Attached files
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| 8-K - ANDEAVOR LOGISTICS LP | tllpearningsrelease8-k.htm |
Exhibit 99.1
Tesoro Logistics LP Reports Third Quarter Results
SAN ANTONIO - November 7, 2011 - Tesoro Logistics LP (NYSE: TLLP) (“TLLP” or the “Partnership”) today reported third quarter 2011 net income of $15.1 million, or $0.49 per basic limited partner unit.
Distributable cash flow for the Partnership's first full quarter of operations was $17.2 million. On October 21, 2011, the Partnership announced its quarterly cash distribution of $10.9 million, or $0.35 per unit or $1.40 per unit on an annualized basis. This is a 4% increase over the prior quarter on an annualized basis and marks the second distribution and the first increase to TLLP unitholders.
“Our results for the quarter reflect higher volumes compared to the prior quarter in each of our segments driven by strong demand and our efforts to optimize the utilization of our assets,” said Greg Goff, TLLP's Chairman and Chief Executive Officer and Tesoro Corporation's President and Chief Executive Officer.
Overview of Financial Results
Revenues for the quarter totaled $27.1 million, driven by higher throughput volumes and the annual escalation in our pipeline tariffs and fees effective July 1, 2011. Strong volumes in the Crude Oil Gathering segment reflect a return to normal operations after the weather-related impacts during the second quarter. Volumes in the Terminalling, Transportation and Storage segment also improved versus the second quarter driven by strong seasonal demands as well as continued efforts to optimize the utilization of our assets. Total operating and maintenance expenses of $7.4 million were lower than guidance due to credits for terminal loss allowances.
“We continue to deliver on our growth strategy and will announce our 2012 capital budget, including additional details around organic growth initiatives, concurrent with Tesoro Corporation's Analyst and Investor Day Event in New York City on December 5th,” said Goff.
Public Invited to Listen to Analyst Conference Call
At 10:00 a.m. CST on November 8, 2011, TLLP will broadcast, live, its conference call with analysts regarding third quarter 2011 results and other business matters. Interested parties may listen to the live conference call over the Internet by logging on to http://www.tesorologistics.com.
About Tesoro Logistics LP
Tesoro Logistics LP, headquartered in San Antonio, Texas, is a fee-based, growth-oriented Delaware limited partnership formed by Tesoro Corporation to own, operate, develop and acquire crude oil and refined products logistics assets.
This earnings release contains certain statements that are "forward-looking" statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, concerning expected growth projects and our expectations about future capital spending, earnings and cash flow. For more information concerning factors that could affect these statements see our Prospectus, filed with the Securities and Exchange Commission on April 21, 2011. We undertake no obligation to publicly release the result of any revisions to any such forward-looking statements that may be made to reflect events or circumstances that occur, or which we become aware of, after the date hereof.
Contact:
Investors:
Louie Rubiola, Director, Investor Relations, (210) 626-4355
Media:
Mike Marcy, Manager, External Affairs, (210) 626-4697
1
Results of Operations (Unaudited)
Factors Affecting Comparability
The following tables present net income (loss), distributable cash flow, earnings before interest, income taxes, depreciation and amortization expense ("EBITDA") and related operational information for the three and nine month periods ended September 30, 2011 and 2010. Prior to April 26, 2011, we recorded affiliate pipeline tariff revenues only on certain regulated pipelines and terminal service fee revenues from third-party customers. We did not record revenues from affiliates on non-regulated pipelines or terminal service fee revenues for use of our terminal facilities. The unaudited condensed combined financial results of Tesoro Logistics LP Predecessor ("Predecessor"), our predecessor for accounting purposes, are presented for periods through April 25, 2011.
Beginning April 26, 2011, affiliate revenues have been recorded for all of our assets in the Crude Oil Gathering segment and the Terminalling, Transportation and Storage segment in connection with the commencement of the new commercial agreements with Tesoro upon completion of the initial public offering (the "Offering"). The condensed consolidated financial results for the three and nine months ended September 30, 2011 also include the results of operations for Tesoro Logistics LP (“TLLP” or the “Partnership”) for the period from April 26, 2011, the date TLLP commenced operations. As a result, the information included in the following tables is not comparable on a year-over-year or quarter-over-quarter basis. The balance sheet as of September 30, 2011 presents solely the condensed consolidated financial position of the Partnership.
TESORO LOGISTICS LP
RESULTS OF OPERATIONS
(Unaudited)
(In thousands, except units and per unit amounts)
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||||
Predecessor (a) | Predecessor (a) | |||||||||||||||||
REVENUES | ||||||||||||||||||
Crude Oil Gathering | $ | 13,789 | $ | 5,173 | $ | 30,047 | $ | 14,177 | ||||||||||
Terminalling, Transportation and Storage | 13,338 | 983 | 23,116 | 2,797 | ||||||||||||||
Total Revenues | 27,127 | 6,156 | 53,163 | 16,974 | ||||||||||||||
COSTS AND EXPENSES | ||||||||||||||||||
Operating and maintenance expenses | 7,382 | 9,360 | 24,231 | 25,484 | ||||||||||||||
Depreciation and amortization expense | 2,017 | 2,004 | 6,054 | 5,983 | ||||||||||||||
General and administrative expenses | 2,000 | 846 | 5,415 | 2,337 | ||||||||||||||
Loss on asset disposals | — | 70 | 1 | 506 | ||||||||||||||
Total Costs and Expenses | 11,399 | 12,280 | 35,701 | 34,310 | ||||||||||||||
OPERATING INCOME (LOSS) (a) | 15,728 | (6,124 | ) | 17,462 | (17,336 | ) | ||||||||||||
Interest and financing costs, net | (601 | ) | — | (1,062 | ) | — | ||||||||||||
NET INCOME (LOSS) | $ | 15,127 | $ | (6,124 | ) | $ | 16,400 | $ | (17,336 | ) | ||||||||
Less: Predecessor loss prior to initial public offering on April 26, 2011 | — | (6,622 | ) | |||||||||||||||
Net income subsequent to initial public offering | 15,127 | 23,022 | ||||||||||||||||
Less: General Partner's interest in net income subsequent to initial public offering | 303 | 460 | ||||||||||||||||
Limited Partners' interest in net income subsequent to initial public offering | $ | 14,824 | $ | 22,562 | ||||||||||||||
Net income per limited partner unit (basic and diluted): | ||||||||||||||||||
Common | $ | 0.49 | $ | 0.74 | ||||||||||||||
Subordinated - Tesoro | $ | 0.49 | $ | 0.74 | ||||||||||||||
Limited partner units outstanding: | ||||||||||||||||||
Common units - Public | 14,950,000 | 14,950,000 | ||||||||||||||||
Common units - Tesoro | 304,890 | 304,890 | ||||||||||||||||
Subordinated units - Tesoro | 15,254,890 | 15,254,890 | ||||||||||||||||
Cash distribution per unit (b) | $ | 0.35 | $ | 0.5948 | ||||||||||||||
2
TESORO LOGISTICS LP
RESULTS OF OPERATIONS
RECONCILIATION OF PREDECESSOR AND PARTNERSHIP
(Unaudited)
(In thousands)
Tesoro Logistics LP Predecessor | Tesoro Logistics LP | Nine Months Ended | |||||||||||
September 30, 2011 | |||||||||||||
Through April 25, 2011 (a) | From April 26, 2011 | ||||||||||||
REVENUES | |||||||||||||
Crude Oil Gathering | $ | 7,307 | $ | 22,740 | $ | 30,047 | |||||||
Terminalling, Transportation and Storage | 891 | 22,225 | 23,116 | ||||||||||
Total Revenues | 8,198 | 44,965 | 53,163 | ||||||||||
COSTS AND EXPENSES | |||||||||||||
Operating and maintenance expenses | 10,907 | 13,324 | 24,231 | ||||||||||
Depreciation and amortization expense | 2,353 | 3,701 | 6,054 | ||||||||||
General and administrative expenses | 1,560 | 3,855 | 5,415 | ||||||||||
Loss on asset disposals | — | 1 | 1 | ||||||||||
Total Costs and Expenses | 14,820 | 20,881 | 35,701 | ||||||||||
OPERATING INCOME (LOSS) (a) | (6,622 | ) | 24,084 | 17,462 | |||||||||
Interest and financing costs, net | — | (1,062 | ) | (1,062 | ) | ||||||||
NET INCOME (LOSS) | $ | (6,622 | ) | $ | 23,022 | $ | 16,400 | ||||||
3
TESORO LOGISTICS LP
RECONCILIATION OF AMOUNTS REPORTED UNDER U.S. GAAP
(Unaudited)
(In thousands)
Tesoro Logistics LP Predecessor | Tesoro Logistics LP | Nine Months Ended September 30, 2011 | Three Months Ended September 30, 2011 | ||||||||||||||
Through April 25, 2011 (a) | From April 26, 2011 | ||||||||||||||||
Reconciliation of Distributable Cash Flow to Net income (loss): | |||||||||||||||||
Net income (loss) | $ | (6,622 | ) | $ | 23,022 | $ | 16,400 | $ | 15,127 | ||||||||
Add: Depreciation and amortization expense | 2,353 | 3,701 | 6,054 | 2,017 | |||||||||||||
Add: Interest and financing costs, net | — | 1,062 | 1,062 | 601 | |||||||||||||
Less: Cash interest paid, net | — | 325 | 325 | 314 | |||||||||||||
Less: Maintenance capital expenditures (c) | 138 | 572 | 710 | 260 | |||||||||||||
Add: Reimbursement for maintenance capital expenditures | — | 8 | 8 | 8 | |||||||||||||
Distributable Cash Flow (d) | $ | (4,407 | ) | $ | 26,896 | $ | 22,489 | $ | 17,179 | ||||||||
Reconciliation of EBITDA to Net income (loss): | |||||||||||||||||
Net income (loss) | $ | (6,622 | ) | $ | 23,022 | $ | 16,400 | $ | 15,127 | ||||||||
Add: Depreciation and amortization expense | 2,353 | 3,701 | 6,054 | 2,017 | |||||||||||||
Add: Interest and financing costs, net | — | 1,062 | 1,062 | 601 | |||||||||||||
EBITDA (d) | $ | (4,269 | ) | $ | 27,785 | $ | 23,516 | $ | 17,745 | ||||||||
Reconciliation of EBITDA to Net cash from (used in) operating activities: | |||||||||||||||||
Net cash from (used in) operating activities | $ | (2,530 | ) | $ | 22,919 | $ | 20,389 | $ | 15,832 | ||||||||
Less: Changes in assets and liabilities | 1,739 | (4,372 | ) | (2,633 | ) | (1,645 | ) | ||||||||||
Less: Amortization of debt issuance costs | — | 266 | 266 | 155 | |||||||||||||
Less: Unit-based compensation expense | — | 301 | 301 | 178 | |||||||||||||
Less: Loss on asset disposals | — | 1 | 1 | — | |||||||||||||
Add: Interest and financing costs, net | — | 1,062 | 1,062 | 601 | |||||||||||||
EBITDA (d) | $ | (4,269 | ) | $ | 27,785 | $ | 23,516 | $ | 17,745 | ||||||||
4
TESORO LOGISTICS LP
SELECTED OPERATING SEGMENT DATA
(Unaudited)
(In thousands, except barrel and per barrel amounts)
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||||
OPERATING SEGMENTS | Predecessor (a) | Predecessor (a) | ||||||||||||||||
CRUDE OIL GATHERING | ||||||||||||||||||
Pipeline gathering: | ||||||||||||||||||
Pipeline revenues (a) | $ | 7,412 | $ | 5,173 | $ | 19,281 | $ | 14,177 | ||||||||||
Pipeline throughput (bpd) (e) | 59,530 | 55,938 | 57,171 | 47,954 | ||||||||||||||
Average pipeline revenue per barrel (f) | $ | 1.35 | $ | 1.01 | $ | 1.24 | $ | 1.08 | ||||||||||
Trucking: | ||||||||||||||||||
Trucking revenues (a) | $ | 6,377 | $ | — | $ | 10,766 | $ | — | ||||||||||
Trucking volume (bpd) | 23,879 | 24,204 | 23,066 | 23,386 | ||||||||||||||
Average trucking revenue per barrel (f) | $ | 2.90 | $ | 1.71 | ||||||||||||||
Total Revenues | $ | 13,789 | $ | 5,173 | $ | 30,047 | $ | 14,177 | ||||||||||
Costs and Expenses: | ||||||||||||||||||
Operating and maintenance expenses | $ | 5,998 | $ | 5,469 | $ | 15,874 | $ | 15,674 | ||||||||||
Depreciation and amortization expense | 785 | 778 | 2,355 | 2,317 | ||||||||||||||
General and administrative expenses | 386 | 145 | 821 | 424 | ||||||||||||||
(Gain) loss on asset disposals | — | — | (10 | ) | 61 | |||||||||||||
Total Costs and Expenses | 7,169 | 6,392 | 19,040 | 18,476 | ||||||||||||||
CRUDE OIL GATHERING SEGMENT OPERATING INCOME (LOSS) | $ | 6,620 | $ | (1,219 | ) | $ | 11,007 | $ | (4,299 | ) | ||||||||
TERMINALLING, TRANSPORTATION AND STORAGE | ||||||||||||||||||
Terminalling: | ||||||||||||||||||
Terminalling revenues (a) | $ | 10,371 | $ | 983 | $ | 18,020 | $ | 2,797 | ||||||||||
Terminalling throughput (bpd) (e) | 144,997 | 109,414 | 132,871 | 113,964 | ||||||||||||||
Average terminalling revenue per barrel (f) | $ | 0.78 | $ | 0.50 | ||||||||||||||
Short-haul pipeline: | ||||||||||||||||||
Short-haul pipeline revenues (a) | $ | 1,628 | $ | — | $ | 2,806 | $ | — | ||||||||||
Short-haul pipeline throughput (bpd) (e) | 69,658 | 69,576 | 66,029 | 58,597 | ||||||||||||||
Average short-haul pipeline revenue per barrel (f) | $ | 0.25 | $ | 0.16 | ||||||||||||||
Storage: | ||||||||||||||||||
Storage revenues (a) | $ | 1,339 | $ | — | $ | 2,290 | $ | — | ||||||||||
Storage capacity reserved (shell capacity barrels) | 878,000 | 878,000 | 878,000 | 878,000 | ||||||||||||||
Storage revenue per barrel on shell capacity (per month) (f) | $ | 0.51 | $ | 0.50 | ||||||||||||||
Total Revenues | $ | 13,338 | $ | 983 | $ | 23,116 | $ | 2,797 | ||||||||||
Costs and Expenses: | ||||||||||||||||||
Operating and maintenance expenses | $ | 1,384 | $ | 3,891 | $ | 8,357 | $ | 9,810 | ||||||||||
Depreciation and amortization expense | 1,232 | 1,226 | 3,699 | 3,666 | ||||||||||||||
General and administrative expenses | 483 | 88 | 975 | 270 | ||||||||||||||
Loss on asset disposals | — | 70 | 11 | 445 | ||||||||||||||
Total Costs and Expenses | 3,099 | 5,275 | 13,042 | 14,191 | ||||||||||||||
TERMINALLING, TRANSPORTATION AND STORAGE SEGMENT OPERATING INCOME (LOSS) | $ | 10,239 | $ | (4,292 | ) | $ | 10,074 | $ | (11,394 | ) | ||||||||
5
TESORO LOGISTICS LP
SELECTED OPERATING SEGMENT DATA
RECONCILIATION OF PREDECESSOR AND PARTNERSHIP
(Unaudited)
(In thousands, except barrel and per barrel amounts)
Tesoro Logistics LP Predecessor | Tesoro Logistics LP | Nine Months Ended September 30, 2011 | |||||||||||
OPERATING SEGMENTS | Through April 25, 2011 (a) | From April 26, 2011 | |||||||||||
CRUDE OIL GATHERING | |||||||||||||
Pipeline gathering: | |||||||||||||
Pipeline revenues (a) | $ | 7,307 | $ | 11,974 | $ | 19,281 | |||||||
Pipeline throughput (bpd) | 56,118 | 57,937 | 57,171 | ||||||||||
Average pipeline revenue per barrel (f) | $ | 1.13 | $ | 1.31 | $ | 1.24 | |||||||
Trucking: | |||||||||||||
Trucking revenues (a) | $ | — | $ | 10,766 | $ | 10,766 | |||||||
Trucking volume (bpd) | 22,331 | 23,600 | 23,066 | ||||||||||
Average trucking revenue per barrel (f) | $ | 2.89 | $ | 1.71 | |||||||||
Total Revenues | $ | 7,307 | $ | 22,740 | $ | 30,047 | |||||||
Costs and Expenses: | |||||||||||||
Operating and maintenance expenses | $ | 6,049 | $ | 9,825 | $ | 15,874 | |||||||
Depreciation and amortization expense | 916 | 1,439 | 2,355 | ||||||||||
General and administrative expenses | 198 | 623 | 821 | ||||||||||
Gain on asset disposals | — | (10 | ) | (10 | ) | ||||||||
Total Costs and Expenses | 7,163 | 11,877 | 19,040 | ||||||||||
CRUDE OIL GATHERING SEGMENT OPERATING INCOME | $ | 144 | $ | 10,863 | $ | 11,007 | |||||||
TERMINALLING, TRANSPORTATION AND STORAGE | |||||||||||||
Terminalling: | |||||||||||||
Terminalling revenues (a) | $ | 891 | $ | 17,129 | $ | 18,020 | |||||||
Terminalling throughput (bpd) | 122,190 | 140,645 | 132,871 | ||||||||||
Average terminalling revenue per barrel (f) | $ | 0.06 | $ | 0.77 | $ | 0.50 | |||||||
Short-haul pipeline: | |||||||||||||
Short-haul pipeline revenues (a) | $ | — | $ | 2,806 | $ | 2,806 | |||||||
Short-haul pipeline throughput (bpd) | 60,047 | 70,384 | 66,029 | ||||||||||
Average short-haul pipeline revenue per barrel (f) | $ | 0.25 | $ | 0.16 | |||||||||
Storage: | |||||||||||||
Storage revenues (a) | $ | — | $ | 2,290 | $ | 2,290 | |||||||
Storage capacity reserved (shell capacity barrels) | 878,000 | 878,000 | 878,000 | ||||||||||
Storage revenue per barrel on shell capacity (per month) (f) | $ | 0.50 | $ | 0.50 | |||||||||
Total Revenues | $ | 891 | $ | 22,225 | $ | 23,116 | |||||||
Costs and Expenses: | |||||||||||||
Operating and maintenance expenses | $ | 4,858 | $ | 3,499 | $ | 8,357 | |||||||
Depreciation and amortization expense | 1,437 | 2,262 | 3,699 | ||||||||||
General and administrative expenses | 100 | 875 | 975 | ||||||||||
Loss on asset disposals | — | 11 | 11 | ||||||||||
Total Costs and Expenses | 6,395 | 6,647 | 13,042 | ||||||||||
TERMINALLING, TRANSPORTATION AND STORAGE SEGMENT OPERATING INCOME (LOSS) | $ | (5,504 | ) | $ | 15,578 | $ | 10,074 | ||||||
6
SELECTED FINANCIAL DATA
(Unaudited)
(In thousands)
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||||
Capital Expenditures | Predecessor (a) | Predecessor (a) | ||||||||||||||||
Maintenance (c) | $ | 260 | $ | 539 | $ | 710 | $ | 1,297 | ||||||||||
Expansion | 2,076 | 96 | 3,396 | 289 | ||||||||||||||
Total Capital Expenditures | $ | 2,336 | $ | 635 | $ | 4,106 | $ | 1,586 | ||||||||||
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||||
General and Administrative Expenses | Predecessor (a) | Predecessor (a) | ||||||||||||||||
Crude Oil Gathering | $ | 386 | $ | 145 | $ | 821 | $ | 424 | ||||||||||
Terminalling, Transportation and Storage | 483 | 88 | 975 | 270 | ||||||||||||||
Unallocated | 1,131 | 613 | 3,619 | 1,643 | ||||||||||||||
Total General and Administrative Expenses | $ | 2,000 | $ | 846 | $ | 5,415 | $ | 2,337 | ||||||||||
TESORO LOGISTICS LP
SELECTED FINANCIAL DATA
RECONCILIATION OF PREDECESSOR AND PARTNERSHIP
(Unaudited)
(In thousands)
Tesoro Logistics LP Predecessor | Tesoro Logistics LP | Nine Months Ended | |||||||||||
September 30, 2011 | |||||||||||||
Through April 25, 2011 (a) | From April 26, 2011 | ||||||||||||
Capital Expenditures | |||||||||||||
Maintenance (c) | $ | 138 | $ | 572 | $ | 710 | |||||||
Expansion | 724 | 2,672 | 3,396 | ||||||||||
Total Capital Expenditures | $ | 862 | $ | 3,244 | $ | 4,106 | |||||||
Tesoro Logistics LP Predecessor | Tesoro Logistics LP | Nine Months Ended | |||||||||||
September 30, 2011 | |||||||||||||
Through April 25, 2011 (a) | From April 26, 2011 | ||||||||||||
General and Administrative Expenses | |||||||||||||
Crude Oil Gathering | $ | 198 | $ | 623 | $ | 821 | |||||||
Terminalling, Transportation and Storage | 100 | 875 | 975 | ||||||||||
Unallocated | 1,262 | 2,357 | 3,619 | ||||||||||
Total General and Administrative Expenses | $ | 1,560 | $ | 3,855 | $ | 5,415 | |||||||
7
TESORO LOGISTICS LP
BALANCE SHEET DATA
(In thousands)
September 30, 2011 | December 31, 2010 | ||||||||
(Unaudited) | Predecessor (a) | ||||||||
Cash and cash equivalents | $ | 17,756 | $ | — | |||||
Total Assets | $ | 165,348 | $ | 135,577 | |||||
Debt | $ | 50,000 | $ | — | |||||
Total Equity | $ | 106,408 | $ | 128,827 | |||||
TESORO LOGISTICS LP
GROWTH PROJECTS
(Unaudited)
(In millions)
Total Expected Project Capital Expenditures | Projected EBITDA (Annual) (d) (g) | Expected Completion Date | ||||||||
OPERATING SEGMENTS | ||||||||||
CRUDE OIL GATHERING | ||||||||||
High Plains expansion | $ | 6.0 | $ | 5.0 | Q2 2012 | |||||
Rangeland interconnect | 1.5 | 1.5 | Q2 2012 | |||||||
Connolly gathering hub (h) | 4.0 | — | Q1 2012 | |||||||
CRUDE OIL GATHERING SEGMENT GROWTH PROJECTS | 11.5 | 6.5 | ||||||||
TERMINALLING, TRANSPORTATION AND STORAGE | ||||||||||
Ethanol blending (h) | 4.5 | 1.0 | Q2 2011-completed (Salt Lake City) Q1 2012 (Burley) | |||||||
Los Angeles terminal transmix | 3.0 | 0.5 | Q3 2012 | |||||||
Stockton terminal storage | 10.0 | 2.5 | Q4 2012 | |||||||
Los Angeles terminal permit expansion | — | 1.0 | Q1 2012 | |||||||
TERMINALLING, TRANSPORTATION AND STORAGE SEGMENT GROWTH PROJECTS | 17.5 | 5.0 | ||||||||
TOTAL GROWTH PROJECTS | $ | 29.0 | $ | 11.5 | ||||||
TESORO LOGISTICS LP
RECONCILIATION OF AMOUNTS FORECASTED UNDER US GAAP
(Unaudited)
(In millions)
Forecasted Annual Run Rate | ||||
Reconciliation of EBITDA to Net income: | ||||
Net income | $ | 50.0 | ||
Add: Depreciation and amortization expense | 10.0 | |||
Add: Interest and financing costs, net | 2.0 | |||
EBITDA (d) | $ | 62.0 | ||
Quarterly EBITDA | $ | 15.5 | ||
8
_______________
(a) | The Partnership's results of operations may not be comparable to the Predecessor's historical results of operations for the reasons described below: |
Revenues-- There are differences in the way our Predecessor recorded revenues and the way the Partnership records revenues after completion of the Offering. See discussion of the factors affecting comparability noted on page 2.
General and Administrative Expenses-- Our Predecessor's general and administrative expenses included direct charges for the management and operation of our logistics assets and certain expenses allocated by Tesoro for general corporate services, such as treasury, accounting and legal services. These expenses were charged, or allocated, to our Predecessor based on the nature of the expenses. Tesoro continues to charge the Partnership a combination of direct charges for the management and operation of our logistics assets, a fixed annual fee for general corporate services, such as treasury, accounting and legal service and incremental additional general and administrative expenses as a result of being a separate publicly-traded partnership.
(b) | Incentive distribution rights are rights that entitle the general partner to receive an increasing share of incremental distributions. On October 21, 2011, we announced a quarterly cash distribution of $0.35 per limited partner unit for the third quarter of 2011. The year-to-date distribution of $0.5948 per limited partner unit includes the second quarter 2011 distribution calculated as the minimum quarterly distribution of $0.3375 per limited partner unit prorated, as $0.2448 per unit, for the period beginning April 26, 2011, the closing of Offering. |
(c) | Maintenance capital expenditures include expenditures required to maintain equipment, reliability, tankage and pipeline integrity, and safety, and to address environmental regulations. |
(d) | We define EBITDA as net income (loss) before net interest expense and depreciation and amortization expense. We define distributable cash flow as EBITDA less cash interest paid, deferred revenue related to shortfall payments (if any), maintenance capital expenditures, plus reimbursement by Tesoro Corporation (our "Sponsor") for certain maintenance capital expenditures. EBITDA and distributable cash flow are not measures prescribed by U.S. GAAP but are supplemental financial measures that are used by management and may be used by external users of our consolidated financial statements, such as industry analysts, investors, lenders and rating agencies, to assess: |
• | our operating performance as compared to other publicly traded partnerships in the midstream energy industry, without regard to historical cost basis or financing methods; |
• | the ability of our assets to generate sufficient cash flow to make distributions to our unitholders; |
• | our ability to incur and service debt and fund capital expenditures; and |
• | the viability of acquisitions and other capital expenditure projects, and the returns on investment of various investment opportunities. |
We believe that the presentation of EBITDA will provide useful information to investors in assessing our financial condition and results of operations. The U.S. GAAP measures most directly comparable to EBITDA are net income (loss) and net cash from (used in) operating activities. EBITDA should not be considered as an alternative to U.S. GAAP net income (loss) or net cash from (used in) operating activities. EBITDA has important limitations as an analytical tool, because it excludes some, but not all, items that affect net income (loss) and net cash from (used in) operating activities. You should not consider EBITDA in isolation or as a substitute for analysis of our results as reported under U.S. GAAP. Our definition of EBITDA may not be comparable to similarly titled measures of other companies, because it may be defined differently by other companies in our industry, thereby diminishing its utility.
We believe that the presentation of distributable cash flow will provide useful information to investors as it is a widely accepted financial indicator used by investors to compare partnership performance, as it provides investors an enhanced perspective of the operating performance of our assets and the cash our business is generating. The amounts included in the calculation of distributable cash flow are derived from amounts separately presented in our consolidated financial statements, with the exception of maintenance capital expenditures and reimbursement by our Sponsor for certain maintenance capital expenditures. Distributable cash flow should not be considered in isolation or as an alternative to net income or operating income as an indication of our operating performance or as a substitute for analysis of our results as reported under U.S. GAAP. Distributable cash flow is not necessarily comparable to similarly titled measures of other companies because it may be defined differently by other companies in our industry, thereby diminishing its utility.
(e) | We experienced lower average daily terminal throughput volumes in 2010 compared to 2011 due to the temporary shut-down processing at Tesoro's Washington refinery following a fire at that refinery in April 2010. For the nine months ended September 30, 2010, a scheduled turnaround at Tesoro's Utah refinery in the first quarter of 2010 affected average daily short-haul pipeline throughput volumes and a scheduled turnaround at Tesoro's North Dakota refinery during the second quarter of 2010 affected average daily pipeline and terminal throughput volumes. |
(f) | Management uses average revenue per barrel and storage revenue per barrel on shell capacity to evaluate performance and compare profitability to other companies in the industry. There are a variety of ways to calculate average revenue per barrel; different companies may calculate it in different ways. We calculate average revenue per barrel as revenue divided by the number of days in the period divided by throughput (bpd). We calculate storage revenue per barrel on shell capacity as revenue divided by number of months in the period divided by shell capacity barrels. Investors and analysts use this financial measure to help analyze and compare companies in the industry on the basis of operating performance. This financial measure should not be considered as an alternative to segment operating income, revenues and operating expenses or any other measure of financial performance presented in accordance with U.S. GAAP. |
(g) | Projected EBITDA for growth projects is equal to projected earnings as there is no net interest expense, income tax, or depreciation and amortization expense projected for these projects. |
(h) | The capital expenditures related to this project will be reimbursed by our Sponsor. |
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