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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 March 31, 2022
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: 001-36710
Shell Midstream Partners, L.P.
(Exact name of registrant as specified in its charter)
Delaware46-5223743
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
150 N. Dairy Ashford, Houston, Texas 77079
(Address of principal executive offices) (Zip Code)
(832) 337-2034
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Units, Representing Limited Partner InterestsSHLXNew 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  ý    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 (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ý    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 ý
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. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ☐    No  ý
The registrant had 393,289,537 common units outstanding as of April 28, 2022.





SHELL MIDSTREAM PARTNERS, L.P.
TABLE OF CONTENTS
 
Page
                   Unaudited Consolidated Statements of Income
* SHELL and the SHELL Pecten are registered trademarks of Shell Trademark Management, B.V. used under license.



PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
SHELL MIDSTREAM PARTNERS, L.P.
UNAUDITED CONSOLIDATED BALANCE SHEETS
March 31, 2022December 31, 2021
(in millions of dollars)
ASSETS
Current assets 
Cash and cash equivalents$251 $361 
Accounts receivable – third parties, net15 16 
Accounts receivable – related parties47 40 
Allowance oil27 22 
Prepaid expenses17 26 
Total current assets357 465 
Equity method investments979 974 
Property, plant and equipment, net640 654 
Operating lease right-of-use assets 3 3 
Other investments2 2 
Contract assets – related parties214 218 
Other assets – related parties2 2 
Total assets$2,197 $2,318 
LIABILITIES
Current liabilities
Accounts payable – third parties$6 $4 
Accounts payable – related parties14 17 
Deferred revenue – third parties4 2 
Deferred revenue – related parties36 31 
Accrued liabilities – third parties12 11 
Accrued liabilities – related parties18 24 
Debt payable – related party250 400 
Total current liabilities340 489 
Noncurrent liabilities
Debt payable – related party2,292 2,292 
Operating lease liabilities4 4 
Finance lease liabilities22 23 
Deferred revenue and other unearned income3 3 
Total noncurrent liabilities2,321 2,322 
Total liabilities2,661 2,811 
Commitments and Contingencies (Note 11)
(DEFICIT) EQUITY
Preferred unitholders (50,782,904 units issued and outstanding as of both March 31, 2022 and December 31, 2021)
(1,059)(1,059)
Common unitholders – public (123,832,233 units issued and outstanding as of both March 31, 2022 and December 31, 2021)
3,363 3,354 
Common unitholder – SPLC (269,457,304 units issued and outstanding as of both March 31, 2022 and December 31, 2021)
(2,469)(2,488)
Financing receivables – related parties(292)(293)
Accumulated other comprehensive loss(8)(8)
Total partners’ deficit(465)(494)
Noncontrolling interests1 1 
Total deficit(464)(493)
Total liabilities and deficit$2,197 $2,318 
The accompanying notes are an integral part of the consolidated financial statements.
3


SHELL MIDSTREAM PARTNERS, L.P.
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended
March 31,
20222021
Revenue
Transportation, terminaling and storage services – third parties$32 $41 
Transportation, terminaling and storage services – related parties79 78 
Product revenue – related parties11 6 
Lease revenue – related parties13 14 
Total revenue135 139 
Costs and expenses
Operations and maintenance – third parties15 11 
Operations and maintenance – related parties26 27 
Cost of product sold9 4 
Impairment of fixed assets 3 
General and administrative – third parties2 2 
General and administrative – related parties11 10 
Depreciation, amortization and accretion12 13 
Property and other taxes5 5 
Total costs and expenses80 75 
Operating income55 64 
Income from equity method investments108 102 
Other income10 14 
Investment and other income118 116 
Interest income8 8 
Interest expense21 21 
Income before income taxes160 167 
Income tax expense  
Net income160 167 
Less: Net income attributable to noncontrolling interests2 4 
Net income attributable to the Partnership$158 $163 
Preferred unitholder’s interest in net income attributable to the Partnership12 12 
Limited Partners’ interest in net income attributable to the Partnership’s common unitholders$146 $151 
Net income per Limited Partner Unit - Basic and Diluted:
Common – basic$0.37 $0.38 
Common – diluted$0.36 $0.37 
Distributions per Limited Partner Unit$0.3000 $0.4600 
Weighted average Limited Partner Units outstanding - Basic and Diluted:
Common units – public – basic123.8 123.8 
Common units – SPLC – basic269.5 269.5 
Common units – public – diluted123.8 123.8 
Common units – SPLC – diluted320.3 320.3 
The accompanying notes are an integral part of the consolidated financial statements.
4


SHELL MIDSTREAM PARTNERS, L.P.
UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Three Months Ended March 31,
20222021
Net income$160 $167 
Other comprehensive income (loss), net of tax:
Remeasurements of pension and other postretirement benefits related to equity method investments, net of tax  
Comprehensive income$160 $167 
Less comprehensive income attributable to:
Noncontrolling interests2 4 
Comprehensive income attributable to the Partnership$158 $163 
The accompanying notes are an integral part of the consolidated financial statements.
5


SHELL MIDSTREAM PARTNERS, L.P.
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS 
Three Months Ended March 31,
20222021
(in millions of dollars)
Cash flows from operating activities
Net income$160 $167 
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation, amortization and accretion12 13 
Amortization of contract assets - related parties4 4 
Impairment of fixed assets 3 
Undistributed equity earnings(21)(5)
Changes in operating assets and liabilities
Accounts receivable (4)
Allowance oil(5)(5)
Prepaid expenses and other assets9 8 
Accounts payable(2)(5)
Deferred revenue and other unearned income6  
Accrued liabilities(6)(10)
Net cash provided by operating activities157 166 
Cash flows from investing activities
Capital expenditures(2)(1)
Contributions to investment (2)
Return of investment16 12 
Net cash provided by investing activities14 9 
Cash flows from financing activities
Repayments of credit facilities(150) 
Distributions to noncontrolling interests(2)(4)
Distributions to unitholders and general partner(130)(173)
Prepayment fee on credit facility (2)
Receipt of principal payments on financing receivables1 1 
Net cash used in financing activities(281)(178)
Net decrease in cash and cash equivalents(110)(3)
Cash and cash equivalents at beginning of the period361 320 
Cash and cash equivalents at end of the period$251 $317 
Supplemental cash flow information
Non-cash investing and financing transactions:
Change in accrued capital expenditures$ $1 
The accompanying notes are an integral part of the consolidated financial statements.
6


SHELL MIDSTREAM PARTNERS, L.P.
UNAUDITED CONSOLIDATED STATEMENT OF CHANGES IN (DEFICIT) EQUITY
Partnership
(in millions of dollars)Preferred Unitholder SPLCCommon Unitholders PublicCommon Unitholder SPLCFinancing ReceivablesAccumulated Other Comprehensive LossNoncontrolling InterestsTotal
Balance as of December 31, 2021$(1,059)$3,354 $(2,488)$(293)$(8)$1 $(493)
Net income12 46 100 — — 2 160 
Distributions to unitholders(12)(37)(81)— — — (130)
Distributions to noncontrolling interests— — — — — (2)(2)
Principal repayments on financing receivables— — — 1 — — 1 
Balance as of March 31, 2022$(1,059)$3,363 $(2,469)$(292)$(8)$1 $(464)

Partnership
(in millions of dollars)Preferred Unitholder SPLCCommon Unitholders PublicCommon Unitholder SPLCFinancing ReceivablesAccumulated Other Comprehensive LossNoncontrolling InterestsTotal
Balance as of December 31, 2020$(1,059)$3,382 $(2,497)$(298)$(9)$23 $(458)
Net income12 48 103 — — 4 167 
Distributions to unitholders(12)(57)(104)— — — (173)
Distributions to noncontrolling interests— — — — — (4)(4)
Principal repayments on financing receivables— — — 1 — — 1 
Balance as of March 31, 2021$(1,059)$3,373 $(2,498)$(297)$(9)$23 $(467)
The accompanying notes are an integral part of the consolidated financial statements.

7


SHELL MIDSTREAM PARTNERS, L.P.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 
Except as noted within the context of each note disclosure, the dollar amounts presented in the tabular data within these note disclosures are stated in millions of dollars.

1. Description of the Business and Basis of Presentation
Shell Midstream Partners, L.P. (“we,” “us,” “our,” “SHLX” or “the Partnership”) is a Delaware limited partnership formed by Shell plc on March 19, 2014 to own and operate pipeline and other midstream assets, including certain assets purchased from Shell Pipeline Company LP (“SPLC”) and its affiliates. We conduct our operations either through our wholly-owned subsidiary, Shell Midstream Operating LLC (the “Operating Company”), or through direct ownership. Our general partner is Shell Midstream Partners GP LLC (“general partner”). References to “Shell” or “Parent” refer collectively to Shell plc and its controlled affiliates, other than us, our subsidiaries and our general partner.

As of March 31, 2022, our general partner holds a non-economic general partner interest in the Partnership, and affiliates of SPLC own a 68.5% limited partner interest (269,457,304 common units) and 50,782,904 Series A perpetual convertible preferred units (the “Series A Preferred Units”) in the Partnership. These common units and preferred units, on an as-converted basis, represent a 72% interest in the Partnership. See Note 7 (Deficit) Equity for additional details.

Take Private Proposal
On February 11, 2022, the Board of Directors of our general partner (the “Board”) received a non-binding, preliminary proposal letter from SPLC to acquire all of the Partnership’s issued and outstanding common units not already owned by SPLC or its affiliates at a value of $12.89 per each issued and outstanding publicly-held common unit (the “Proposal”). The Board has appointed the conflicts committee to review, evaluate and negotiate the Proposal.

The proposed transaction is subject to a number of contingencies, including the approval of the Board, the negotiation of a definitive agreement concerning the transaction, and the satisfaction of conditions to the consummation of a transaction set forth in any such definitive agreement. There can be no assurance that such definitive agreement will be executed or that any transaction will be consummated on the terms described above or at all.

Description of the Business
We own, operate, develop and acquire pipelines and other midstream and logistics assets. As of March 31, 2022, our assets include interests in entities that own (a) crude oil and refined products pipelines and terminals that serve as key infrastructure to transport onshore and offshore crude oil production to Gulf Coast and Midwest refining markets and deliver refined products from those markets to major demand centers and (b) storage tanks and financing receivables that are secured by pipelines, storage tanks, docks, truck and rail racks and other infrastructure used to stage and transport intermediate and finished products. The Partnership’s assets also include interests in entities that own natural gas and refinery gas pipelines that transport offshore natural gas to market hubs and deliver refinery gas from refineries and plants to chemical sites along the Gulf Coast.

We generate revenue from the transportation, terminaling and storage of crude oil, refined products, and intermediate and finished products through our pipelines, storage tanks, docks, truck and rail racks, generate income from our equity and other investments, and generate interest income from financing receivables on certain logistics assets. Our operations consist of one reportable segment. 














8


The following table reflects our ownership interests as of March 31, 2022:
SHLX Ownership
Pecten Midstream LLC (“Pecten”)100.0 %
Sand Dollar Pipeline LLC (“Sand Dollar”)100.0 %
Triton West LLC (“Triton”)100.0 %
Zydeco Pipeline Company LLC (“Zydeco”) (1)
100.0 %
Mattox Pipeline Company LLC (“Mattox”)79.0 %
Amberjack Pipeline Company LLC (“Amberjack”) – Series A/Series B
75.0% / 50.0%
Mars Oil Pipeline Company LLC (“Mars”)71.5 %
Odyssey Pipeline L.L.C. (“Odyssey”)71.0 %
Bengal Pipeline Company LLC (“Bengal”)50.0 %
Crestwood Permian Basin LLC (“Permian Basin”)50.0 %
LOCAP LLC (“LOCAP”)41.48 %
Explorer Pipeline Company (“Explorer”)38.59 %
Poseidon Oil Pipeline Company, L.L.C. (“Poseidon”)36.0 %
Colonial Enterprises, Inc. (“Colonial”)16.125 %
Proteus Oil Pipeline Company, LLC (“Proteus”)10.0 %
Endymion Oil Pipeline Company, LLC (“Endymion”)10.0 %
Cleopatra Gas Gathering Company, LLC (“Cleopatra”)1.0 %
(1) Prior to May 1, 2021, we owned a 92.5% ownership interest in Zydeco and SPLC owned the remaining 7.5% ownership interest.

Basis of Presentation
Our unaudited consolidated financial statements include all subsidiaries required to be consolidated under generally accepted accounting principles in the United States (“GAAP”). Our reporting currency is U.S. dollars, and all references to dollars are U.S. dollars. The accompanying unaudited consolidated financial statements and related notes have been prepared in accordance with GAAP for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by GAAP for complete annual financial statements. The year-end consolidated balance sheet data was derived from audited financial statements. During interim periods, we follow the accounting policies disclosed in our Annual Report on Form 10-K for the year ended December 31, 2021 (our “2021 Annual Report”), filed with the United States Securities and Exchange Commission (“SEC”) unless otherwise described herein. The unaudited consolidated financial statements for the three months ended March 31, 2022 and March 31, 2021 include all adjustments we believe are necessary for a fair statement of the results of operations for the interim periods presented. These adjustments are of a normal recurring nature unless otherwise disclosed. Operating results for the interim periods are not necessarily indicative of the results that may be expected for the full year. These unaudited 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 2021 Annual Report.

Our consolidated subsidiaries include Pecten, Sand Dollar, Triton, Zydeco, Odyssey and the Operating Company. Asset acquisitions of additional interests in previously consolidated subsidiaries and interests in equity method and other investments are included in the financial statements prospectively from the effective date of each acquisition. In cases where these types of acquisitions are considered acquisitions of businesses under common control, the financial statements are retrospectively adjusted.

Summary of Significant Accounting Policies
The accounting policies are set forth in Note 2 – Summary of Significant Accounting Policies in the Notes to Consolidated Financial Statements of our 2021 Annual Report. There have been no significant changes to these policies during the three months ended March 31, 2022.


9


2. Related Party Transactions
Related party transactions include transactions with SPLC and Shell, including those entities in which Shell has an ownership interest but does not have control. See Note 1 – Description of the Business and Basis of Presentation – Take Private Proposal for additional information regarding the non-binding, preliminary proposal letter that the Board received from SPLC to acquire all of the Partnership’s issued and outstanding common units not already owned by SPLC or its affiliates.

Acquisition Agreements
We have entered into several acquisition and other related agreements with SPLC and Shell. See Note 4 – Related Party Transactions – Acquisition Agreements in the Notes to Consolidated Financial Statements of our 2021 Annual Report for additional information.

Omnibus Agreement
We, our general partner, SPLC and the Operating Company entered into an Omnibus Agreement effective February 1, 2019 (the “2019 Omnibus Agreement”).

The 2019 Omnibus Agreement addresses, among other things, the following matters:

our payment of an annual general and administrative fee of approximately $10 million for the provision of certain services by SPLC;
our obligation to reimburse SPLC for certain direct or allocated costs and expenses incurred by SPLC on our behalf; and
our obligation to reimburse SPLC for all expenses incurred by SPLC as a result of us becoming and continuing as a publicly-traded entity; we will reimburse our general partner for these expenses to the extent the fees relating to such services are not included in the general and administrative fee.

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

Tax Sharing Agreement
For a discussion of the Tax Sharing Agreement, see Note 4 – Related Party Transactions – Tax Sharing Agreement in the Notes to Consolidated Financial Statements of our 2021 Annual Report.

Other Agreements
We have entered into several customary agreements with SPLC and Shell. These agreements include pipeline operating agreements, reimbursement agreements and services agreements. See Note 4 – Related Party Transactions – Other Agreements in the Notes to Consolidated Financial Statements of our 2021 Annual Report for additional information.

Partnership Agreement
On April 1, 2020, we executed the Second Amended and Restated Agreement of Limited Partnership of Shell Midstream Partners, L.P. (the “Second Amended and Restated Partnership Agreement”), which amended and restated the Partnership’s First Amended and Restated Agreement of Limited Partnership dated November 3, 2014 in its entirety. Under the Second Amended and Restated Partnership Agreement, we reorganized our capital structure and our general partner or its assignee agreed to waive a portion of the distributions that would otherwise have been payable on the common units issued to SPLC as part of the transactions completed in April 2020, in an amount of $20 million per quarter for four consecutive fiscal quarters, beginning with the distribution made with respect to the second quarter of 2020 and ending with the distribution made with respect to the first quarter of 2021. For additional information on the transactions completed in April 2020, see Note 3 – Acquisitions and Other Transactions in the Notes to Consolidated Financial Statements of our 2021 Annual Report.

Noncontrolling Interests
The noncontrolling interest for Odyssey consists of GEL Offshore Pipeline LLC’s (“GEL”) 29% retained ownership interest as of both March 31, 2022 and December 31, 2021.

10


Other Related Party Balances
Other related party balances consist of the following:
March 31, 2022December 31, 2021
Accounts receivable$47 $40 
Prepaid expenses15 23 
Other assets2 2 
Contract assets (1)
214 218 
Accounts payable (2)
14 17 
Deferred revenue36 31 
Accrued liabilities (3)
18 24 
Debt payable (4)
2,542 2,692 
Finance lease liability2 2 
Financing receivables (1)
292 293 
(1) Refer to the section entitled Sale Leaseback below for additional details. Financing receivables are presented as a component of (deficit) equity.
(2) Accounts payable reflects amounts owed to SPLC for reimbursement of third-party expenses incurred by SPLC for our benefit.
(3) As of March 31, 2022, Accrued liabilities reflects $14 million of accrued interest and $4 million of other accrued liabilities. As of December 31, 2021, Accrued liabilities reflects $15 million of accrued interest and $9 million of other accrued liabilities. Other accrued liabilities are primarily related to the accrued operations and maintenance expenses on the Norco Assets (as defined below).
(4) Debt payable reflects borrowings outstanding after taking into account unamortized debt issuance costs of $2 million as of both March 31, 2022 and December 31, 2021.

Related Party Credit Facilities
We have entered into five credit facilities with Shell Treasury Center (West) Inc. (“STCW”), an affiliate of the Partnership: the 2021 Ten Year Fixed Facility, the Ten Year Fixed Facility, the Seven Year Fixed Facility, the Five Year Revolver due July 2023 and the Five Year Revolver due December 2022. On June 30, 2021, Zydeco entered into a termination of revolving loan facility agreement with STCW to terminate the 2019 Zydeco Revolver. For definitions and additional information regarding these credit facilities, see Note 5 – Related Party Debt in this report and Note 8 – Related Party Debt in the Notes to Consolidated Financial Statements of our 2021 Annual Report.

Related Party Revenues and Expenses
We provide crude oil transportation, terminaling and storage services to related parties under long-term contracts. We entered into these contracts in the normal course of our business. Our revenue from related parties for the three months ended March 31, 2022 and March 31, 2021 is disclosed in Note 8 – Revenue Recognition.

The following table shows related party expenses, including certain personnel costs, incurred by Shell and SPLC on our behalf that are reflected in the accompanying unaudited consolidated statements of income for the indicated periods. Included in these amounts, and disclosed below, is our share of operating and general corporate expenses, as well as the fees paid to SPLC under certain agreements.
11


 
Three Months Ended March 31,
20222021
Allocated operating expenses$11 $14 
Major maintenance costs (1)
1 1 
Insurance expense (2)
5 5 
Other (3)
9 7 
Operations and maintenance – related parties$26 $27 
Allocated general corporate expenses$6 $5 
Management Agreement fee3 2 
Omnibus Agreement fee2 3 
General and administrative – related parties$11 $10 
(1) Major maintenance costs are expensed as incurred in connection with the maintenance services of the Norco Assets (as defined below). Refer to section entitled Sale Leaseback below for additional details.
(2) Prior to November 1, 2021, the majority of our insurance coverage was provided by a wholly owned subsidiary of Shell, with the remaining coverage provided by third-party insurers. After November 1, 2021, a third-party insurer provided and continues to provide the first 5% of our insurance coverage with the remaining coverage provided by an affiliate of Shell as a reinsurer.
(3) Other expenses primarily relate to salaries and wages, other payroll expenses and special maintenance.

For a discussion of services performed by Shell on our behalf, see Note 1 – Description of Business and Basis of Presentation – Basis of Presentation – Expense Allocations in the Notes to Consolidated Financial Statements of our 2021 Annual Report.

Pension and Retirement Savings Plans
Employees who directly or indirectly support our operations participate in the pension, postretirement health and life insurance and defined contribution benefit plans sponsored by Shell, which include other Shell subsidiaries. Our share of pension and postretirement health and life insurance costs for the three months ended March 31, 2022 and March 31, 2021 were $1 million and $2 million, respectively. Our share of defined contribution benefit plan costs for the three months ended March 31, 2022 and March 31, 2021 were less than $1 million and $1 million, respectively. Pension and defined contribution benefit plan expenses are included in either General and administrative – related parties or Operations and maintenance – related parties in the accompanying unaudited consolidated statements of income, depending on the nature of the employee’s role in our operations.

Equity and Other Investments
We have equity and other investments in various entities. In some cases, we may be required to make capital contributions or other payments to these entities. See Note 3 – Equity Method Investments for additional details.

Sale Leaseback
Pursuant to the terminaling services agreements entered into among Triton, Equilon Enterprises LLC d/b/a Shell Oil Products US (“SOPUS”) and Shell Chemical LP (“Shell Chemical”) related to certain logistics assets at the Shell Norco Manufacturing Complex (the “Norco Assets”), the Partnership receives an annual net payment of $140 million, which is the total annual payment pursuant to the terminaling service agreements of $151 million, less $11 million, which primarily represents the allocated utility costs from SOPUS related to the Norco Assets. The annual payments are subject to annual Consumer Price Index adjustments. See Note 8 – Revenue Recognition for additional details.

The transfer of the Norco Assets, combined with the terminaling services agreements, were accounted for as a failed sale leaseback under Accounting Standards Codification (“ASC”) Topic 842, Leases (the “lease standard”). As a result, the transaction was treated as a financing arrangement in which the underlying assets were not recognized in property, plant and equipment of the Partnership as control of the Norco Assets did not transfer to the Partnership, and instead were recorded as financing receivables from SOPUS and Shell Chemical.

We recognize interest income on the financing receivables on the basis of an imputed interest rate of 11.1% related to SOPUS and 7.4% related to Shell Chemical. The following table shows the interest income and cash principal payments received on the financing receivables for the three months ended March 31, 2022 and March 31, 2021:

12


Three Months Ended March 31,
20222021
Cash payments for interest income$6 $8 
Cash payments on principal of the financing receivables1 1 

The terminaling services agreements associated with the Norco Assets have operation and maintenance service components and major maintenance service components (together “service components”). Consistent with our operating lease arrangements, we allocate a portion of the arrangement’s transaction price to any service components within the scope of ASC Topic 606, Revenue from Contracts with Customers (“the revenue standard”) and defer the revenue, if necessary, until the point at which the performance obligation is met. We present the revenue earned from the service components under the revenue standard within Transportation, terminaling and storage services – related parties in the unaudited consolidated statements of income. See Note 8 – Revenue Recognition for additional details related to revenue recognized on the service components and amortization of the contract assets.

3. Equity Method Investments
For each of the following investments, we have the ability to exercise significant influence over these investments based on certain governance provisions and our participation in the significant activities and decisions that impact the management and economic performance of the investments.

Equity method investments comprise the following as of the dates indicated:
March 31, 2022December 31, 2021
OwnershipInvestment AmountOwnershipInvestment Amount
Mattox79.0%$153 79.0%$156 
Amberjack – Series A / Series B
75.0% / 50.0%
349 
75.0% / 50.0%
359 
Mars71.5%150 71.5%150 
Bengal50.0%85 50.0%85 
Permian Basin50.0%79 50.0%80 
LOCAP41.48%16 41.48%15 
Explorer38.59%65 38.59%68 
Poseidon36.0% 36.0% 
Colonial16.125%53 16.125%32 
Proteus10.0%13 10.0%13 
Endymion10.0%16 10.0%16 
$979 $974 

Impacts to Equity Method Investments
Earnings from our equity method investments were as follows during the periods indicated:
Three Months Ended March 31,
20222021
Mattox$15 $15 
Amberjack28 29 
Mars29 29 
Bengal2 3 
Explorer10 7 
Colonial21 15 
Other (1)
3 4 
$108 $102 
(1) Included in Other is the activity associated with our investments in Permian Basin, LOCAP, Proteus and Endymion.

For the three months ended March 31, 2022 and March 31, 2021, distributions received from equity method investments were $111 million and $123 million, respectively.
13



Unamortized differences in the basis of the initial investments and our interest in the separate net assets within the financial statements of the investees are amortized into net income over the remaining useful lives of the underlying assets. The amortization is included in Income from equity method investments. As of March 31, 2022 and December 31, 2021, the unamortized basis differences included in our equity investments were $73 million and $75 million, respectively. For both the three months ended March 31, 2022 and March 31, 2021, the net amortization expense was $2 million.

Cumulatively, distributions received from Poseidon have been in excess of our investment balance and, therefore, the equity method of accounting has been suspended for this investment and the investment amount reduced to zero. As we have no commitments to provide further financial support to Poseidon, we have recorded excess distributions in Other income of $8 million and $14 million for the three months ended March 31, 2022 and March 31, 2021, respectively. Once our cumulative share of equity earnings becomes greater than the cumulative amount of distributions received, we will resume the equity method of accounting as long as the equity method investment balance remains greater than zero.

Significant Developments
The board of directors of Colonial elected not to declare a dividend for the three months ended March 31, 2022.

Capital Contributions
We make capital contributions for our pro-rata interest in Permian Basin to fund capital and other expenditures. For the three months ended March 31, 2022 and March 31, 2021, we made capital contributions of zero and approximately $2 million, respectively.

Summarized Financial Information
The following tables present aggregated selected unaudited income statement data for our equity method investments on a 100% basis. However, during periods in which an acquisition occurs, the selected unaudited income statement data reflects activity from the date of the acquisition.
Three Months Ended March 31, 2022
Total revenues Total operating expenses Operating income Net income
Statements of Income
Mattox$22 $3 $19 $19 
Amberjack71 17 54 54 
Mars61 19 42 42 
Bengal10 4 6 3 
Explorer81 44 37 26 
Colonial383 176 207 132 
Poseidon31 9 22 21 
Other (1)
50 30 20 18 
(1) Included in Other is the activity associated with our investments in Permian Basin, LOCAP, Proteus and Endymion.

14


Three Months Ended March 31, 2021
Total revenues Total operating expenses Operating income Net income
Statements of Income
Mattox$22 $3 $19 $19 
Amberjack72 17 55 55 
Mars63 22 41 41 
Bengal13 7 6 6 
Explorer69 42 27 21 
Colonial290 133 157 97 
Poseidon42 10 32 31 
Other (1)
56 32 24 23 
(1) Included in Other is the activity associated with our investments in Permian Basin, LOCAP, Proteus and Endymion.


4. Property, Plant and Equipment
Property, plant and equipment, net, consists of the following as of the dates indicated:
 
Depreciable
Life
March 31, 2022December 31, 2021
Land
— $12 $12 
Building and improvements
10 - 40 years
45 45 
Pipeline and equipment (1)
10 - 30 years
1,238 1,240 
Other
5 - 25 years
35 35 
1,330 1,332 
Accumulated depreciation and amortization (2)
(702)(690)
628 642 
Construction in progress
12 12 
Property, plant and equipment, net
$640 $654 
(1) As of both March 31, 2022 and December 31, 2021, includes costs of $366 million related to assets under operating leases (as lessor). As of both March 31, 2022 and December 31, 2021, includes cost of $23 million related to assets under capital lease (as lessee).
(2) As of March 31, 2022 and December 31, 2021, includes accumulated depreciation of $158 million and $155 million, respectively, related to assets under operating leases (as lessor). As of March 31, 2022 and December 31, 2021, includes accumulated amortization of $10 million and $9 million, respectively, related to assets under capital lease (as lessee).

Depreciation and amortization expense on property, plant and equipment for the three months ended March 31, 2022 and March 31, 2021 was $12 million and $13 million, respectively, and is included in costs and expenses in the accompanying unaudited consolidated statements of income. Depreciation and amortization expense on property, plant and equipment includes amounts pertaining to assets under both operating leases (as lessor) and capital leases (as lessee).

15


5. Related Party Debt
Consolidated related party debt obligations comprise the following as of the dates indicated:
March 31, 2022December 31, 2021
Outstanding BalanceTotal CapacityAvailable CapacityOutstanding BalanceTotal CapacityAvailable Capacity
Current
Five Year Revolver due December 2022
$250 $1,000 $750 $400 $1,000 $600 
Total current debt payable (1)
$250 $1,000 $750 $400 $1,000 $600 
Noncurrent
2021 Ten Year Fixed Facility
$600 $600 $ $600 $600 $ 
Ten Year Fixed Facility
600 600  600 600  
Seven Year Fixed Facility
600 600  600 600  
Five Year Revolver due July 2023
494 760 266 494 760 266 
Unamortized debt issuance costs(2)n/an/a(2)n/an/a
Total noncurrent debt payable$2,292 $2,560 $266 $2,292 $2,560 $266 
Total debt payable$2,542 $3,560 $1,016 $2,692 $3,560 $866 
(1) As of both March 31, 2022 and December 31, 2021, the unamortized debt issuance costs for the current debt payable is less than $1 million and is therefore not being reflected in this table.

Interest and fee expenses associated with our borrowings, net of capitalized interest, were $20 million and $21 million for the three months ended March 31, 2022 and March 31, 2021, respectively, of which we paid $20 million and $24 million, respectively.

Borrowings and Repayments
Borrowings under the Five Year Revolver due July 2023 and the Five Year Revolver due December 2022 bear interest at the three-month London Interbank Offered Rate (“LIBOR”) plus a margin or, in certain instances (including if LIBOR is discontinued) at an alternate interest rate as described in each respective revolver. LIBOR is being discontinued globally, and as such, a new benchmark will take its place. We are in discussion with our Parent to further clarify the reference rate(s) applicable to our revolving credit facilities once LIBOR is discontinued, and once determined, will assess the financial impact, if any.

Borrowings under these revolving credit facilities approximate fair value as the interest rates are variable and reflective of market rates, which results in Level 2 instruments. The fair value of our fixed rate credit facilities is estimated based on the published market prices for issuances of similar risk and tenor and is categorized as Level 2 within the fair value hierarchy. As of March 31, 2022, the carrying amount and estimated fair value of total debt (before amortization of issuance costs) was $2,544 million and $2,555 million, respectively. As of December 31, 2021, the carrying amount and estimated fair value of total debt (before amortization of issuance costs) was $2,694 million and $2,849 million, respectively.

On February 16, 2022, we used excess cash to repay $150 million of borrowings under the Five Year Revolver due December 2022.

The 2021 Ten Year Fixed Facility was fully drawn on March 23, 2021, and the borrowings were used to repay the borrowings under, and replace, the Five Year Fixed Facility. In consideration for STCW’s consent to the prepayment of the Five Year Fixed Facility, the Partnership incurred a fee of approximately $2 million, which was paid on March 23, 2021. The