Company Quick10K Filing
Shell Midstream Partners
Price1.00 EPS-550,000,000
Shares-0 P/E-0
MCap-0 P/FCF-0
Net Debt2,525 EBIT550
TEV2,525 TEV/EBIT5
TTM 2019-09-30, in MM, except price, ratios
10-Q 2020-03-31 Filed 2020-05-07
10-K 2019-12-31 Filed 2020-02-20
10-Q 2019-09-30 Filed 2019-11-01
10-Q 2019-06-30 Filed 2019-08-02
10-Q 2019-03-31 Filed 2019-05-03
10-K 2018-12-31 Filed 2019-02-21
10-Q 2018-09-30 Filed 2018-11-02
10-Q 2018-06-30 Filed 2018-08-02
10-Q 2018-03-31 Filed 2018-05-03
10-K 2017-12-31 Filed 2018-02-28
10-Q 2017-09-30 Filed 2017-11-03
10-Q 2017-06-30 Filed 2017-08-03
10-Q 2017-03-31 Filed 2017-05-05
10-K 2016-12-31 Filed 2017-02-23
10-Q 2016-09-30 Filed 2016-11-03
10-Q 2016-06-30 Filed 2016-08-04
10-Q 2016-03-31 Filed 2016-05-05
10-K 2015-12-31 Filed 2016-02-29
10-Q 2015-09-30 Filed 2015-11-12
10-Q 2015-06-30 Filed 2015-08-12
10-Q 2015-03-31 Filed 2015-05-13
10-K 2014-12-31 Filed 2015-03-25
10-Q 2014-09-30 Filed 2014-12-09
8-K 2020-05-11
8-K 2020-05-07
8-K 2020-04-21
8-K 2020-04-01
8-K 2020-03-02
8-K 2020-02-27
8-K 2020-02-20
8-K 2019-10-31
8-K 2019-08-01
8-K 2019-06-04
8-K 2019-05-10
8-K 2019-05-02
8-K 2019-03-05
8-K 2019-02-21
8-K 2018-12-21
8-K 2018-11-01
8-K 2018-08-02
8-K 2018-07-31
8-K 2018-05-10
8-K 2018-05-09
8-K 2018-05-09
8-K 2018-05-03
8-K 2018-02-27
8-K 2018-02-26
8-K 2018-02-01
8-K 2018-02-01
8-K 2018-01-22
8-K 2018-01-10

SHLX 10Q Quarterly Report

Part I. Financial Information
Item 1. Financial Statements (Unaudited)
Item 2. Management's Discussion and Analysis of Financial Condition 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
Item 5. Other Information
Item 6. Exhibits
EX-31.1 a2020q1-ex311.htm
EX-31.2 a2020q1-ex312.htm
EX-32.1 a2020q1-ex321.htm
EX-32.2 a2020q1-ex322.htm

Shell Midstream Partners Earnings 2020-03-31

Balance SheetIncome StatementCash Flow
2.11.50.90.4-0.2-0.82014201620182020
Assets, Equity
0.20.20.10.10.00.02014201620182020
Rev, G Profit, Net Income
0.40.20.0-0.1-0.3-0.52014201620182020
Ops, Inv, Fin

shlx-20200331
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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, 2020
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 May 7, 2020.





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 STATEMENTS OF INCOME
Three Months Ended
March 31,
20202019
(in millions of dollars, except per unit data)
Revenue
Transportation, terminaling and storage services – third parties$31  $42  
Transportation, terminaling and storage services – related parties69  64  
Product revenue – third parties  1  
Product revenue – related parties7  10  
Lease revenue – related parties14  14  
Total revenue121  131  
Costs and expenses
Operations and maintenance – third parties14  13  
Operations and maintenance – related parties14  14  
Cost of product sold15  9  
Loss from revision of asset retirement obligation  2  
General and administrative – third parties3  1  
General and administrative – related parties12  11  
Depreciation, amortization and accretion13  12  
Property and other taxes5  4  
Total costs and expenses76  66  
Operating income45  65  
Income from equity method investments112  70  
Dividend income from other investments  14  
Other income9  8  
Investment, dividend and other income121  92  
Interest expense, net24  20  
Income before income taxes142  137  
Income tax expense    
Net income142  137  
Less: Net income attributable to noncontrolling interests4  5  
Net income attributable to the Partnership$138  $132  
General partner’s interest in net income attributable to the Partnership$55  $27  
Limited Partners’ interest in net income attributable to the Partnership$83  $105  
Net income per Limited Partner Unit - Basic and Diluted:
Common$0.36  $0.47  
Distributions per Limited Partner Unit$0.460  $0.415  
Weighted average Limited Partner Units outstanding - Basic and Diluted:
Common units – public123.8  123.8  
Common units – SPLC109.5  100.0  
The accompanying notes are an integral part of the consolidated financial statements.

3


SHELL MIDSTREAM PARTNERS, L.P.
UNAUDITED CONSOLIDATED BALANCE SHEETS
March 31, 2020December 31, 2019
(in millions of dollars)
ASSETS
Current assets 
Cash and cash equivalents$292  $290  
Accounts receivable – third parties, net10  12  
Accounts receivable – related parties32  29  
Allowance oil4  12  
Prepaid expenses13  16  
Total current assets351  359  
Equity method investments912  926  
Property, plant and equipment, net717  726  
Operating lease right-of-use assets 4  4  
Other investments2  2  
Other assets – related parties2  2  
Total assets$1,988  $2,019  
LIABILITIES
Current liabilities
Accounts payable – third parties$1  $5  
Accounts payable – related parties8  10  
Deferred revenue – third parties1    
Deferred revenue – related party1    
Accrued liabilities – third parties12  12  
Accrued liabilities – related parties17  19  
Total current liabilities40  46  
Noncurrent liabilities
Debt payable – related party2,692  2,692  
Operating lease liabilities  4  4  
Finance lease liabilities  24  24  
Other unearned income  2  2  
Total noncurrent liabilities2,722  2,722  
Total liabilities2,762  2,768  
Commitments and Contingencies (Note 12)
(DEFICIT) EQUITY
Common unitholders – public (123,832,233 units issued and outstanding as of both March 31, 2020 and December 31, 2019)3,437  3,450  
Common unitholder – SPLC (109,457,304 units issued and outstanding as of both March 31, 2020 and December 31, 2019)(214) (203) 
General partner – SPLC (4,761,012 units issued and outstanding as of both March 31, 2020 and December 31, 2019)(4,014) (4,014) 
Accumulated other comprehensive loss  (8) (8) 
Total partners’ deficit(799) (775) 
Noncontrolling interests25  26  
Total deficit(774) (749) 
Total liabilities and deficit$1,988  $2,019  

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,
20202019
(in millions of dollars)
Net income$142  $137  
Other comprehensive loss, net of tax:
Remeasurements of pension and other postretirement benefits related to equity method investments, net of tax    
Comprehensive income$142  $137  
Less comprehensive income attributable to:
Noncontrolling interests4  5  
Comprehensive income attributable to the Partnership$138  $132  

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,
20202019
(in millions of dollars)
Cash flows from operating activities
Net income$142  $137  
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation, amortization and accretion13  12  
Loss from revision of asset retirement obligation  2  
Allowance oil reduction to net realizable value8    
Undistributed equity earnings  (3) 
Changes in operating assets and liabilities
Accounts receivable(3) 5  
Allowance oil  2  
Prepaid expenses and other assets3  4  
Accounts payable(3) (1) 
Deferred revenue and other unearned income2  (8) 
Net cash provided by operating activities162  150  
Cash flows from investing activities
Capital expenditures(7) (10) 
Contributions to investment  (5) 
Return of investment14  8  
Net cash provided by (used in) investing activities7  (7) 
Cash flows from financing activities
Distributions to noncontrolling interests(5) (3) 
Distributions to unitholders and general partner(162) (129) 
Other contributions from Parent  7  
Net cash used in financing activities(167) (125) 
Net increase in cash and cash equivalents2  18  
Cash and cash equivalents at beginning of the period290  208  
Cash and cash equivalents at end of the period$292  $226  
Supplemental cash flow information
Non-cash investing and financing transactions:
Change in accrued capital expenditures$(4) $2  
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)Common Unitholders PublicCommon Unitholder SPLCGeneral Partner SPLCAccumulated Other Comprehensive LossNoncontrolling InterestsTotal
Balance as of December 31, 2019$3,450  $(203) $(4,014) $(8) $26  $(749) 
Net income44  39  55  —  4  142  
Distributions to unitholders and general partner(57) (50) (55) —  —  (162) 
Distributions to noncontrolling interests—  —  —  —  (5) (5) 
Balance as of March 31, 2020$3,437  $(214) $(4,014) $(8) $25  $(774) 


Partnership
(in millions of dollars)Common Unitholders PublicCommon Unitholder SPLCGeneral Partner SPLCNoncontrolling InterestsTotal
Balance as of December 31, 2018$3,459  $(198) $(3,543) $25  $(257) 
Impact of change in accounting policy (Note 3)(4) (5)   —  (9) 
Net income58  47  27  5  137  
Other contributions from Parent—  —  7  —  7  
Distributions to unitholders and general partner(49) (40) (40) —  (129) 
Distributions to noncontrolling interests—  —  —  (3) (3) 
Balance as of March 31, 2019$3,464  $(196) $(3,549) $27  $(254) 

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 Business and Basis of Presentation

Shell Midstream Partners, L.P. (“we,” “us,” “our,” “SHLX” or “the Partnership”) is a Delaware limited partnership formed by Royal Dutch Shell plc on March 19, 2014 to own and operate pipeline and other midstream assets, including certain assets acquired 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” or “sponsor”). References to “RDS”, “Shell” or “Parent” refer collectively to Royal Dutch Shell plc and its controlled affiliates, other than us, our subsidiaries and our general partner.

Description of Business

We own, operate, develop and acquire pipelines and other midstream assets. As of March 31, 2020, our assets include interests in entities that own crude oil and refined products pipelines and terminals that serve as key infrastructure to (i) transport onshore and offshore crude oil production to Gulf Coast and Midwest refining markets and (ii) deliver refined products from those markets to major demand centers. Our 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 and refined products through our pipelines and storage tanks, and generate income from our equity and other investments. Our operations consist of one reportable segment. 

The following table reflects our ownership interests as of March 31, 2020:
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)
92.5 %
Amberjack Pipeline Company LLC (“Amberjack”) – Series A/Series B75.0% / 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) SPLC owns the remaining 7.5% ownership interest in Zydeco.

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
8


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, 2019 (our “2019 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, 2020 and March 31, 2019 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 2019 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 2019 Annual Report. There have been no significant changes to these policies during the three months ended March 31, 2020, other than those noted below.

Allowance for Expected Credit Losses

Accounts receivable represent valid claims against customers for products sold or services rendered, net of allowances for doubtful accounts. We assess the creditworthiness of our counterparties on an ongoing basis and require security, including prepayments and other forms of collateral, when appropriate. We establish provisions for losses on third party accounts receivable due from shippers and operators based on current expected credit losses. As of March 31, 2020 and December 31, 2019, we did not have a material amount of allowance for doubtful accounts.

Recent Accounting Pronouncements

Standards Adopted as of January 1, 2020

In June 2016, the FASB issued ASU 2016-13 to Topic 326, Financial Instruments Credit Losses: Measurement of Credit Losses on Financial Instruments, which replaces the current incurred loss impairment method with a method that reflects expected credit losses on financial instruments. The measurement of current expected credit losses under the new guidance is applicable to financial assets measured at amortized cost, including third-party trade receivables. We adopted the new standard effective January 1, 2020 using the modified retrospective method for all financial assets measured. No cumulative-effect adjustment to retained earnings was required upon adoption. The adoption of ASU 2016-13 did not have a material impact on our consolidated financial statements.

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.

Acquisition Agreements

For a description of applicable agreements, see Note 3—Acquisitions and Divestiture in the Notes to Consolidated Financial Statements of our 2019 Annual Report.

2019 Omnibus Agreement

On November 3, 2014, we entered into an Omnibus Agreement with SPLC and our general partner concerning our payment of an annual general and administrative services fee to SPLC as well as our reimbursement of certain costs incurred by SPLC on our behalf. On February 19, 2019, we, our general partner, SPLC, the Operating Company and Shell Oil Company terminated the Omnibus Agreement effective as of February 1, 2019, and we, our general partner, SPLC and the Operating Company
9


entered into a new Omnibus Agreement effective February 1, 2019 (the “2019 Omnibus Agreement”). On February 18, 2020, pursuant to the 2019 Omnibus Agreement, the Board of Directors of our general partner (the “Board”) approved a 3% inflationary increase to the annual general and administrative fee for 2020.

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

our payment of an annual general and administrative fee of approximately $11 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.

Under the 2019 Omnibus Agreement, SPLC agreed to indemnify us against tax liabilities relating to our assets acquired at our initial public offering (our “initial assets”) that are identified prior to the date that is 60 days after the expiration of the statute of limitations applicable to such liabilities. This obligation has no threshold or cap. We in turn agreed to indemnify SPLC against events and conditions associated with the ownership or operation of our initial assets (other than any liabilities against which SPLC is specifically required to indemnify us as described above).

During the three months ended March 31, 2020, neither we, nor SPLC, made any claims for indemnification under the 2019 Omnibus Agreement.

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 2019 Annual Report.

Other Agreements

We have entered into several other 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 2019 Annual Report.

Partnership Agreement

On December 21, 2018, we executed Amendment No. 2 (the “Second Amendment”) to the Partnership’s First Amended and Restated Agreement of Limited Partnership dated November 3, 2014 (as so amended, our “partnership agreement”). Under the Second Amendment, our sponsor agreed to waive $50 million of distributions in 2019 by agreeing to reduce distributions to holders of the Partnership's incentive distribution rights (“IDRs”) by: (1) $17 million for the three months ended March 31, 2019, (2) $17 million for the three months ended June 30, 2019 and (3) $16 million for the three months ended September 30, 2019.

Noncontrolling Interests

For Zydeco, noncontrolling interest consists of SPLC’s 7.5% retained ownership interest as of both March 31, 2020 and December 31, 2019. For Odyssey, noncontrolling interest consists of GEL Offshore Pipeline LLC’s (“GEL”) 29.0% retained ownership interest as of both March 31, 2020 and December 31, 2019.

10


Other Related Party Balances

Other related party balances consist of the following:
March 31, 2020December 31, 2019
Accounts receivable$32  $29  
Prepaid expenses11  15  
Other assets2  2  
Accounts payable (1)
8  10  
Deferred revenue1    
Accrued liabilities (2)
17  19  
Debt payable (3)
2,692  2,692  
(1) Accounts payable reflects amounts owed to SPLC for reimbursement of third-party expenses incurred by SPLC for our benefit.
(2) As of March 31, 2020, Accrued liabilities reflects $17 million accrued interest. As of December 31, 2019, Accrued liabilities reflects $18 million accrued interest and $1 million other accrued liabilities.
(3) Debt payable reflects borrowings outstanding after taking into account unamortized debt issuance costs of $2 million as of both March 31, 2020 and December 31, 2019.

Related Party Credit Facilities

We have entered into five credit facilities with Shell Treasury Center (West) Inc. (“STCW”): the Ten Year Fixed Facility, the Seven Year Fixed Facility, the Five Year Revolver due July 2023, the Five Year Revolver due December 2022 and the Five Year Fixed Facility. Zydeco has also entered into the 2019 Zydeco Revolver with STCW. For definitions and additional information regarding these credit facilities, see Note 6 – Related Party Debt in this report and Note 8 – Related Party Debt in the Notes to Consolidated Financial Statements of our 2019 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, 2020 and March 31, 2019 is disclosed in Note 9 – 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.
 
Three Months Ended March 31,
20202019
Allocated operating expenses$4  $5  
Insurance expense (1)
5  4  
Other (2)
5  5  
Operations and maintenance – related parties$14  $14  
Allocated general corporate expenses$7  $6  
Management Agreement fee2  2  
Omnibus Agreement fee3  3  
General and administrative – related parties$12  $11  
(1) The majority of our insurance coverage is provided by a wholly owned subsidiary of Shell. The remaining coverage is provided by third-party insurers.
(2) Other expenses primarily relate to salaries and wages and other payroll expenses.

For a discussion of services performed by Shell on our behalf, see Note 1 – Description of Business and Basis of Presentation – Basis of Presentation in the Notes to Consolidated Financial Statements of our 2019 Annual Report.

11


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 both the three months ended March 31, 2020 and March 31, 2019 were $2 million. Our share of defined contribution benefit plan costs for both the three months ended March 31, 2020 and March 31, 2019 were $1 million. Pension and defined contribution benefit plan expenses are included in either General and administrative – related parties or Operations and maintenance – related parties, depending on the nature of the employee’s role in our operations.

Share-based Compensation

Certain SPLC and Shell employees supporting our operations as well as other Shell operations were historically granted awards under the Performance Share Plan, Shell’s incentive compensation program. Share-based compensation expense is included in General and administrative – related parties in the accompanying unaudited consolidated statements of income. These costs for both the three months ended March 31, 2020 and March 31, 2019 were not material.

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.

Reimbursements

Total reimbursements received for the three months ended March 31, 2020 were not material and for the three months ended March 31, 2019 were $7 million. These reimbursements are included in Other contributions from Parent in the accompanying unaudited consolidated statements of cash flows. As the directional drill project on the Zydeco pipeline system was finalized at the end of 2019, the amount incurred by the project and claims for reimbursement from our Parent in the three months ended March 31, 2020 were immaterial. During the three months ended March 31, 2019, we filed claims for reimbursement from our Parent of $7 million. For each of these periods, this amount reflects our proportionate share of the Zydeco directional drill project costs and expenses.

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, 2020December 31, 2019
OwnershipInvestment AmountOwnershipInvestment Amount
Amberjack – Series A / Series B75.0% / 50.0%$418  75.0% / 50.0%$426  
Mars71.5%160  71.5%161  
Bengal50.0%87  50.0%88  
Permian Basin50.0%90  50.0%91  
LOCAP41.48%9  41.48%9  
Explorer38.59%85  38.59%88  
Poseidon36.0%  36.0%  
Colonial16.125%30  16.125%30  
Proteus10.0%15  10.0%15  
Endymion10.0%18  10.0%18  
$912  $926  

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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. As of March 31, 2020 and December 31, 2019, the unamortized basis differences included in our equity investments are $90 million and $92 million, respectively. For the three months ended March 31, 2020 and March 31, 2019, the net amortization expense was $2 million and $1 million, respectively.

During the first quarter of 2018, the investment amount for Poseidon was reduced to zero due to distributions received that were in excess of our investment balance and we, therefore, suspended the equity method of accounting. Further, we have no commitments to provide further financial support to Poseidon. As such, we have recorded excess distributions in Other income of $9 million and $8 million for the three months ended March 31, 2020 and March 31, 2019, respectively. Once our cumulative share of equity earnings becomes greater than the amount of distributions received, we will resume the equity method of accounting as long as the equity method investment balance remains greater than zero.

Earnings from our equity method investments were as follows during the periods indicated:

Three Months Ended March 31,
20202019
Amberjack$29  $32  
Mars31  29  
Bengal5  5  
Explorer (1)
14    
Colonial (1)
27    
Other (2)
6  4  
$112  $70  
(1) We acquired additional interests in Explorer and Colonial in June 2019. The acquisition of these interests has been accounted for prospectively.
(2) Included in Other is the activity associated with our investments in Permian Basin, LOCAP, Proteus and Endymion.

The adoption of Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers, and all related accounting standards updates to such Topic (collectively, “the revenue standard”) for the majority of our equity method investments followed the non-public business entity adoption date of January 1, 2019 for their stand-alone financial statements, with the exception of Mars and Permian Basin, which adopted on January 1, 2018. As a result of the adoption of the revenue standard on January 1, 2019, we recognized our proportionate share of Amberjack’s cumulative effect transition adjustments as a decrease to opening equity (deficit) in the amount of $9 million under the modified retrospective transition method.

Under ASC Topic 842, Leases, the adoption date for our equity method investments will follow the non-public business entity adoption date of January 1, 2020 or 2021 for their stand-alone financial statements, with the exception of Permian Basin, which adopted on January 1, 2019. There was no material impact on the Partnership's consolidated financial statements as a result of the adoption of the lease standard.

We assess our equity method investments for impairment whenever changes in the facts and circumstances indicate a loss in value has occurred, if the loss is deemed to be other than temporary. Due to the change in market conditions, as of March 31, 2020, we evaluated whether an impairment indicator existed. Based on our current forecast and expectations of market conditions, we determined that there was no triggering event that required us to update our impairment evaluation of our equity method investments. However, if the facts and circumstances change in the near term and indicate a loss in value that is other than temporary, we will re-evaluate whether the carrying amount of our equity method investments may not be recoverable.

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.

13


Three Months Ended March 31, 2020
Total revenues Total operating expenses Operating income Net income
Statements of Income
Amberjack$76  $19  $57  $57  
Mars72  28  44  44  
Bengal17  7  10  10  
Explorer
96  47  49  38  
Colonial