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FORM 10-Q

☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

OR

☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                     

(Exact Name of Registrant as Specified in Its Charter)

Delaware						30-0831007
(State or Other Jurisdiction of Incorporation or Organization)						(I.R.S. Employer Identification No.)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class			Trading Symbol			Name of each exchange on which registered
Common Units Representing Limited Partner Interests			USDP			New York Stock Exchange

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒    No  ☐

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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☐

Accelerated filer

☐

Non-accelerated filer

☒

Smaller reporting company

☒

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

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

As of August 2, 2021, there were 27,225,104 common units and 461,136 general partner units outstanding.

TABLE OF CONTENTS

PART I — FINANCIAL INFORMATION
Item 1.			Financial Statements
			Consolidated Statements of Operations			1
			Consolidated Statements of Comprehensive Income (Loss)			2
			Consolidated Statements of Cash Flows			3
			Consolidated Balance Sheets			4
			Consolidated Statements of Partners’ Capital			5
			Notes to the Consolidated Financial Statements			7
Item 2.			Management’s Discussion and Analysis of Financial Condition and Results of Operations			34
Item 3.			Quantitative and Qualitative Disclosures about Market Risk			54
Item 4.			Controls and Procedures			54
PART II — OTHER INFORMATION
Item 1.			Legal Proceedings			55
Item 1A.			Risk Factors			55
Item 6.			Exhibits			55
SIGNATURES						57

Unless the context otherwise requires, all references in this Quarterly Report on Form 10-Q, or this “Report,” to “USD Partners,” “USDP,” “the Partnership,” “we,” “us,” “our,” or like terms refer to USD Partners LP and its subsidiaries.

Unless the context otherwise requires, all references in this Report to (i) “our general partner” refer to USD Partners GP LLC, a Delaware limited liability company; (ii) “USD” refers to US Development Group, LLC, a Delaware limited liability company, and where the context requires, its subsidiaries; (iii) “USDG” and “our sponsor” refer to USD Group LLC, a Delaware limited liability company and currently the sole direct subsidiary of USD; (iv) “Energy Capital Partners” refers to Energy Capital Partners III, LP and its parallel and co-investment funds and related investment vehicles; and (v) “Goldman Sachs” refers to The Goldman Sachs Group, Inc. and its affiliates.

Cautionary Note Regarding Forward-Looking Statements

This Report includes forward-looking statements, which are statements that frequently use words such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “forecast,” “intend,” “may,” “plan,” “position,” “projection,” “should,” “strategy,” “target,” “will” and similar words. Although we believe that such forward-looking statements are reasonable based on currently available information, such statements involve risks, uncertainties and assumptions and are not guarantees of performance. Future actions, conditions or events and future results of operations may differ materially from those expressed in these forward-looking statements. Any forward-looking statement made by us in this Report speaks only as of the date on which it is made, and we undertake no obligation to publicly update any forward-looking statement. Many of the factors that will determine these results are beyond our ability to control or predict. Specific factors that could cause actual results to differ from those in the forward-looking statements include: (1) the impact of the novel coronavirus (COVID-19) pandemic and related economic downturn and governmental regulations; (2) changes in general economic conditions and commodity prices; (3) the effects of competition, in particular, by pipelines and other terminalling facilities; (4) shut-downs or cutbacks at upstream production facilities, refineries or other related businesses; (5) government regulations regarding oil production, including if the Alberta Government were to resume setting production limits; (6) the supply of, and demand for, terminalling services for crude oil and biofuels; (7) the price and availability of debt and equity financing; (8) actions by third parties, including customers, lenders, construction-related services providers, and our sponsors; (9) hazards and operating risks that may not be covered fully by insurance; (10) disruptions due to equipment interruption or failure at our facilities or third-party facilities on which our business is dependent; (11) natural disasters, weather-related delays, casualty losses and other matters beyond our control; (12) changes in laws or regulations to which we are subject, including compliance with environmental and operational safety regulations, that may increase our costs or limit our operations; and (13) our ability to successfully identify and finance potential acquisitions, development projects and other growth opportunities. For additional factors that may affect our results, see “Risk Factors” and the other information included elsewhere in this Report and our Annual Report on Form 10-K for the fiscal year ended December 31, 2020, which is available to the public over the Internet at the website of the U.S. Securities and Exchange Commission, or SEC, (www.sec.gov) and at our website (www.usdpartners.com).

CONSOLIDATED STATEMENTS OF OPERATIONS

			Three Months Ended June 30,												Six Months Ended June 30,
			2021						2020						2021						2020
			(unaudited; in thousands of US dollars, except per unit amounts)
Revenues
Terminalling services			$	30,992					$	22,309					$	59,097					$	46,544
Terminalling services — related party			1,111						3,800						2,214						7,888
Fleet leases — related party			983						983						1,967						1,967
Fleet services			—						51						24						101
Fleet services — related party			228						228						455						455
Freight and other reimbursables			207						64						363						686
Freight and other reimbursables — related party			—						1						—						1
Total revenues			33,521						27,436						64,120						57,642
Operating costs
Subcontracted rail services			3,523						2,688						6,664						6,133
Pipeline fees			6,398						5,395						12,444						11,742
Freight and other reimbursables			207						65						363						687
Operating and maintenance			2,602						2,564						5,434						5,645
Operating and maintenance — related party			2,101						2,065						4,191						4,092
Selling, general and administrative			2,411						2,620						5,467						5,800
Selling, general and administrative — related party			1,625						1,835						3,302						3,828
Goodwill impairment loss			—						—						—						33,589
Depreciation and amortization			5,500						5,203						10,971						10,625
Total operating costs			24,367						22,435						48,836						82,141
Operating income (loss)			9,154						5,001						15,284						(24,499)
Interest expense			1,591						2,256						3,326						4,995
Loss (gain) associated with derivative instruments			718						332						(2,358)						3,205
Foreign currency transaction loss (gain)			(41)						1,150						(102)						1,058
Other expense (income), net			4						(111)						(16)						(843)
Income (loss) before income taxes			6,882						1,374						14,434						(32,914)
Provision for (benefit from) income taxes			166						188						390						(319)
Net income (loss)			$	6,716					$	1,186					$	14,044					$	(32,595)
Net income (loss) attributable to limited partner interests			$	6,605					$	1,166					$	13,809					$	(32,044)
Net income (loss) per common unit (basic and diluted)			$	0.24					$	0.05					$	0.51					$	(1.22)
Weighted average common units outstanding			27,224						26,844						27,128						26,180
Net income (loss) per subordinated unit (basic and diluted)			$	—					$	—					$	—					$	(0.03)
Weighted average subordinated units outstanding			—						—						—						575

			Three Months Ended June 30,												Six Months Ended June 30,
			2021						2020						2021						2020
			(unaudited; in thousands of US dollars)
Net income (loss)			$	6,716					$	1,186					$	14,044					$	(32,595)
Other comprehensive income (loss) — foreign currency translation			580						2,917						955						(1,605)
Comprehensive income (loss)			$	7,296					$	4,103					$	14,999					$	(34,200)

			Six Months Ended June 30,
			2021						2020
			(unaudited; in thousands of US dollars)
Cash flows from operating activities:
Net income (loss)			$	14,044					$	(32,595)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization			10,971						10,625
Loss (gain) associated with derivative instruments			(2,358)						3,205
Settlement of derivative contracts			(543)						(289)
Unit based compensation expense			2,917						3,265
Loss associated with disposal of assets			5						—
Deferred income taxes			(90)						(541)
Amortization of deferred financing costs			414						414
Goodwill impairment loss			—						33,589
Changes in operating assets and liabilities:
Accounts receivable			(849)						690
Accounts receivable — related party			1,069						(746)
Prepaid expenses and other assets			733						(1,571)
Other assets — related party			(806)						(510)
Accounts payable and accrued expenses			582						(1,145)
Accounts payable and accrued expenses — related party			(36)						(87)
Deferred revenue and other liabilities			622						3,846
Deferred revenue — related party			—						(1,024)
Other liabilities — related party			24						—
Net cash provided by operating activities			26,699						17,126
Cash flows from investing activities:
Additions of property and equipment			(1,384)						(377)
Net cash used in investing activities			(1,384)						(377)
Cash flows from financing activities:
Distributions			(6,486)						(13,837)
Vested phantom units used for payment of participant taxes			(857)						(1,788)
Proceeds from long-term debt			—						10,000
Repayments of long-term debt			(18,000)						(12,000)
Net cash used in financing activities			(25,343)						(17,625)
Effect of exchange rates on cash			(148)						438
Net change in cash, cash equivalents and restricted cash			(176)						(438)
Cash, cash equivalents and restricted cash — beginning of period			10,994						10,684
Cash, cash equivalents and restricted cash — end of period			$	10,818					$	10,246

			June 30, 2021						December 31, 2020
			(unaudited; in thousands of US dollars, except unit amounts)
ASSETS
Current assets
Cash and cash equivalents			$	3,131					$	3,040
Restricted cash			7,687						7,954
Accounts receivable, net			4,938						4,049
Accounts receivable — related party			1,442						2,460
Prepaid expenses			2,556						1,959
Other current assets			465						1,777
Other current assets — related party			242						15
Total current assets			20,461						21,254
Property and equipment, net			138,140						139,841
Intangible assets, net			55,189						61,492
Operating lease right-of-use assets			7,551						9,630
Other non-current assets			3,941						3,625
Other non-current assets — related party			2,337						1,706
Total assets			$	227,619					$	237,548
LIABILITIES AND PARTNERS’ CAPITAL
Current liabilities
Accounts payable and accrued expenses			$	2,686					$	1,865
Accounts payable and accrued expenses — related party			348						383
Deferred revenue			5,949						6,367
Deferred revenue — related party			410						410
Operating lease liabilities, current			5,627						5,291
Other current liabilities			5,086						4,222
Total current liabilities			20,106						18,538
Long-term debt, net			177,895						195,480
Operating lease liabilities, non-current			1,894						4,392
Other non-current liabilities			11,080						12,870
Other non-current liabilities — related party			24						—
Total liabilities			210,999						231,280
Commitments and contingencies
Partners’ capital
Common units (27,224,441 and 26,844,715 outstanding at June 30, 2021 and December 31, 2020, respectively)			13,100						3,829
General partner units (461,136 outstanding at June 30, 2021 and December 31, 2020)			2,018						1,892
Accumulated other comprehensive income			1,502						547
Total partners’ capital			16,620						6,268
Total liabilities and partners’ capital			$	227,619					$	237,548

			Three Months Ended June 30,
			2021												2020
			Units						Amount						Units						Amount
			(unaudited; in thousands of US dollars, except unit amounts)
Common units
Beginning balance at April 1,			27,224,441						$	8,472					26,843,674						$	(5,286)
Common units issued for vested phantom units			—						—						—						—
Net income			—						6,605						—						1,166
Unit based compensation expense			—						1,271						—						1,579
Distributions			—						(3,248)						—						(3,129)
Ending balance at June 30,			27,224,441						13,100						26,843,674						(5,670)
Subordinated units
Beginning balance at April 1,			—						—						—						—
Net income			—						—						—						—
Distributions			—						—						—						—
Ending balance at June 30,			—						—						—						—
General Partner units
Beginning balance at April 1,			461,136						1,962						461,136						1,817
Net income			—						111						—						20
Distributions			—						(55)						—						(53)
Ending balance at June 30,			461,136						2,018						461,136						1,784
Accumulated other comprehensive income (loss)
Beginning balance at April 1,									922												(4,649)
Cumulative translation adjustment									580												2,917
Ending balance at June 30,									1,502												(1,732)
Total partners’ capital at June 30,									$	16,620											$	(5,618)

			Six Months Ended June 30,
			2021												2020
			Units						Amount						Units						Amount
			(unaudited; in thousands of US dollars, except unit amounts)
Common units
Beginning balance at January 1,			26,844,715						$	3,829					24,411,892						$	61,013
Conversion of units			—						—						2,092,709						(23,423)
Common units issued for vested phantom units			379,726						(857)						339,073						(1,788)
Net income (loss)			—						13,809						—						(32,029)
Unit based compensation expense			—						2,696						—						3,150
Distributions			—						(6,377)						—						(12,593)
Ending balance at June 30,			27,224,441						13,100						26,843,674						(5,670)
Subordinated units
Beginning balance at January 1,			—						—						2,092,709						(22,597)
Conversion of units			—						—						(2,092,709)						23,423
Net income (loss)			—						—						—						(15)
Distributions			—						—						—						(811)
Ending balance at June 30,			—						—						—						—
General Partner units
Beginning balance at January 1,			461,136						1,892						461,136						2,767
Net income (loss)			—						235						—						(551)
Unit based compensation expense			—						—						—						1
Distributions			—						(109)						—						(433)
Ending balance at June 30,			461,136						2,018						461,136						1,784
Accumulated other comprehensive income (loss)
Beginning balance at January 1,									547												(127)
Cumulative translation adjustment									955												(1,605)
Ending balance at June 30,									1,502												(1,732)
Total partners’ capital at June 30,									$	16,620											$	(5,618)

USD Partners LP and its consolidated subsidiaries, collectively referred to herein as we, us, our, the Partnership and USDP, is a fee-based, growth-oriented master limited partnership formed in 2014 by US Development Group, LLC, or USD, through its wholly-owned subsidiary, USD Group LLC, or USDG. We were formed to acquire, develop and operate midstream infrastructure and complementary logistics solutions for crude oil, biofuels and other energy-related products. We generate substantially all of our operating cash flows from multi-year, take-or-pay contracts with primarily investment grade customers, including major integrated oil companies, refiners and marketers. Our network of crude oil terminals facilitate the transportation of heavy crude oil from Western Canada to key demand centers across North America. Our operations include railcar loading and unloading, storage and blending in onsite tanks, inbound and outbound pipeline connectivity, truck transloading, as well as other related logistics services. We also provide our customers with leased railcars and fleet services to facilitate the transportation of liquid hydrocarbons by rail. We do not generally take ownership of the products that we handle, nor do we receive any payments from our customers based on the value of such products. We may on occasion enter into buy-sell arrangements in which we take temporary title to commodities while in our terminals. We expect such arrangements to be at fixed prices where we do not take commodity price exposure.

A substantial amount of the operating cash flows related to the terminalling services that we provide are generated from take-or-pay contracts with minimum monthly commitment fees and, as a result, are not directly related to actual throughput volumes at our crude oil terminals. Throughput volumes at our terminals are primarily influenced by the difference in price between Western Canadian Select, or WCS, and other grades of crude oil, commonly referred to as spreads, rather than absolute price levels. WCS spreads are influenced by several market factors, including the availability of supplies relative to the level of demand from refiners and other end users, the price and availability of alternative grades of crude oil, the availability of takeaway capacity, as well as transportation costs from supply areas to demand centers.

Our accompanying unaudited interim consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States, or GAAP, for interim consolidated financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all the information and disclosures required by GAAP for complete consolidated financial statements. In the opinion of our management, they contain all adjustments, consisting only of normal recurring adjustments, which our management considers necessary to present fairly our financial position as of June 30, 2021, our results of operations for the three and six months ended June 30, 2021 and 2020, and our cash flows for the six months ended June 30, 2021 and 2020. We derived our consolidated balance sheet as of December 31, 2020 from the audited consolidated financial statements included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020. Our results of operations for the three and six months ended June 30, 2021 and 2020 should not be taken as indicative of the results to be expected for the full year due to fluctuations in the supply of and demand for crude oil and biofuels, timing and completion of acquisitions, if any, changes in the fair market value of our derivative instruments and the impact of fluctuations in foreign currency exchange rates. These unaudited interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements and accompanying notes thereto presented in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020.

During 2020, the COVID-19 pandemic adversely affected the global economy, disrupted global supply chains and created significant volatility in the financial markets. As a result, beginning in March 2020, there was significant reductions in demand for crude oil, natural gas and natural gas liquids, which led to a decline in commodity prices. This drove Canadian producers to curtail production, which in turn resulted in lower crude oil supply levels and led

We conduct a substantial portion of our operations in Canada, which we account for in the local currency, the Canadian dollar. We translate most Canadian dollar denominated balance sheet accounts into our reporting currency, the U.S. dollar, at the end of period exchange rate, while most accounts in our statement of operations accounts are translated into our reporting currency based on the average exchange rate for each monthly period. Fluctuations in the exchange rates between the Canadian dollar and the U.S. dollar can create variability in the amounts we translate and report in U.S. dollars.

Within these consolidated financial statements, we denote amounts denominated in Canadian dollars with “C$” immediately prior to the stated amount.

USD and its affiliates are engaged in designing, developing, owning and managing large-scale multi-modal logistics centers and energy-related infrastructure across North America. USD is the indirect owner of our general partner through its direct ownership of USDG and is currently owned by Energy Capital Partners, Goldman Sachs and certain of USD’s management team.

In December 2019, the Financial Accounting Standards Board, or FASB, issued Accounting Standards Update No. 2019-12, or ASU 2019-12, which amends the FASB Accounting Standards Codification, or ASC, Topic 740, by removing certain exceptions related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. It also simplifies aspects of the accounting for franchise taxes and enacted changes in tax laws or rates and clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill. In addition, under the provisions of ASU 2019-12, single-member limited liability companies and similar disregarded entities that are not subject to income tax are not required to recognize an allocation of consolidated income tax expense in their separate financial statements, but they could elect to do so. The pronouncement is effective for fiscal years beginning after December 15, 2020, or for any interim periods within those fiscal years, with early adoption permitted.

We adopted the provisions of ASU 2019-12 on January 1, 2021. Our adoption of this standard did not have an impact on our financial statements.

We allocate our net income or loss among our general partner and limited partners using the two-class method in accordance with applicable authoritative accounting guidance. Under the two-class method, we allocate our net income or loss and any net income or loss in excess of distributions to our limited partners, our general partner and the holder of the incentive distribution rights, or IDRs, according to the distribution formula for available cash as set forth in our partnership agreement. We allocate any distributions in excess of earnings for the period to our limited partners and general partner based on their respective proportionate ownership interests in us, as set forth in our partnership agreement after taking into account distributions to be paid with respect to the IDRs.

The formula for distributing available cash as set forth in our partnership agreement is as follows:

Distribution Targets						Portion of Quarterly Distribution Per Unit						Percentage Distributed to Limited Partners						Percentage Distributed to General Partner (including IDRs) (1)
Minimum Quarterly Distribution						Up to $0.2875						98%						2%
First Target Distribution						> $0.2875 to $0.330625						98%						2%
Second Target Distribution						> $0.330625 to $0.359375						85%						15%
Third Target Distribution						> $0.359375 to $0.431250						75%						25%
Thereafter						Amounts above $0.431250						50%						50%

    

(1)Calculated as if our general partner holds the original 2% general partner interest in us, which is currently 1.7%.

We determined basic and diluted net income (loss) per limited partner unit as set forth in the following tables:

						For the Three Months Ended June 30, 2021
						Common Units						Subordinated Units (7)												General Partner Units						Total
						(in thousands, except per unit amounts)
Net income attributable to general and limited partner interests in USD Partners LP (1)						$	6,605					$	—											$	111					$	6,716
Less: Distributable earnings (2)						3,319						—												56						3,375
Excess net income						$	3,286					$	—											$	55					$	3,341
Weighted average units outstanding (3)						27,224						—												461						27,685
Distributable earnings per unit (4)						$	0.12					$	—
Underdistributed earnings per unit (5)						0.12						—
Net income per limited partner unit (basic and diluted) (6)						$	0.24					$	—

    

(1)Represents net income allocated to each class of units based on the actual ownership of the Partnership during the period. There were no amounts attributed to the general partner for its incentive distribution rights.

(2)Represents the distributions payable for the period based upon the quarterly distribution amounts of $0.116 per unit or $0.464 per unit on an annualized basis. Amounts presented for each class of units include a proportionate amount of the $164 thousand distributable to holders of the Equity classified Phantom Units pursuant to the distribution equivalent rights granted under the USD Partners LP 2014 Amended and Restated Long-Term Incentive Plan.

(3)Represents the weighted average units outstanding for the period.

(4)Represents the total distributable earnings divided by the weighted average number of units outstanding for the period.

(5)Represents the additional amount per unit necessary to distribute the excess net income for the period among our limited partners and our general partners according to the distribution formula for available cash as set forth in our partnership agreement.

(6)Our computation of net income per limited partner unit excludes the effects of 1,411,618 equity-classified phantom unit awards outstanding as they were anti-dilutive for the period presented.

(7)In February 2020, the final tranche of 2,092,709 subordinated units were converted into common units and therefore there were no subordinated units outstanding during 2021. Refer to Note 16. Partners' Capital for more information.

						For the Three Months Ended June 30, 2020
						Common Units						Subordinated Units (7)												General Partner Units						Total
						(in thousands, except per unit amounts)
Net income attributable to general and limited partner interests in USD Partners LP (1)						$	1,166					$	—											$	20					$	1,186
Less: Distributable earnings (2)						3,129						—												54						3,183
Distributions in excess of earnings						$	(1,963)					$	—											$	(34)					$	(1,997)
Weighted average units outstanding (3)						26,844						—												461						27,305
Distributable earnings per unit (4)						$	0.12					$	—
Overdistributed earnings per unit (5)						(0.07)						—
Net income per limited partner unit (basic and diluted) (6)						$	0.05					$	—

    

(1)Represents net income allocated to each class of units based on the actual ownership of the Partnership during the period. There were no amounts attributed to the general partner for its incentive distribution rights.

(2)Represents the distributions paid for the period based upon the quarterly distribution amount of $0.111 per unit or $0.444 per unit on an annualized basis. Amounts presented for each class of units include a proportionate amount of the $152 thousand distributable to holders of the Equity classified Phantom Units pursuant to the distribution equivalent rights granted under the USD Partners LP 2014 Amended and Restated Long-Term Incentive Plan.

(3)Represents the weighted average units outstanding for the period.

(4)Represents the total distributable earnings divided by the weighted average number of units outstanding for the period.

(5)Represents the distributions in excess of earnings divided by the weighted average number of units outstanding for the period.

(6)Our computation of net income per limited partner unit excludes the effects of 1,367,230 equity-classified phantom unit awards outstanding as they were anti-dilutive for the period presented.

(7)In February 2020, the final tranche of 2,092,709 subordinated units were converted into common units. Refer to Note 16. Partners' Capital for more information.

						For the Six Months Ended June 30, 2021
						Common Units						Subordinated Units (7)												General Partner Units						Total
						(in thousands, except per unit amounts)
Net income attributable to general and limited partner interests in USD Partners LP (1)						$	13,809					$	—											$	235					$	14,044
Less: Distributable earnings (2)						6,567						—												112						6,679
Excess net income						$	7,242					$	—											$	123					$	7,365
Weighted average units outstanding (3)						27,128						—												461						27,589
Distributable earnings per unit (4)						$	0.24					$	—
Underdistributed earnings per unit (5)						0.27						—
Net income per limited partner unit (basic and diluted) (6)						$	0.51					$	—

    

(1)Represents net income allocated to each class of units based on the actual ownership of the Partnership during the period. There were no amounts attributed to the general partner for its incentive distribution rights.

(2)Represents the per unit distribution paid of $0.1135 per unit for the three months ended March 31, 2021 and $0.116 per unit distributable for the three months ended June 30, 2021, representing a year-to-date distribution of $0.2295 per unit. Amounts presented for each class of units include a proportionate amount of the $161 thousand distributed and $164 thousand distributable to holders of the Equity classified Phantom Units pursuant to the distribution equivalent rights granted under the USD Partners LP 2014 Amended and Restated Long-Term Incentive Plan.

(3)Represents the weighted average units outstanding for the period.

(4)Represents the total distributable earnings divided by the weighted average number of units outstanding for the period.

(5)Represents the additional amount per unit necessary to distribute the excess net income for the period among our limited partners and our general partners according to the distribution formula for available cash as set forth in our partnership agreement.

(6)Our computation of net income per limited partner unit excludes the effects of 1,411,618 equity-classified phantom unit awards outstanding as they were anti-dilutive for the period presented.

(7)In February 2020, the final tranche of 2,092,709 subordinated units were converted into common units and therefore there were no subordinated units outstanding during 2021. Refer to Note 16. Partners' Capital for more information.

						For the Six Months Ended June 30, 2020
						Common Units						Subordinated Units (7)												General Partner Units						Total
						(in thousands, except per unit amounts)
Net loss attributable to general and limited partner interests in USD Partners LP (1)						$	(32,029)					$	(15)											$	(551)					$	(32,595)
Less: Distributable earnings (2)						6,258						—												107						6,365
Distributions in excess of earnings						$	(38,287)					$	(15)											$	(658)					$	(38,960)
Weighted average units outstanding (3)						26,180						575												461						27,216
Distributable earnings per unit (4)						$	0.24					$	—
Overdistributed earnings per unit (5)						(1.46)						(0.03)
Net loss per limited partner unit (basic and diluted)(6)						$	(1.22)					$	(0.03)

    

(1)Represents net loss allocated to each class of units based on the actual ownership of the Partnership during the period. There were no amounts attributed to the general partner for its incentive distribution rights.

(2)Represents the per unit distribution paid of $0.111 per unit for the three months ended March 31, 2020 and $0.111 distributed for the three months ended June 30, 2020, representing a year-to-date distribution of $0.222 per unit. Amounts presented for each class of units include a proportionate amount of the $304 thousand distributed to holders of the Equity-classified Phantom Units pursuant to the distribution equivalent rights granted under the USD Partners LP 2014 Amended and Restated Long-Term Incentive Plan.

(3)Represents the weighted average units outstanding for the period.

(4)Represents the total distributable earnings divided by the weighted average number of units outstanding for the period.

(5)Represents the distributions in excess of earnings divided by the weighted average number of units outstanding for the period.

(6)Our computation of net loss per limited partner unit excludes the effects of 1,367,230 equity-classified phantom unit awards outstanding as they were anti-dilutive for the period presented.

(7)In February 2020, the final tranche of 2,092,709 subordinated units were converted into common units. Refer to Note 16. Partners' Capital for more information.

We manage our business in two reportable segments: Terminalling services and Fleet services. Our segments offer different services and are managed accordingly. Our chief operating decision maker, or CODM, regularly reviews financial information about both segments in order to allocate resources and evaluate performance. As such, we have concluded that disaggregating revenue by reporting segments appropriately depicts how the nature, amount, timing, and uncertainty of revenue and cash flows are affected by economic factors. Refer to Note 14. Segment Reporting for our disaggregated revenues by segment. Additionally, the below tables summarize the geographic data for our revenues:

			Three Months Ended June 30, 2021
			U.S.						Canada						Total
			(in thousands)
Third party			$	9,854					$	21,345					$	31,199
Related party			$	2,322					$	—					$	2,322

			Three Months Ended June 30, 2020
			U.S.						Canada						Total
			(in thousands)
Third party			$	6,653					$	15,771					$	22,424
Related party			$	2,115					$	2,897					$	5,012

			Six Months Ended June 30, 2021
			U.S.						Canada						Total
			(in thousands)
Third party			$	17,492					$	41,992					$	59,484
Related party			$	4,636					$	—					$	4,636

			Six Months Ended June 30, 2020
			U.S.						Canada						Total
			(in thousands)
Third party			$	13,702					$	33,629					$	47,331
Related party			$	4,420					$	5,891					$	10,311

The transaction price allocated to the remaining performance obligations associated with our terminalling and fleet services agreements as of June 30, 2021 are as follows for the periods indicated:

			For the six months ended December 31, 2021						2022						2023						2024						Thereafter						Total
			(in thousands)
Terminalling Services (1) (2) (3)			$	48,677					$	75,775					$	38,063					$	19,528					$	126,932					$	308,975
Fleet Services			455						1,195						—						—						—						1,650
Total			$	49,132					$	76,970					$	38,063					$	19,528					$	126,932					$	310,625

(1)A significant portion of our terminalling services agreements are denominated in Canadian dollars. We have converted the remaining performance obligations associated with these Canadian dollar-denominated contracts using the year-to-date average exchange rate of 0.802 U.S. dollars for each Canadian dollar at June 30, 2021.

(2)Includes fixed monthly minimum commitment fees per contracts and excludes constrained estimates of variable consideration for rate-escalations associated with an index, such as the consumer price index, as well as any incremental revenue associated with volume activity above the minimum volumes set forth within the contracts. Also excludes estimated constrained variable consideration included in certain of our terminalling services agreements that is based on crude oil pricing index differentials.

(3)Assumes USD’s Diluent Recovery Unit project goes into service in the second half of 2021, which will result in certain terminalling services agreements of our Hardisty Terminal being automatically extended through mid-2031 and certain agreements at our Stroud Terminal having a termination right in June 2022.

We have applied the practical expedient that allows us to exclude disclosure of performance obligations that are part of a contract that has an expected duration of one year or less.

Our contract assets represent cumulative revenue that has been recognized in advance of billing the customer due to tiered billing provisions. In such arrangements, revenue is recognized using a blended rate based on the billing tiers of the agreement, as the services are consistently provided throughout the duration of the contractual arrangement.

We had the following amounts outstanding associated with our contract assets on our consolidated balance sheets in the financial statement line items presented below in the following table for the indicated periods:

			June 30, 2021						December 31, 2020
			(in thousands)
Other current assets			$	173					$	1,622

Our deferred revenue is a form of a contract liability and consists of amounts collected in advance from customers associated with their terminalling and fleet services agreements and deferred revenues associated with

We also have deferred revenue that represents cumulative revenue that has been deferred due to tiered billing provisions. In such arrangements, revenue is recognized using a blended rate based on the billing tiers of the agreement, as the services are consistently provided throughout the duration of the contractual arrangement, which we included in “Other current liabilities” and “Other non-current liabilities” on our consolidated balance sheets.

The following table presents the amounts outstanding on our consolidated balance sheets and changes associated with the balance of our deferred revenue for the six months ended June 30, 2021:

						December 31, 2020						Cash Additions for Customer Prepayments						Revenue Recognized						June 30, 2021
						(in thousands)
Deferred revenue						$	6,367					$	5,949					$	(6,367)					$	5,949
Other current liabilities						$	—					$	2,122					$	—					$	2,122
Other non-current liabilities (1)						$	10,087					$	912					$	—					$	10,999

(1)    Includes cumulative revenue that has been deferred due to tiered billing provisions included in certain of our Canadian dollar-denominated contracts, as discussed above. As such, the change in “Other non-current liabilities” presented has been increased by $281 thousand due to the impact of the change in the end of period exchange rate between December 31, 2020 and June 30, 2021.

Deferred Revenue — Fleet Leases

Our deferred revenue also includes advance payments from customers of our Fleet services business, which will be recognized as Fleet leases revenue when earned pursuant to the terms of our contractual arrangements. We have included $0.4 million at June 30, 2021 and December 31, 2020, in “Deferred revenue — related party” on our consolidated balance sheets associated with customer prepayments for our fleet lease agreements. Refer to Note 7. Leases for additional discussion of our lease revenues.

We include in restricted cash amounts representing a cash account for which the use of funds is restricted by a facilities connection agreement among us and Gibson Energy Inc., or Gibson, that we entered into during 2014 in connection with the development of our Hardisty Terminal. The collaborative arrangement is further discussed in Note 10. Collaborative Arrangement.

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within our consolidated balance sheets to the amounts shown in our consolidated statements of cash flows for the specified periods:

			June 30,
			2021						2020
			(in thousands)
Cash and cash equivalents			$	3,131					$	3,093
Restricted Cash			7,687						7,153
Total cash, cash equivalents and restricted cash			$	10,818					$	10,246

Our property and equipment is comprised of the following asset classifications as of the dates indicated:

			June 30, 2021						December 31, 2020			Estimated Depreciable Lives (Years)
			(in thousands)
Land			$	10,371					$	10,288		N/A
Trackage and facilities			129,238						127,401			10-30
Pipeline			32,735						32,735			20-30
Equipment			17,708						17,337			3-20
Furniture			68						67			5-10
Total property and equipment			190,120						187,828
Accumulated depreciation			(53,984)						(48,630)
Construction in progress (1)			2,004						643
Property and equipment, net			$	138,140					$	139,841

(1)The amounts classified as “Construction in progress” are excluded from amounts being depreciated. These amounts represent property that has not been placed into productive service as of the respective consolidated balance sheet date.

Depreciation expense associated with property and equipment totaled $2.3 million and $2.1 million for the three months ended June 30, 2021 and 2020, respectively, and $4.7 million and $4.3 million for the six months ended June 30, 2021 and 2020, respectively.

We have noncancellable operating leases for railcars, buildings, storage tanks, offices, railroad tracks, and land.

									Six Months Ended June 30, 2021
Weighted-average discount rate									5.7		%
Weighted average remaining lease term in years									1.38

Our total lease cost consisted of the following items for the dates indicated:

						Three Months Ended June 30,												Six Months Ended June 30,
						2021						2020						2021						2020
			(in thousands)
Operating lease cost						$	1,508					$	1,492					$	2,987					$	2,978
Short term lease cost						48						47						92						92
Variable lease cost						9						2						27						11
Sublease income						(1,348)						(1,342)						(2,696)						(2,683)
Total						$	217					$	199					$	410					$	398

The maturity analysis below presents the undiscounted cash payments we expect to make each period for property that we lease from others under noncancellable operating leases as of June 30, 2021 (in thousands): 

2021			$	3,055
2022			4,751
2023			35
2024			2
Total lease payments			$	7,843
Less: imputed interest			(322)
Present value of lease liabilities			$	7,521

We serve as an intermediary to assist our customers with obtaining railcars. In connection with our leasing of railcars from third parties, we simultaneously enter into lease agreements with our customers for noncancellable terms that are designed to recover our costs associated with leasing the railcars plus a fee for providing this service. In addition to these leases, we also have lease income from storage tanks.

						Three Months Ended June 30,												Six Months Ended June 30,
						2021						2020						2021						2020
						(in thousands, except weighted average term)
Lease income (1)						$	2,169					$	2,366					$	4,354					$	4,552
Weighted average remaining lease term in years																								3.46

(1)Lease income presented above includes lease income from related parties. Refer to Note 12. Transactions with Related Parties for additional discussion of lease income from a related party. Lease income associated with crude oil storage tanks we lease to customers of our terminals totaling $1.2 million and $1.4 million for the three months ended June 30, 2021 and 2020, and $2.4 million and $2.5 million for the six months ended June 30, 2021 and 2020, respectively, is included in “Terminalling services” revenues on our consolidated statements of operations.

The maturity analysis below presents the undiscounted future minimum lease payments we expect to receive from customers each period for property they lease from us under noncancellable operating leases as of June 30, 2021 (in thousands): 

2021			$	4,127
2022			7,660
2023			2,656
2024			2,663
2025			2,656
Thereafter			2,430
Total			$	22,192

The composition, gross carrying amount and accumulated amortization of our identifiable intangible assets are as follows as of the dates indicated:

			June 30, 2021						December 31, 2020
			(in thousands)
Carrying amount:
Customer service agreements			$	125,960					$	125,960
Other			106						106
Total carrying amount			126,066						126,066
Accumulated amortization:
Customer service agreements			(70,818)						(64,520)
Other			(59)						(54)
Total accumulated amortization			(70,877)						(64,574)
Total intangible assets, net			$	55,189					$	61,492

Amortization expense associated with intangible assets totaled $3.2 million for the three months ended June 30, 2021 and 2020, and $6.3 million for the six months ended June 30, 2021 and 2020.

In November 2018, we amended and restated our senior secured credit agreement, which we originally established at the time of our initial public offering in October 2014. We refer to the amended and restated senior secured credit agreement executed in November 2018 as the Credit Agreement and the original senior secured credit agreement as the Previous Credit Agreement. Our Credit Agreement is a $385 million revolving credit facility (subject to limits set forth therein) with Citibank, N.A., as administrative agent, and a syndicate of lenders. Our Credit Agreement amends and restates in its entirety our Previous Credit Agreement.

Our Credit Agreement is a four year committed facility that initially matures on November 2, 2022. Our Credit Agreement provides us with the ability to request two one-year maturity date extensions, subject to the satisfaction of certain conditions, and allows us the option to increase the maximum amount of credit available up to a total facility size of $500 million, subject to receiving increased commitments from lenders and satisfaction of certain conditions.

Our Credit Agreement and any issuances of letters of credit are available for working capital, capital expenditures, general partnership purposes and continue the indebtedness outstanding under the Previous Credit Agreement. The Credit Agreement includes an aggregate $20 million sublimit for standby letters of credit and a $20 million sublimit for swingline loans. Obligations under the Credit Agreement are guaranteed by our restricted subsidiaries (as such term is defined therein) and are secured by a first priority lien on our assets and those of our restricted subsidiaries, other than certain excluded assets.

Our long-term debt balances included the following components as of the specified dates:

			June 30, 2021						December 31, 2020
			(in thousands)
Revolving Credit Facility			$	179,000					$	197,000
Less: Deferred financing costs, net			(1,105)						(1,520)
Total long-term debt, net			$	177,895					$	195,480

We determined the capacity available to us under the terms of our Credit Agreement was as follows as of the specified dates:

			June 30, 2021						December 31, 2020
			(in millions)
Aggregate borrowing capacity under Credit Agreement			$	385.0					$	385.0
Less: Revolving Credit Facility amounts outstanding			179.0						197.0
Available under the Credit Agreement based on capacity			$	206.0					$	188.0
Available under the Credit Agreement based on covenants (1)			$	97.3					$	53.2

(1)    Pursuant to the terms of our Credit Agreement, our borrowing capacity, currently, is limited to 4.5 times our trailing 12-month consolidated EBITDA, which equates to $97.3 million and $53.2 million of borrowing capacity available at June 30, 2021 and December 31, 2020, respectively.

The weighted average interest rate on our outstanding indebtedness was 2.35% and 2.66% at June 30, 2021 and December 31, 2020, respectively, without consideration to the effect of our derivative contracts. In addition to the interest we incur on our outstanding indebtedness, we pay commitment fees of 0.50% on unused commitments, which rate will vary based on our consolidated net leverage ratio, as defined in our Credit Agreement. At June 30, 2021, we were in compliance with the covenants set forth in our Credit Agreement.

Interest expense associated with our outstanding indebtedness was as follows for the specified periods:

			Three Months Ended June 30,												Six Months Ended June 30,
			2021						2020						2021						2020
			(in thousands)
Interest expense on the Credit Agreement			$	1,384					$	2,049					$	2,912					$	4,581
Amortization of deferred financing costs			207						207						414						414
Total interest expense			$	1,591					$	2,256					$	3,326					$	4,995

We entered into a facilities connection agreement in 2014 with Gibson under which Gibson developed, constructed and operates a pipeline and related facilities connected to our Hardisty Terminal. Gibson’s storage terminal is the exclusive means by which our Hardisty Terminal receives crude oil. Subject to certain limited exceptions regarding manifest train facilities, our Hardisty Terminal is the exclusive means by which crude oil from Gibson’s Hardisty storage terminal may be transported by rail. We remit pipeline fees to Gibson for the transportation of crude oil to our Hardisty Terminal based on a predetermined formula. Pursuant to our arrangement with Gibson, we incurred pipeline fees of $6.4 million and $5.4 million for the three months ended June 30, 2021 and 2020, respectively, and $12.4 million and $11.7 million for the six months ended June 30, 2021 and 2020, respectively, which are presented as “Pipeline fees” in our consolidated statements of operations. We have included a liability related to this agreement in “Other current liabilities” on our consolidated balance sheets of $0.6 million and $2.3 million at June 30, 2021 and December 31, 2020, respectively. Additionally, we have included an asset related to this agreement in “Other non-current assets” of $3.0 million and $2.9 million at June 30, 2021 and December 31, 2020, respectively, which we will recognize as expense concurrently with the recognition of the associated revenue at out Hardisty Terminal.

Historically we entered into purchase, assignment and assumption agreements to assign payment and performance obligations for certain operating lease agreements with lessors, as well as customer fleet service payments related to these operating leases, with unconsolidated entities in which we had variable interests. These variable interest entities, or VIEs, included LRT Logistics Funding LLC, USD Fleet Funding LLC, USD Fleet Funding Canada Inc., and USD Logistics Funding Canada Inc. We treated those entities as variable interests under the applicable accounting guidance due to their having an insufficient amount of equity invested at risk to finance their activities without additional subordinated financial support. We were not the primary beneficiary of the VIEs, as we did not have the power to direct the activities that most significantly affected the economic performance of the VIEs, nor did we have the power to remove the managing member under the terms of the VIEs’ limited liability company agreements. Accordingly, we did not consolidate the results of the VIEs in our consolidated financial statements.

As of the end of February 2021, the remaining railcar leases associated with these VIEs were either assigned directly to our customers or have expired. As such, we have terminated our relationship with these VIEs discussed herein effective as of the end of February 2021.

The following table summarizes the total assets and liabilities between us and the VIEs as reflected in our consolidated balance sheet at December 31, 2020, as well as our maximum exposure to losses from entities in which we had a variable interest, but were not the primary beneficiary. Generally, our maximum exposure to losses was limited to amounts receivable for services we provided, reduced by any related liabilities.

			December 31, 2020
			Total assets						Total liabilities						Maximum exposure to loss
			(in thousands)
Accounts receivable			$	43					$	—					$	33
Deferred revenue			—						10						—
			$	43					$	10					$	33

USD is engaged in designing, developing, owning and managing large-scale multi-modal logistics centers and other energy-related infrastructure across North America. USD is also the sole owner of USDG and the ultimate parent of our general partner. USD is owned by Energy Capital Partners, Goldman Sachs and certain members of its management.

USDG is the sole owner of our general partner and at June 30, 2021, owns 11,557,090 of our common units representing a 41.7% limited partner interest in us. As of June 30, 2021, a value of up to $10.0 million of these common units were pledged as collateral under USDG’s letter of credit facility. USDG also provides us with general and administrative support services necessary for the operation and management of our business.

USD Partners GP LLC, our general partner, currently owns all 461,136 of our general partner units representing a 1.7% general partner interest in us, as well as all of our incentive distribution rights. Pursuant to our partnership agreement, our general partner is responsible for our overall governance and operations. However, our general partner has no obligation to, does not intend to and has not implied that it would, provide financial support to or fund cash flow deficits of the Partnership.

USD Marketing LLC, or USDM, is a wholly-owned subsidiary of USDG organized to promote contracting for services provided by our terminals and to facilitate the marketing of customer products.

USD Terminals Canada II ULC, or USDTC II, is an indirect, wholly-owned Canadian subsidiary of USDG, organized for the purposes of pursuing expansion and other development opportunities associated with our Hardisty Terminal, pursuant to the Development Rights and Cooperation agreement between our wholly-owned subsidiary USD Terminals Canada ULC, or USDTC, and USDG. USDTC owns the legacy crude oil loading facility we refer to as the Hardisty Terminal. USDTC II completed construction of the Hardisty South expansion (“Hardisty South”) which commenced operations in January 2019. Hardisty South, which is owned and operated by USDTC II, added one and one-half 120-railcar unit trains of transloading capacity per day, or approximately 112,500 barrels per day, of takeaway capacity to the terminal by modifying the existing loading rack and building additional infrastructure and trackage.

USD Clean Fuels LLC, or USDCF, is a newly formed subsidiary of USD organized for the purpose of providing production and logistics solutions to the growing market for clean energy transportation fuels.

We are party to an omnibus agreement with USD, USDG and certain of their subsidiaries, or the Omnibus Agreement, including our general partner, pursuant to which we obtain and make payments for specified services provided to us and for out-of-pocket costs incurred on our behalf. We pay USDG, in equal monthly installments, the annual amount USDG estimates will be payable by us during the calendar year for providing services for our benefit. The Omnibus Agreement provides that this amount may be adjusted annually to reflect, among other things, changes in the scope of the general and administrative services provided to us due to a contribution, acquisition or disposition of assets by us or our subsidiaries, or for changes in any law, rule or regulation applicable to us, which affects the cost of providing the general and administrative services. We also reimburse USDG for any out-of-pocket costs and expenses incurred on our behalf in providing general and administrative services to us. This reimbursement is in addition to the amounts we pay to reimburse our general partner and its affiliates for certain costs and expenses incurred on our behalf for managing our business and operations, as required by our partnership agreement.

In June 2021, we entered into an Amended and Restated Omnibus Agreement, or the Amended Omnibus Agreement, with USD, USDG and certain of their subsidiaries, which amends and restates the Omnibus Agreement, dated October 15, 2014, to extend the termination date of the right of first offer period, or ROFO Period, as defined in the Amended Omnibus Agreement, by an additional five years such that the ROFO Period will terminate on October 15, 2026 unless a Partnership Change of Control, as defined in the Amended Omnibus Agreement, occurs prior to such date.

The total amounts charged to us under the Omnibus Agreement for the three months ended June 30, 2021 and 2020 was $1.6 million and $1.8 million, respectively, and for the six months ended June 30, 2021 and 2020 was $3.3 million and $3.8 million, respectively, which amounts are included in “Selling, general and administrative — related party” in our consolidated statements of operations. We had a payable balance of $0.3 million with respect to these costs at June 30, 2021 and December 31, 2020, included in “Accounts payable and accrued expenses — related party” in our consolidated balance sheets.

Marketing Services Agreement - Stroud Terminal

In connection with our purchase of the Stroud terminal, we entered into a Marketing Services Agreement with USDM, or the Stroud Terminal MSA, in May 2017, whereby we granted USDM the right to market the capacity at the Stroud Terminal in excess of the original capacity of our initial customer in exchange for a nominal per barrel fee. USDM is obligated to fund any related capital costs associated with increasing the throughput or efficiency of the terminal to handle additional throughput. Upon expiration of our contract with the initial Stroud customer in June 2020, the same marketing rights now apply to all throughput at the Stroud Terminal in excess of the throughput necessary for the Stroud Terminal to generate Adjusted EBITDA that is at least equal to the average monthly Adjusted EBITDA derived from the initial Stroud customer during the 12 months prior to expiration. We also granted USDG the right to develop other projects at the Stroud Terminal in exchange for the payment to us of market-based compensation for the use of our property for such development projects. Any such development projects would be wholly-owned by USDG and would be subject to our existing right of first offer with respect to

Marketing Services Agreement - West Colton Terminal

In June 2021, we entered into a new Terminalling Services Agreement with USDCF that is supported by a minimum throughput commitment to USDCF from an investment-grade rated, refining customer as well as a performance guaranty from USD. The Terminal Services Agreement provides for the inbound shipment of renewable diesel on rail at our West Colton Terminal and the outbound shipment of the product on tank trucks to local consumers. The new terminalling services agreement has an initial term of five years with a target commencement date of December 1, 2021, and we are currently in the process of modifying our existing West Colton Terminal so that it will have the capability to transload renewable diesel in addition to the ethanol that it is currently transloading.

In exchange for the new terminalling agreement at our West Colton Terminal with USDCF discussed above, we also entered into a Marketing Services Agreement in June 2021, or the West Colton MSA, with USDCF pursuant to which we agreed to grant USDCF marketing and development rights pertaining to future renewable diesel opportunities associated with the West Colton Terminal in excess of the initial renewable diesel terminalling services agreement simultaneously executed in June 2021 between us and USDCF. These rights entitle USDCF to market all additional renewable diesel opportunities at the West Colton Terminal during the initial term of the USDCF agreement, and following the initial term of that agreement, all renewable diesel opportunities at the West Colton Terminal in excess of the throughput necessary to generate Adjusted EBITDA for the West Colton Terminal that is at least equal to the average monthly Adjusted EBITDA derived from the initial USDCF agreement during the 12 months prior to expiration of that agreement’s initial five-year term. Pursuant to the West Colton MSA, USDCF will fund any related capital costs associated with increasing the throughput or efficiency of the terminal to handle additional renewable diesel opportunities. In addition, we granted USDCF the right to develop other renewable diesel projects at the West Colton Terminal in exchange for a per barrel fee covering our associated operating costs. Any such development projects would be wholly-owned by USD and would be subject to the right of first offer with respect to midstream infrastructure developed by USD. There have been no payments made under the West Colton MSA during the periods presented in this Report.

Hardisty Terminal Services Agreement

We entered into a terminal services agreement with USDTC II in 2019, whereby Hardisty South will provide terminalling services for a third-party customer of our Hardisty Terminal for contracted capacity that exceeds the transloading capacity currently available. We incurred $2.1 million of expenses pursuant to the arrangement for the three months ended June 30, 2021 and 2020, and $4.2 million and $4.1 million for the six months ended June 30, 2021 and 2020, respectively, which amounts are included in “Operating and maintenance expense — related party” in our consolidated statements of operations. These costs represent the same rate, on a per barrel basis, that we received as revenue from our third-party customer, which is included in “Terminalling Services” revenue in our consolidated statements of operations. Additionally, in conjunction with the agreement, we recorded a contract asset of $2.6 million and $1.7 million at June 30, 2021 and December 31, 2020, respectively, on our consolidated balance sheet in “Other current assets — related party” and “Other non-current assets — related party”, representing prepaid expense associated with this agreement due to tiered billing provisions in the related terminalling services agreements.

Hardisty Shared Facilities Agreement

USDTC facilitates the provision of services on behalf of USDTC II pursuant to the terms of a shared facilities agreement, which includes all subcontracted railcar loading, operating, maintenance, pipeline and management services for the entire Hardisty Terminal, including Hardisty South owned by USDTC II. USDTC passes through a

Related Party Revenue and Deferred Revenue

We have agreements to provide terminalling and fleet services for USDM with respect to our Hardisty Terminal and terminalling services with respect to our Stroud Terminal, which also include reimbursement to us for certain out-of-pocket expenses we incur.

USDM assumed the rights and obligations for terminalling capacity at our Hardisty Terminal from another customer in June 2017 to facilitate the origination of crude oil barrels by the Stroud customer from our Hardisty Terminal for delivery to the Stroud Terminal. As a result of USDM assuming these rights and obligations and in order to accommodate the needs of the Stroud customer, the contracted term for the capacity held by USDM at our Hardisty Terminal was extended from June 30, 2019 to June 30, 2020. The terms and conditions of these agreements were similar to the terms and conditions of agreements we have with other parties at the Hardisty Terminal that are not related to us. USDM’s agreement with the third party customer was renewed and extended, effective July 1, 2020, and USDM subsequently assigned its terminalling services agreement with the third party customer directly to us and is therefore no longer a customer at our Hardisty Terminal. USDM controlled approximately 25% of the available monthly capacity of the Hardisty Terminal through June 30, 2020.

In connection with our purchase of the Stroud Terminal, we also entered into a Marketing Services Agreement with USDM, as discussed above. Pursuant to the terms of the agreement, we receive a fixed amount per barrel from USDM in exchange for marketing the additional capacity available at the Stroud Terminal. We also received revenue for providing additional terminalling services at our Hardisty Terminal to USDM pursuant to the terms of its agreement with us. Additionally, effective January 2019, we entered into a six month terminalling services agreement with USDM at our Casper Terminal to maximize utilization of available terminalling and storage capacity by offering these services to customers on an uncommitted basis at current market rates. This agreement automatically renews for successive periods of six months on an evergreen basis unless otherwise canceled by either party. We include amounts received pursuant to these arrangements as revenue in the table below under “Terminalling services — related party” in our consolidated statements of operations. Additionally, we received revenue from USDM for the lease of 200 railcars pursuant to the terms of an existing agreement with us, which is included in the table below under “Fleet leases — related party” and “Fleet services — related party” and in our consolidated statements of operations.

Our related party revenues from USD and affiliates are presented below in the following table for the indicated periods:

			Three Months Ended June 30,												Six Months Ended June 30,
			2021						2020						2021						2020
			(in thousands)
Terminalling services — related party			$	1,111					$	3,800					$	2,214					$	7,888
Fleet leases — related party			983						983						1,967						1,967
Fleet services — related party			228						228						455						455
Freight and other reimbursables — related party			—						1						—						1
			$	2,322					$	5,012					$	4,636					$	10,311

We had the following amounts outstanding with USD and affiliates on our consolidated balance sheets as presented below in the following table for the indicated periods:

			June 30, 2021						December 31, 2020
			(in thousands)
Accounts receivable — related party			$	1,442					$	2,460
Accounts payable and accrued expenses — related party (1)			$	64					$	64
Other current and non-current assets — related party (2)			$	2,579					$	1,721
Other non-current liabilities — related party (3)			$	24					$	—
Deferred revenue — related party (4)			$	410					$	410

(1)Does not include amounts payable to related parties associated with the Omnibus Agreement, as discussed above.

(2)Includes a contract asset associated with the Hardisty Terminal Services Agreement with USDTC II, as discussed above. Also includes a contract asset associated with a lease agreement with USDM. Refer to Note 4. Revenues for further discussion.

(3)Represents a contract liability associated with a lease agreement with USDM and cumulative revenue that has been deferred due to tiered billing provisions. Refer to Note 4. Revenues for further discussion.

(4)Represents deferred revenues associated with our fleet services agreements with USD and affiliates for amounts we have collected from them for their prepaid leases.

We paid the following aggregate cash distributions to USDG as a holder of our common units and to USD Partners GP LLC as sole holder of our general partner interest and IDRs.

Distribution Declaration Date						Record Date						Distribution Payment Date						Amount Paid to  USDG						Amount Paid to USD Partners GP LLC
																		(in thousands)
January 28, 2021						February 10, 2021						February 19, 2021						$	1,283					$	51
April 22, 2021						May 5, 2021						May 14, 2021						$	1,312					$	52

From time to time, we may be involved in legal, tax, regulatory and other proceedings in the ordinary course of business. We do not believe that we are currently a party to any such proceedings that will have a material adverse impact on our financial condition or results of operations.

We manage our business in two reportable segments: Terminalling services and Fleet services. The Terminalling services segment charges minimum monthly commitment fees under multi-year take-or-pay contracts

Our segments offer different services and are managed accordingly. Our chief operating decision maker, or CODM, regularly reviews financial information about both segments in order to allocate resources and evaluate performance. Our CODM assesses segment performance based on the cash flows produced by our established reporting segments using Segment Adjusted EBITDA. Segment Adjusted EBITDA is a measure calculated in accordance with GAAP. We define Segment Adjusted EBITDA as “Net income (loss)” of each segment adjusted for depreciation and amortization, interest, income taxes, changes in contract assets and liabilities, deferred revenues, foreign currency transaction gains and losses and other items which do not affect the underlying cash flows produced by our businesses. As such, we have concluded that disaggregating revenue by reporting segments appropriately depicts how the nature, amount, timing, and uncertainty of revenue and cash flows are affected by economic factors.

Historically, we have allocated certain selling, general and administrative expenses to our Terminalling services and Fleet services segments that included corporate function personnel costs for managing our business that are allocated to us by our general partner, as well as other administrative expenses including audit fees and certain consulting fees. Beginning with the first quarter in 2021, these selling, general, and administrative expenses that are not directly related to operating our Terminalling services and Fleet services segments will now be allocated to corporate selling, general, and administrative expenses to better reflect the financial results of our Terminalling services and Fleet services segments.

			Three Months Ended June 30, 2021
			Terminalling services						Fleet services						Corporate						Total
			(in thousands)
Revenues
Terminalling services			$	30,992					$	—					$	—					$	30,992
Terminalling services — related party			1,111						—						—						1,111
Fleet leases — related party			—						983						—						983
Fleet services			—						—						—						—
Fleet services — related party			—						228						—						228
Freight and other reimbursables			176						31						—						207
Freight and other reimbursables — related party			—						—						—						—
Total revenues			32,279						1,242						—						33,521
Operating costs
Subcontracted rail services			3,523						—						—						3,523
Pipeline fees			6,398						—						—						6,398
Freight and other reimbursables			176						31						—						207
Operating and maintenance			3,710						993						—						4,703
Selling, general and administrative			1,055						73						2,908						4,036
Goodwill impairment loss			—						—						—						—
Depreciation and amortization			5,500						—						—						5,500
Total operating costs			20,362						1,097						2,908						24,367
Operating income (loss)			11,917						145						(2,908)						9,154
Interest expense			—						—						1,591						1,591
Loss associated with derivative instruments			—						—						718						718
Foreign currency transaction loss (gain)			57						1						(99)						(41)
Other expense (income), net			5						—						(1)						4
Provision for income taxes			145						21						—						166
Net income (loss)			$	11,710					$	123					$	(5,117)					$	6,716