Attached files
LOOP LLC
Condensed Financial Statements
As of June 30, 2017
LOOP LLC
Index of Condensed Financial Statements
Page(s)
Financial Statements
Condensed Balance Sheets at June 30, 2017 and December 31, 2016............................................... 2
Condensed Statements of Income for the Six Months Ended June 30, 2017 and 2016........................ 3
Condensed Statements of Comprehensive Income for the Six Months Ended June 30, 2017
and 2016 ................................................................................................................................................ 4
Condensed Statements of Changes in Members’ Equity for the Six Months Ended June 30, 2017
and 2016 ................................................................................................................................................ 5
Condensed Statements of Cash Flows for the Six Months Ended June 30, 2017 and 2016 ................ 6
Notes to Condensed Financial Statements........................................................................................ 7–12
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LOOP LLC
Condensed Balance Sheets (Unaudited)
June 30, 2017 and December 31, 2016
June 30, 2017 | December 31, 2016 | |||||||
Assets | ||||||||
Current assets | ||||||||
Cash and cash equivalents | $ | 48,533,474 | $ | 27,438,056 | ||||
Receivables from affiliates | 12,101,595 | 11,002,371 | ||||||
Receivables from nonaffiliates | 11,245,949 | 10,595,533 | ||||||
Materials and supplies | 15,799,856 | 15,189,596 | ||||||
Prepayments | 7,898,248 | 6,159,982 | ||||||
Restricted cash | 1,904,000 | 8,384,000 | ||||||
Oil inventory | 31,069,730 | 37,902,796 | ||||||
Total current assets | 128,552,852 | 116,672,334 | ||||||
Property, plant and equipment net of accumulated depreciation and amortization | 776,505,687 | 754,871,328 | ||||||
Construction in progress | 40,064,998 | 56,256,759 | ||||||
Net property, plant and equipment | 816,570,685 | 811,128,087 | ||||||
Other assets | 147,296 | 153,319 | ||||||
Total Assets | $ | 945,270,833 | $ | 927,953,740 | ||||
Liabilities and Members' Equity | ||||||||
Current liabilities | ||||||||
Accounts payable and accrued expenses | $ | 16,338,242 | $ | 25,124,185 | ||||
Deferred revenue | 3,210,250 | 6,523,000 | ||||||
Interest payable | 1,223,334 | 1,290,742 | ||||||
Current maturities of long-term debt | 94,710,000 | 94,710,000 | ||||||
Total current liabilities | 115,481,826 | 127,647,927 | ||||||
Noncurrent Liabilities | ||||||||
Long-term debt | 270,096,172 | 270,016,077 | ||||||
Pension and benefits | 43,083,908 | 40,226,441 | ||||||
Asset retirement obligation | 19,659,750 | 18,919,413 | ||||||
Deferred revenue | 1,530,243 | 1,643,674 | ||||||
Other | 5,352,926 | 5,378,504 | ||||||
Total noncurrent liabilities | 339,722,999 | 336,184,109 | ||||||
Members' equity | 490,066,008 | 464,121,704 | ||||||
Total Liabilities and Members' Equity | $ | 945,270,833 | $ | 927,953,740 | ||||
The accompanying notes are an integral part of these condensed financial statements.
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LOOP LLC
Condensed Statements of Income (Unaudited)
June 30, 2017 and 2016
Six Months Ended June 30, | ||||||||
2017 | 2016 | |||||||
Operating revenues | ||||||||
Offloading | $ | 42,336,952 | $ | 50,708,383 | ||||
Pipeline receipts | 28,916,712 | 23,997,014 | ||||||
Tank storage fees | 27,196,340 | 22,530,000 | ||||||
Cavern storage fees | 24,426,151 | 17,239,354 | ||||||
Storage futures trading | 14,075,629 | 8,166,273 | ||||||
Port fees, blending, and incidental | 4,294,238 | 4,749,722 | ||||||
Allowance oil | 13,476,935 | 6,195,225 | ||||||
Management fees | 2,312,543 | 2,226,257 | ||||||
Total Operating Revenues (Affiliate revenue was approximately $69,567,000 and $59,957,000 in 2017 and 2016, respectively) | 157,035,500 | 135,812,228 | ||||||
Operating expenses Salaries and wages | ||||||||
Salaries and wages | 13,698,506 | 12,895,713 | ||||||
Materials and supplies | 2,580,340 | 2,601,019 | ||||||
Outside services | 27,206,757 | 26,810,987 | ||||||
Fuel and power | 4,918,666 | 4,830,826 | ||||||
Maintenance materials | 1,396,992 | 2,322,261 | ||||||
Rentals | 5,761,117 | 5,609,610 | ||||||
Oil loss allowance | 348,305 | 1,860,369 | ||||||
Depreciation, amortization, and accretion | 12,162,085 | 12,024,569 | ||||||
Pension and benefits | 5,158,606 | 5,261,043 | ||||||
Insurance and uninsured losses | 945,894 | 955,801 | ||||||
Taxes - other than income | 2,536,411 | 2,357,480 | ||||||
Total operating expenses (Affiliate expense was $0 for 2017 and 2016, respectively) | 76,713,679 | 77,529,678 | ||||||
Income from operations | 80,321,821 | 58,282,550 | ||||||
Interest and other | ||||||||
Other income | 1,358,184 | 1,089,941 | ||||||
Interest income | 65,583 | 94,006 | ||||||
Interest expense | (3,301,284 | ) | (2,409,938 | ) | ||||
Net interest expense and other | (1,877,517 | ) | (1,225,991 | ) | ||||
Net income | $ | 78,444,304 | $ | 57,056,559 | ||||
The accompanying notes are an integral part of these condensed financial statements.
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LOOP LLC
Condensed Statements of Comprehensive Income (Unaudited)
June 30, 2017 and 2016
Six Months Ended June 30, | ||||||||
2017 | 2016 | |||||||
Net income | $ | 78,444,304 | $ | 57,056,559 | ||||
Other comprehensive income | ||||||||
Pension and postretirement benefits adjustments | (995,730 | ) | (724,962 | ) | ||||
Comprehensive income | $ | 77,448,574 | $ | 56,331,597 | ||||
The accompanying notes are an integral part of these condensed financial statements.
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LOOP LLC
Condensed Statements of Changes in Members' Equity (Unaudited)
June 30, 2017 and 2016
Six Months Ended June 30, | ||||||||
2017 | 2016 | |||||||
Members' equity | ||||||||
Balances at beginning of year | $ | 464,121,704 | $ | 419,664,718 | ||||
Net income | 78,444,304 | 57,056,559 | ||||||
Members' distributions | (52,500,000 | ) | (32,500,000 | ) | ||||
Balances at June 30 | 490,066,008 | 444,221,277 | ||||||
The accompanying notes are an integral part of these condensed financial statements.
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LOOP LLC
Condensed Statements of Cash Flows (Unaudited)
June 30, 2017 and 2016
Six Months Ended June 30, | ||||||||
2017 | 2016 | |||||||
Cash flows from operating activities | ||||||||
Net income | $ | 78,444,304 | $ | 57,056,559 | ||||
Adjustments to reconcile net income to net cash provided by operating activities | ||||||||
Depreciation, amortization, and accretion | 12,242,180 | 12,024,569 | ||||||
Pension and benefits | 2,857,467 | 2,985,434 | ||||||
Changes in operating assets and liabilities | ||||||||
Receivables from affiliates | (1,099,224 | ) | 3,895,899 | |||||
Receivables from nonaffiliates | (650,416 | ) | (609,649 | ) | ||||
Materials and supplies | (610,260 | ) | (668,269 | ) | ||||
Prepayments | (1,738,266 | ) | 127,492 | |||||
Other assets | 6,023 | 93,276 | ||||||
Oil inventory | 6,833,066 | (4,544,856 | ) | |||||
Deferred revenue | (3,426,181 | ) | 2,288,937 | |||||
Accounts payable and accrued expenses | (6,582,094 | ) | 1,291,398 | |||||
Other noncurrent liabilities | 714,759 | 556,240 | ||||||
Interest payable | (67,408 | ) | 32,602 | |||||
Net cash provided by operating activities | 86,923,950 | 74,529,632 | ||||||
Cash flows from investing activities | ||||||||
Capital expenditures | (19,808,532 | ) | (61,916,630 | ) | ||||
Increase in restricted cash | 6,480,000 | (6,071,000 | ) | |||||
Net cash used in investing activities | (13,328,532 | ) | (67,987,630 | ) | ||||
Cash flows from financing activities | ||||||||
Members' distributions | (52,500,000 | ) | (32,500,000 | ) | ||||
Net cash used in financing activities | (52,500,000 | ) | (32,500,000 | ) | ||||
Net increase (decrease) in cash and cash equivalents | 21,095,418 | (25,957,998 | ) | |||||
Cash and cash equivalents | ||||||||
Beginning of period | 27,438,056 | 53,042,282 | ||||||
End of period | $ | 48,533,474 | $ | 27,084,284 | ||||
Noncash transactions | ||||||||
Capital expenditures in accounts payable and accrued expenses, net | $ | (2,203,848 | ) | $ | (159,486 | ) | ||
The accompanying notes are an integral part of these condensed financial statements.
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LOOP LLC
Notes to Condensed Financial Statements
June 30, 2017 and 2016
1. Organization, Operations and Ownership
Organization and Operations
LOOP LLC (LOOP), headquartered in Covington, Louisiana, owns and operates midstream crude oil infrastructure, including a deep water oil port offshore of Louisiana, pipelines, and onshore storage facilities. The deep water oil port offloads crude oil from crude carrying marine vessels destined for onshore storage and pipeline transport to the LOCAP LLC (LOCAP), an affiliate pipeline system, and other connecting carriers for onward delivery to refineries on the United States of America’s (U.S.) Gulf Coast and the Midwest regions. Additionally, LOOP receives and stores oil for onward transport from various other pipeline connections, and manages the operations of LOCAP. LOOP also offers future period cavern storage capacity through auction, providing market participants with the right to store barrels of LOOP Sour Crude at one of their onshore storage facilities for a specific calendar month.
Ownership
Under the Limited Liability Company Agreement and the First Stage Throughput and Deficiency Agreement (T&D), as amended, each owner, as listed below, is obligated in accordance with its ownership percentage to ship oil through LOOP’s midstream crude oil infrastructure in quantities sufficient for LOOP to pay certain of its expenses and obligations, including LOOP’s long-term debt secured by the T&D, or to make cash payments to LOOP for which they receive credit for future throughput. At December 31, 2016 and 2015, the ownership of LOOP and the associated T&D obligations were as follows:
Ownership | T&D Obligation | |||||
Marathon Petroleum Company LP | 10.0 | % | 50.7 | % | ||
MPL Louisiana Holdings LLC | 40.7 | * | ||||
Valero Terminaling and Distribution Company | 3.2 | 3.2 | ||||
Shell Oil Company | 19.5 | 46.1 | ||||
Shell Pipeline Company LP | 26.6 | ** | ||||
100.0 | % | 100.0 | % | |||
* The T&D obligor is Marathon Petroleum Company LP. | ||||||
** The T&D obligor is Shell Oil Company. | ||||||
2. Summary of Significant Accounting Policies
Basis of Accounting
The condensed financial statements have been prepared pursuant to generally accepted accounting principles in the United States of America (“U.S. GAAP”) which provide for reduced disclosure for interim periods. These condensed financial statements, including the year-end balance sheet data that was derived from audited financial statements, do not include all necessary disclosures required by U.S. GAAP for annual financial statements.
In management’s opinion, the unaudited financial information for the interim periods presented includes all adjustments necessary for a fair presentation of our results of operations, financial position, and cash flows. All adjustments are of a normal recurring nature unless otherwise disclosed. Revenues, expenses, assets and liabilities can vary during each interim period of the year. Our results of operations for the six months ended June 30, 2017 are not necessarily indicative of results expected for the full year of 2017. For a more complete discussion of the Company’s significant accounting policies and
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LOOP LLC
Notes to Condensed Financial Statements
June 30, 2017 and 2016
other information, you should read our most recent audited financial statements as of December 31, 2016, which includes all disclosures required by U.S. GAAP.
Allowance Oil Revenue, Oil Loss Allowance, and Oil Inventory
As of June 30, 2017, 400,000 barrels of oil were sold, for which a gain of $5,844,000 was recorded to Allowance oil revenue.
There have been no comprehensive inventory measurements and related adjustments recorded for the six months ended June 30, 2017.
Receivables
There was no allowance for doubtful accounts as of June 30, 2017 and December 31, 2016.
Recent Accounting Pronouncements
In March 2017, the FASB issued accounting guidance that changes the presentation of net periodic pension and postretirement benefit cost (“net benefit cost”) in the income statement. This new guidance requires service cost to be presented as part of operating income (expense) and all other components of net benefit cost are to be shown outside of operations. This guidance will be effective for periods beginning after December 15, 2018, including interim periods within those fiscal years, and is to be applied on a retrospective basis. Early adoption is permitted as of the beginning of an annual period for which an entity’s financial statements have not been issued or made available for issuance. We do not expect this guidance to have a significant impact on our financial statements.
In February 2016, the FASB issued ASU 2016-02, Leases, which requires the recognition of lease assets and lease liabilities by lessees for those leases classified as operating leases under previous GAAP. The new standard must be adopted using a modified retrospective transition, and provides for certain practical expedients. The new guidance will be effective in 2020 for private companies, with early adoption permitted. LOOP has not yet determined the potential effects on the financial statements.
In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows, which requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. Therefore, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. The amendments in this Update do not provide a definition of restricted cash or restricted cash equivalents. The new guidance will be effective in 2018 for private companies, with early adoption permitted. LOOP has not yet determined the potential effects on the financial statements.
In July 2015, the FASB issued ASU No. 2015-11, Simplifying the Measurement of Inventory. ASU
2015-11 simplifies the subsequent measurement of inventory by requiring inventory to be measured at the lower of cost and net realizable value. ASU 2015-11 applies only to inventories for which cost is determined by methods other than last-in first-out and the retail inventory method. ASU 2015-11 is effective for public companies for annual reporting periods beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption of ASU 2015-11 is permitted. We are currently evaluating ASU 2015-11 to determine if this guidance will have a material impact.
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LOOP LLC
Notes to Condensed Financial Statements
June 30, 2017 and 2016
In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2014-09 related to recognition of revenue based upon an entity’s contracts with customers to transfer goods or services. Under the new standard update, an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This guidance will be effective beginning January 1, 2019. LOOP is currently evaluating the impact of this accounting standard update on the financial statements.
3. Property, Plant, and Equipment
As of June 30, 2017 and December 31, 2016, gross property, plant, and equipment was as follows:
(in thousands) | June 30, 2017 | December 31, 2016 | ||||||
Land, leases, and rights of way | $ | 13,362 | $ | 13,362 | ||||
Buildings | 77,755 | 77,755 | ||||||
Equipment and communications systems | 35,344 | 33,499 | ||||||
Storage caverns and tanks | 638,219 | 610,191 | ||||||
Delivery equipment | 798,218 | 795,476 | ||||||
Furniture, fixtures, and other | 29,940 | 29,864 | ||||||
Construction in progress | 40,065 | 56,257 | ||||||
Total property, plant, and equipment | $ | 1,632,903 | $ | 1,616,404 | ||||
Accumulated depreciation | 816,333 | 805,276 | ||||||
Net property, plant, and equipment | $ | 816,570 | $ | 811,128 | ||||
Total assets depreciated under the straight-line method have an original cost of approximately $165,413,000 and $163,521,000 at June 30, 2017 and December 31, 2016, respectively, and are depreciated over useful lives ranging from 5 to 25 years, with the exception of the Northpark headquarters, which is depreciated over 50 years. The remaining assets are depreciated under the UTD method. At current throughput levels, the remaining depreciable life is approximately 22 years as of June 30, 2017. Interest capitalized was approximately $190,000 and $804,000 as of June 30, 2017 and, 2016, respectively.
Asset Retirement Obligations
The following table reconciles the beginning and ending aggregate recorded amount of the asset retirement obligations as of June 30, 2017 and 2016:
(in thousands) | Asset Retirement Obligation | |||
December 31, 2015 | $ | 17,611 | ||
Change in estimate | — | |||
Accretion expense | 622 | |||
June 30, 2016 | $ | 18,233 | ||
December 31, 2016 | $ | 18,919 | ||
Change in estimate | — | |||
Accretion expense | 741 | |||
June 30, 2017 | $ | 19,660 | ||
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LOOP LLC
Notes to Condensed Financial Statements
June 30, 2017 and 2016
4. Long-Term Debt and Financing Arrangements
The Louisiana Offshore Terminal Authority (the Authority) issued Deepwater Port Revenue Bonds
(the Bonds) for the benefit of LOOP as indicated below:
(in thousands)
Series | Maturity Date | Date of Mandatory Put | Outstanding as of June 30, 2017 | |||||
1997A | September 1, 2017 | N/A | $ | 24,710 | ||||
1999 | * | October 1, 2019 | N/A | 24,605 | ||||
2001 | * | October 1, 2021 | N/A | 23,255 | ||||
2003D | * | September 1, 2023 | N/A | 22,520 | ||||
2007A | September 1, 2027 | N/A | 81,020 | |||||
2007B1A1 | * | October 1, 2037 | N/A | 20,000 | ||||
2007B1B | * | October 1, 2037 | N/A | 20,000 | ||||
2007B1B2 | * | October 1, 2037 | N/A | 20,000 | ||||
2007B2A1 | October 1, 2037 | October 1, 2019 | 30,000 | |||||
2007B2A2 | * | October 1, 2037 | N/A | 10,000 | ||||
2007B2B | * | October 1, 2037 | N/A | 20,000 | ||||
2010A | October 1, 2018 | October 1, 2018 | 22,980 | |||||
2010B-1 | October 1, 2040 | October 1, 2017 | 70,000 | |||||
2010B-2 | * | October 1, 2040 | N/A | 30,000 | ||||
2012 | * | October 1, 2020 | N/A | 22,345 | ||||
2013A | September 1, 2033 | N/A | 56,550 | |||||
2013B | September 1, 2033 | N/A | 43,450 | |||||
2013C | September 1, 2034 | N/A | 37,960 | |||||
$ | 579,395 | |||||||
*Less Treasury bonds held by LOOP | (212,725 | ) | ||||||
Total debt | $ | 366,670 | ||||||
Less amount due within one year | (94,710 | ) | ||||||
Less issuance costs | (1,866 | ) | ||||||
$ | 270,094 | |||||||
LOOP currently has two irrevocable letters of credit securing outstanding or contingent obligations. The first letter of credit with a commitment of approximately $25,116,000 provides security for the Series 1997A Bonds and expires on March 31, 2018. The second letter of credit with a commitment of approximately $44,164,000 provides security for the Series 2013B Bonds and expires on August 31, 2019. LOOP also has a $50,000,000 committed line of credit for general corporate purposes. The line of credit expires on December 31, 2017. There were no amounts outstanding on the line of credit at June 30, 2017 and December 31, 2016. The credit facilities mentioned above are collateralized by the assignment of certain of LOOP’s rights to receive payments under the T&D (Note 1).
Cash paid for interest was approximately $3,369,000 and $2,377,000 as of June 30, 2017 and 2016, respectively.
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LOOP LLC
Notes to Condensed Financial Statements
June 30, 2017 and 2016
5. Related-Party Transactions
Revenues from owners and owner affiliates were $69,567,000 and $59,957,000 for the periods ending June 30, 2017 and 2016, respectively. Affiliate revenue related to the sale of crude oil was $5,844,000 and $0 for the periods ending June 30, 2017 and 2016, respectively. There were no expenses relating to oil exchange transactions with owner affiliates in 2017.
LOOP receives a management fee under its contract to manage the operations of LOCAP. The contract is extended automatically from year-to-year unless terminated by either LOCAP or LOOP. LOCAP is the largest pipeline of LOOP’s three outbound connecting carriers and for the six months ended June 30, 2017 handled 74% of LOOP’s deliveries. Two of LOOP’s owners are also owners of LOCAP. LOOP also receives a management fee under a terminalling agreement for the storage of MARS Oil Pipeline Company crude oil, which is automatically renewed.
6. Employees’ Pension and Other Postretirement Benefits
Components of net periodic retirement and other post-retirement benefits expense for the six months ended June 30, 2017 and 2016 consisted of the following:
Six Months Ended June 30, | ||||||||
(in thousands) | 2017 | 2016 | ||||||
Pension plans | ||||||||
Service cost | $ | 1,951 | $ | 1,582 | ||||
Interest cost | 1,947 | 1,905 | ||||||
Expected return on assets | (2,617 | ) | (2,397 | ) | ||||
Amortization of prior service cost | — | — | ||||||
Amortization of actuarial loss | 956 | 937 | ||||||
Net periodic pension cost | $ | 2,237 | $ | 2,027 | ||||
Other postretirement plans | ||||||||
Service cost | $ | 370 | $ | 307 | ||||
Interest cost | 339 | 332 | ||||||
Expected return on assets | — | — | ||||||
Amortization of prior service cost | — | — | ||||||
Amortization of actuarial loss | 40 | 34 | ||||||
Net other postretirement plans cost | $ | 749 | $ | 673 | ||||
LOOP contributed $2,000,000 to its pension plans during the six-month period ending June 30, 2017, which is in excess of its minimum funding requirement of $0.
LOOP also sponsors a Savings Plan to assist eligible employees in providing for retirement or other future financial needs. Employee contributions (up to 7% of their earnings) are matched by LOOP at a rate of 100%. LOOP’s contributions to the Savings Plan were $976,000 and $911,000 for the six months ended June 30, 2017 and 2016, respectively.
Under authoritative accounting standards, assumptions are made regarding the valuation of benefit obligations and the performance of plan assets. As required, we recognize a balance sheet asset or liability for each of our pension and other postretirement benefit (“OPEB”) plans equal to the plan’s funded status as of the measurement date.
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LOOP LLC
Notes to Condensed Financial Statements
June 30, 2017 and 2016
Actuarial gains and losses are recognized annually in our consolidated statements of income in the fourth quarter and whenever a plan is determined to qualify for a re-measurement during a fiscal year. The remaining components of pension and OPEB plan expense, primarily service cost, interest cost and expected return on assets, are recorded on a monthly basis. The market-related value of assets equals the actual market value as of the date of measurement.
7. Subsequent Events
LOOP has evaluated all other events that occurred prior to August 18, 2017, the date of issuance of these financial statements, and has determined that there are no other subsequent events that require disclosure.
On September 1, 2017, Marathon Petroleum Corporation dropped its 40.7% ownership in LOOP LLC by MPL Louisiana Holdings LLC to MPLX, a master limited partnership.
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