described below, there have been no significant changes to our accounting policies as disclosed in Note 2 - Summary of Significant Accounting Policies in our 2018 Annual Report.

Standards Adopted

Topic 842

On February 25, 2016, the FASB issued ASU 2016-02, “Leases” followed by a series of related accounting standard updates (collectively referred to as “Topic 842”). We adopted the new standard on January 1, 2019, utilizing the modified retrospective method. The new lease standard improves transparency and comparability among organizations by requiring lessees to recognize a lease liability and a corresponding right-of-use asset for virtually all lease contracts. We elected the optional transition relief under ASU 2018-11 "Leases: Targeted Improvement" which allows us to apply the transition provision at the adoption date instead of the earliest comparative period presented in our financial statements. Therefore, we recognized and measured leases existing at the adoption date but without retrospective application. See Note 3 - Leases. No cumulative effect impact was recorded to the statement of operations or beginning balance in our statement of changes in equity.

2. Revenue Recognition

In 2018, we adopted ASU 2014-09, "Revenue from Contracts with Customers" and all related ASU’s (collectively referred to as “Topic 606”) by applying the modified retrospective method to all contracts that were not completed on January 1, 2018. Results for reporting periods beginning after January 1, 2018 are presented in accordance with the new revenue standard. Topic 606 requires entities to recognize revenue through the application of a five-step model, which includes: (1) identification of the contract; (2) identification of the performance obligations; (3) determination of the transaction price; (4) allocation of the transaction price to the performance obligations; and (5) recognition of revenue as the entity satisfies the performance obligations.


9



BP MIDSTREAM PARTNERS LP  
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(in thousands of dollars, unless otherwise indicated)


Pipeline Transportation

Revenue from pipeline transportation is comprised of tariffs and fees associated with the transportation of liquid petroleum products, generally at published tariffs and in certain instances, revenue from MVC contracts at negotiated rates. Tariff revenue is recognized either at the point of delivery or at the point of receipt, pursuant to specifications outlined in the respective tariffs.

Billings to BP Products for deficiency volumes under its MVCs, if any, are recorded as deferred revenue and credits, a contract liability, on our condensed consolidated balance sheets, as BP Products has the right to make up the deficiency volumes within the measurement period specified by the agreements. Deferred revenue under these arrangements is recognized into revenue once it is deemed remote that the customer will meet its required annual MVC. We recognized $2,356 of deficiency revenue under the throughput and deficiency agreements with BP Products for the three and nine months ended September 30, 2019, and $3,857 for the three and nine months ended September 30, 2018.

Allowance Oil

Our tariff for crude oil transportation at BP2 includes a fixed loss allowance (“FLA”). An FLA factor per barrel, a fixed percentage, is a separate fee that is considered a part of the transaction price under the applicable crude oil tariff to cover evaporation and other losses in transit.

In the three and nine months ended September 30, 2019 we recognized revenue of $2,728 and $7,824, respectively, related to the FLA arrangements with our Parent. In the three and nine months ended September 30, 2018, we recognized revenue of $2,691 and $7,691, respectively, related to the FLA arrangements with our Parent.

Disaggregation of Revenue

The following table provides information about disaggregated revenue:
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2019
2018
 
2019
2018
Transportation services revenue - third parties
$
725

$
508

 
$
2,238

$
2,072

Transportation services revenue - related parties
33,836

31,566

 
91,164

85,556

    Total ASC 606 revenue
$
34,561

$
32,074

 
$
93,402

$
87,628



Future Performance Obligations

The fixed portion of our existing customer contracts are summarized in the future performance obligations as of September 30, 2019. The unfulfilled performance obligations included in the table below are expected to be recognized in revenue in the specified periods:
 
As of September 30, 2019
Remainder of 2019
$
29,052

2020
109,590

     Total
$
138,642



Contract Balances

Contract assets and contract liabilities are the result of timing differences between revenue recognition, billings and cash collections. Contract liabilities or deferred revenue and credits primarily relate to consideration received from customers for temporary deficiency quantities under minimum volume contracts that the customer has the right to make up in a future period, which we subsequently recognize as revenue or amounts we credit back to the customer in a future period.

10



BP MIDSTREAM PARTNERS LP  
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(in thousands of dollars, unless otherwise indicated)



The following table provides information about receivables from contracts with customers, contract assets and contract liabilities:
 
September 30, 2019
December 31, 2018
Receivables from contracts with customers - third parties
$
491

$
325

Receivables from contracts with customers - related parties
10,793

9,611

Deferred revenue and credits - related parties
3,026

1,067



3. Leases

We have elected the optional practical expedients permitted under the transition guidance within the new lease standard, which among other things, allows us to carry forward the historical accounting treatment relating to classification for existing leases upon adoption, allows us to not be required to reassess whether an expired or existing contract is or contains a lease, and allows us not to have to reassess initial direct costs for an existing lease.

In addition, we elected the optional transition guidance related to land easements that allows us to carry forward our historical accounting treatment on existing agreements upon adoption. This allowed us to not be required to assess existing land easements that were not historically accounted for as leases under Topic 840, therefore they are excluded from this disclosure.

We also elected the practical expedient to not separate lease and non-lease components for all asset classes. However, we did not elect to apply the hindsight practical expedient; therefore the non-exercised renewals were not included in the lease terms.

Beginning January 1, 2019, operating right-of-use ("ROU") assets and operating lease liabilities are recognized based on the present value of lease payments over the lease term at commencement date. Because our leases do not provide an explicit rate of return, we use our incremental borrowing rate based on lease term information available at the commencement date in determining the present value of lease payments.

The impact of Topic 842 on our condensed consolidated balance sheet beginning January 1, 2019 was through the recognition of ROU assets and lease liabilities for operating leases. Amounts recognized at January 1, 2019 for operating leases were as follows:
 
January 1, 2019
ROU Assets
$
518

Current lease liability
60

Long-term lease liability
458



We have a total of four operating leases related to office space of which the term of two expires in 2036 and the other two in 2020. We have the option to terminate our leases 30 days after providing written notice of the election to terminate to the landlord. Two of our leases include a right of renewal and an annual 3% escalation on the anniversary date of lease inception. We have the option to renew our leases by giving notice to landlord not less than 60 days prior to the expiration of the lease term. We have not included the option to renew the leases in our determination of lease term because at the time of lease inception it was not certain we would exercise the renewal. We have included the variable lease payments based on the escalation percentage from above in the determination of our lease liabilities and our ROU assets. The other two leases include a non-lease component for maintenance expense. No leases include a residual value guarantee or provide us an option to acquire the real property at the end of the lease. We have no material subleasing arrangements.

Amounts recognized in the accompanying condensed consolidated balance sheet are as follows:
Lease activity
Balance sheet location
September 30, 2019
ROU assets
Other assets
$
481

Current lease liability
Other current liabilities
60

Long-term lease liability
Other liabilities
427



As of September 30, 2019, the weighted average discount rate of our leases was 4.36% and the weighted average remaining lease term was 15.4 years.

11



BP MIDSTREAM PARTNERS LP  
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(in thousands of dollars, unless otherwise indicated)


The undiscounted future minimum lease payments as of September 30, 2019 and December 31, 2018 are presented in the table below:
 
Post-adoption ASC 842
Pre-adoption ASC 842
 
September 30, 2019
December 31, 2018
2019
$
16

$
62

2020
63

63

2021
32

32

2022
33

33

2023
34

34

Thereafter
514

514

   Total
$
692

$
738



4. Equity Method Investments

We account for our ownership interests in Mars, Ursa, KM Phoenix and the Mardi Gras Joint Ventures using the equity method for financial reporting purposes. Our financial results include our proportionate share of the Mars, Ursa, KM Phoenix and the Mardi Gras Joint Ventures, which is reflected in Income from equity method investments on the condensed consolidated statements of operations. We did not record any impairment loss on our equity method investments during the nine months ended September 30, 2019 and 2018.

The table below summarizes the balances and activities related to each of our equity method investments ("EMI") that we recorded for the three and nine months ended September 30, 2019 and 2018:
 
Three Months Ended September 30, 2019
 
Three Months Ended September 30, 2018
 
Percentage Ownership
Distributions Received
Income from EMI
Carrying Value
 
Percentage Ownership
Distributions Received
Income from EMI
Carrying Value
Mars
28.5%
$
(14,250
)
$
14,104

$
56,874

 
28.5%
$
(13,167
)
$
12,241

$
57,762

Caesar(1)
56.0%
(4,760
)
3,640

118,403

 
56.0%
(4,760
)
4,519

120,593

Cleopatra(1)
53.0%
(2,438
)
1,703

117,566

 
53.0%
(2,544
)
1,306

120,309

Proteus(1)
65.0%
(4,342
)
3,153

76,535

 
65.0%
(3,510
)
2,135

82,606

Endymion(1)
65.0%
(3,510
)
4,759

81,996

 
65.0%
(3,835
)
2,380

83,569

Others(2)
Various
(3,162
)
2,745

86,201

 
0%



Total Equity Investments
 
$
(32,462
)
$
30,104

$
537,575

 
 
$
(27,816
)
$
22,581

$
464,839


12



BP MIDSTREAM PARTNERS LP  
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(in thousands of dollars, unless otherwise indicated)


 
Nine Months Ended September 30, 2019
 
Nine Months Ended September 30, 2018
 
Percentage Ownership
Distributions Received
Income from EMI
Carrying Value
 
Percentage Ownership
Cumulative Effect of Accounting Change(3)
Distributions Received
Income from EMI
Carrying Value
Mars
28.5%
$
(40,088
)
$
37,819

$
56,874

 
28.5%
$
(2,746
)
$
(36,110
)
$
31,057

$
57,762

Caesar(1)
56.0%
(14,448
)
13,461

118,403

 
56.0%

(15,357
)
12,364

120,593

Cleopatra(1)
53.0%
(9,063
)
7,079

117,566

 
53.0%

(7,844
)
4,641

120,309

Proteus(1)
65.0%
(11,882
)
7,085

76,535

 
65.0%

(13,585
)
9,047

82,606

Endymion(1)
65.0%
(9,945
)
9,430

81,996

 
65.0%

(13,780
)
9,153

83,569

Others(2)
Various
(9,350
)
8,438

86,201

 
0%




Total Equity Investments
 
$
(94,776
)
$
83,312

$
537,575

 
 
$
(2,746
)
$
(86,676
)
$
66,262

$
464,839

1.
These investments are held by our investment in Mardi Gras which increased to 65% from 20% on October 1, 2018.
2.
Includes ownership in Ursa (22.7%) and KM Phoenix (25%) acquired on October 1, 2018.
3.
The financial results of Mars reflected the adoption of Topic 606 on January 1, 2018 under the modified retrospective transition method through a cumulative adjustment to equity. Our cumulative effect impact from this accounting change to our Mars investment was $(2,746), offset to equity. The Mardi Gras Joint Ventures and Ursa adopted this ASU on January 1, 2019 and there was no cumulative effect impact from the adoption. KM Phoenix adopted Topic 606 on January 1, 2018 and there was no cumulative effect impact from the adoption.

The following table presents aggregated selected income statement data for our equity method investments on a 100% basis for the three and nine months ended September 30, 2019 and 2018:
 
 
Three Months Ended September 30,
 
 
2019
 
2018(1)
Statement of operations
 
 
 
 
Revenue
 
$
146,090

 
$
124,644

Operating expenses
 
63,313

 
53,994

Net income
 
83,039

 
70,761

 
 
Nine Months Ended September 30,
 
 
2019
 
2018(1)
Statement of operations
 
 
 
 
Revenue
 
$
410,232

 
$
339,931

Operating expenses
 
180,277

 
147,024

Net income
 
231,413

 
193,248

1.
Balances include KM Phoenix and Ursa results.


13



BP MIDSTREAM PARTNERS LP  
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(in thousands of dollars, unless otherwise indicated)


5. Property, Plant and Equipment

Property, plant and equipment consisted of the following:
 
 
September 30, 2019
 
December 31, 2018
Land
 
$
155

 
$
155

Right-of-way assets
 
1,380

 
1,380

Buildings and improvements
 
9,332

 
12,032

Pipelines and equipment
 
93,951

 
93,617

Other
 
514

 
509

Construction in progress
 
463

 
277

Property, plant and equipment
 
105,795

 
107,970

Less: Accumulated depreciation
 
(40,929
)
 
(39,390
)
Property, plant and equipment, net
 
$
64,866

 
$
68,580



During the nine months ended September 30, 2019, an impairment charge of $2.3 million was recorded under "Impairment and other, net" on our condensed consolidated statements of operations. See Note 12 - Commitments and Contingencies. There were no impairments during the period ended December 31, 2018.

6. Other Current Liabilities

Other current liabilities consisted of the following:
 
 
September 30, 2019
 
December 31, 2018