Quarterly Report (10-q)

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


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

For the quarterly period ended June 30, 2022


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

For the transition period from to

Commission file number 001-36674

USD PARTNERS LP

(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.)

811 Main Street, Suite 2800

Houston, Texas 77002

(Address of Principal Executive Offices) (Zip Code)

(Registrant’s Telephone Number, Including Area Code): (281) 291-0510

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 1, 2022, there were 33,379,431 common units outstanding.

TABLE OF CONTENTS


PART I — FINANCIAL INFORMATION

Item 1.	Financial Statements
	Consolidated Statements of Operations	1
	Consolidated Statements of Comprehensive Income	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	55
Item 4.	Controls and Procedures	55

PART II — OTHER INFORMATION

Item 1.	Legal Proceedings	56
Item 1A.	Risk Factors	56
Item 6.	Exhibits	56
SIGNATURES		58

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, including as a result of the invasion of Ukraine by Russia and its regional and global ramifications, inflationary pressures, or slowing growth or recession; (3) the effects of competition, in particular, by pipelines and other terminal 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, terminal 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 sponsor, including contract renewals and extensions of our credit agreement maturity; (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, 2021, 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).

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements

USD PARTNERS LP

CONSOLIDATED STATEMENTS OF OPERATIONS (1)


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
	(unaudited; in thousands of US dollars, except per unit amounts)
Revenues
Terminalling services	$	31,704	$	88,981	$	65,527	$	130,112
Terminalling services — related party	662		1,111		1,317		2,214


Fleet leases — related party	913		983		1,825		1,967
Fleet services	—		—		—		24
Fleet services — related party	299		228		598		455
Freight and other reimbursables	163		210		260		368

Total revenues	33,741		91,513		69,527		135,140
Operating costs
Subcontracted rail services	3,604		4,704		7,595		8,878
Pipeline fees	8,389		26,625		16,890		37,566
Freight and other reimbursables	163		210		260		368
Operating and maintenance	3,090		2,836		6,576		5,983
Operating and maintenance — related party	127		—		258		—
Selling, general and administrative	4,830		2,693		8,252		5,978
Selling, general and administrative — related party	2,565		39,522		7,889		49,370

Depreciation and amortization	5,765		5,773		11,604		11,509
Total operating costs	28,533		82,363		59,324		119,652
Operating income	5,208		9,150		10,203		15,488
Interest expense	2,097		1,745		3,599		3,661
Loss (gain) associated with derivative instruments	(812)		718		(6,896)		(2,358)
Foreign currency transaction loss (gain)	143		(521)		1,790		(789)
Other expense (income), net	(4)		3		(27)		(16)
Income before income taxes	3,784		7,205		11,737		14,990
Provision for (benefit from) income taxes	(21)		319		459		580
Net income	$	3,805	$	6,886	$	11,278	$	14,410
Net income attributable to limited partner interests	$	3,805	$	6,605	$	12,647	$	13,809
Net income per common unit (basic and diluted)	$	0.12	$	0.24	$	0.42	$	0.51
Weighted average common units outstanding	33,378		27,224		30,426		27,128

(1)As discussed in Note 1. Organization and Basis of Presentation, our consolidated financial statements have been retrospectively recast to include the pre-acquisition results of the Hardisty South Terminal Acquisition which we acquired effective April 1, 2022 because the transaction was between entities under common control.

The accompanying notes are an integral part of these consolidated financial statements.

USD PARTNERS LP

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (1)


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
	(unaudited; in thousands of US dollars)
Net income	$	3,805	$	6,886	$	11,278	$	14,410
Other comprehensive income (loss) — foreign currency translation	(1,788)		635		(1,194)		1,048
Comprehensive income	$	2,017	$	7,521	$	10,084	$	15,458

The accompanying notes are an integral part of these consolidated financial statements.

USD PARTNERS LP

CONSOLIDATED STATEMENTS OF CASH FLOWS (1)


	Six Months Ended June 30,
	2022		2021
	(unaudited; in thousands of US dollars)
Cash flows from operating activities:
Net income	$	11,278	$	14,410
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	11,604		11,509
Gain associated with derivative instruments	(6,896)		(2,358)
Settlement of derivative contracts	(608)		(543)
Unit based compensation expense	2,520		2,917
Loss associated with disposal of assets	3		5
Deferred income taxes	(114)		(59)
Amortization of deferred financing costs	628		464

Changes in operating assets and liabilities:
Accounts receivable	398		2,628
Accounts receivable — related party	1,717		1,872
Prepaid expenses, inventory and other assets	(2,727)		648
Other assets — related party	—		15
Accounts payable and accrued expenses	3,361		497
Accounts payable and accrued expenses — related party	(1,038)		7,375
Deferred revenue and other liabilities	(5,044)		(2,647)
Deferred revenue and other liabilities — related party	366		24

Net cash provided by operating activities	15,448		36,757
Cash flows from investing activities:
Additions of property and equipment	(288)		(3,037)
Acquisition of Hardisty South entities from Sponsor	(75,000)		—
Net cash used in investing activities	(75,288)		(3,037)
Cash flows from financing activities:
Distributions	(7,154)		(6,486)
Payments for deferred financing costs	(13)		—
Vested phantom units used for payment of participant taxes	(1,091)		(857)

Proceeds from long-term debt	75,000		—
Repayments of long-term debt	(12,396)		(30,444)

Net cash provided by (used in) financing activities	54,346		(37,787)
Effect of exchange rates on cash	1,057		(395)
Net change in cash, cash equivalents and restricted cash	(4,437)		(4,462)
Cash, cash equivalents and restricted cash — beginning of period	12,717		20,499
Cash, cash equivalents and restricted cash — end of period	$	8,280	$	16,037

The accompanying notes are an integral part of these consolidated financial statements.

USD PARTNERS LP

CONSOLIDATED BALANCE SHEETS (1)


	June 30, 2022		December 31, 2021
	(unaudited; in thousands of US dollars, except unit amounts)
ASSETS
Current assets
Cash and cash equivalents	$	4,333	$	5,541
Restricted cash	3,947		7,176
Accounts receivable, net	6,303		6,764
Accounts receivable — related party	334		2,051
Prepaid expenses	4,572		4,538
Inventory	6,998		3,027
Other current assets	2,353		129

Total current assets	28,840		29,226
Property and equipment, net	149,889		157,854
Intangible assets, net	42,582		48,886

Operating lease right-of-use assets	3,584		5,658
Other non-current assets	8,927		5,392

Total assets	$	233,822	$	247,016

LIABILITIES AND PARTNERS’ CAPITAL
Current liabilities
Accounts payable and accrued expenses	$	9,097	$	7,706
Accounts payable and accrued expenses — related party	588		14,131

Deferred revenue	2,697		7,575
Deferred revenue — related party	398		—
Long-term debt, current portion	—		4,251
Operating lease liabilities, current	2,682		4,674
Other current liabilities	12,407		9,012
Other current liabilities — related party	32		64
Total current liabilities	27,901		47,413
Long-term debt, net	230,548		167,370



Operating lease liabilities, non-current	783		793
Other non-current liabilities	5,335		9,585

Total liabilities	264,567		225,161
Commitments and contingencies
Partners’ capital
Common units (33,379,431 and 27,268,878 outstanding at June 30, 2022 and December 31, 2021, respectively)	(29,373)		16,355
General partner units (461,136 outstanding at December 31, 2021)	—		5,678
Accumulated other comprehensive loss	(1,372)		(178)
Total partners’ capital	(30,745)		21,855
Total liabilities and partners’ capital	$	233,822	$	247,016

The accompanying notes are an integral part of these consolidated financial statements.

USD PARTNERS LP

THREE MONTHS CONSOLIDATED STATEMENTS OF PARTNERS’ CAPITAL (1)


	Three Months Ended June 30,
	2022			2021
	Units	Amount		Units	Amount
	(unaudited; in thousands of US dollars, except unit amounts)
Common units
Beginning balance at April 1,	27,619,909	$	21,835	27,224,441	$	8,472

Common units issued for vested phantom units	8,386	(39)		—	—

Net income	—	3,805		—	6,605
Unit based compensation expense	—	1,205		—	1,271
Distributions	—	(3,636)		—	(3,248)
Acquisition of Hardisty South entities from Sponsor and conversion of General Partner units	5,751,136	(52,543)		—	—
Ending balance at June 30,	33,379,431	(29,373)		27,224,441	13,100















General Partner units
Beginning balance at April 1,	461,136	22,457		461,136	4,436

Net income	—	—		—	281

Distributions	—	—		—	(55)
Acquisition of Hardisty South entities from Sponsor and conversion of General Partner units	(461,136)	(22,457)		—	—
Ending balance at June 30,	—	—		461,136	4,662
Accumulated other comprehensive income (loss)
Beginning balance at April 1,		416			1,133
Cumulative translation adjustment		(1,788)			635
Ending balance at June 30,		(1,372)			1,768
Total partners’ capital at June 30,		$	(30,745)		$	19,530

The accompanying notes are an integral part of these consolidated financial statements.

USD PARTNERS LP

SIX MONTHS CONSOLIDATED STATEMENTS OF PARTNERS’ CAPITAL (1)


	Six Months Ended June 30,
	2022			2021
	Units	Amount		Units	Amount
	(unaudited; in thousands of US dollars, except unit amounts)
Common units
Beginning balance at January 1,	27,268,878	$	16,355	26,844,715	$	3,829
Conversion of units	—	—		—	—
Common units issued for vested phantom units	359,417	(1,091)		379,726	(857)

Net income	—	12,647		—	13,809
Unit based compensation expense	—	2,354		—	2,696
Distributions	—	(7,095)		—	(6,377)
Acquisition of Hardisty South entities from Sponsor and conversion of General Partner units	5,751,136	(52,543)		—	—
Ending balance at June 30,	33,379,431	(29,373)		27,224,441	13,100















General Partner units
Beginning balance at January 1,	461,136	5,678		461,136	4,170
Non-cash contribution to Hardisty South entities from Sponsor prior to acquisition	—	18,207		—	—
Net income (loss)	—	(1,369)		—	601

Distributions	—	(59)		—	(109)
Acquisition of Hardisty South entities from Sponsor and conversion of General Partner units	(461,136)	(22,457)		—	—
Ending balance at June 30,	—	—		461,136	4,662
Accumulated other comprehensive income
Beginning balance at January 1,		(178)			720
Cumulative translation adjustment		(1,194)			1,048
Ending balance at June 30,		(1,372)			1,768
Total partners’ capital at June 30,		$	(30,745)		$	19,530

The accompanying notes are an integral part of these consolidated financial statements.

USD PARTNERS LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

1. ORGANIZATION AND BASIS OF PRESENTATION

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 terminal 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.

On April 6, 2022, we completed the acquisition of 100% of the entities owning the Hardisty South Terminal assets from USDG, exchanged our sponsor’s economic general partner interest in us for a non-economic general partner interest and eliminated our sponsor’s incentive distribution rights, or IDRs, for a total consideration of $75 million in cash and 5,751,136 common units, that was made effective as of April 1, 2022. The acquisition was determined to be a business combination of entities under common control. Refer to Note 2. Hardisty South Terminal Acquisition for more information. The entities acquired in the Hardisty South acquisition have been included in our Terminalling Services segment.

Basis of Presentation

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.

Our unaudited interim consolidated financial statements and related notes have been retrospectively recast to include the pre-acquisition results of the Hardisty South Terminal acquisition because the acquisition represented a business combination between entities under common control. We recorded the assets and liabilities acquired in the acquisition at their historical carrying amounts.

In the opinion of our management, our unaudited interim consolidated financial statements contain all adjustments, consisting only of normal recurring adjustments, which our management considers necessary to present fairly our financial position as of June 30, 2022 and December 31, 2021, our results of operations for the three and six months ended June 30, 2022 and 2021, and our cash flows for the six months ended June 30, 2022 and 2021. Our results of operations for the three and six months ended June 30, 2022 and 2021 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, 2021.

Foreign Currency Translation

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.

US Development Group, LLC

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.

2. HARDISTY SOUTH TERMINAL ACQUISITION

On April 6, 2022, we completed the acquisition of 100% of the entities owning the Hardisty South Terminal assets from USDG, exchanged our sponsor’s economic general partner interest in us for a non-economic general partner interest and eliminated our sponsor’s incentive distribution rights, or IDRs, for a total consideration of $75 million in cash and 5,751,136 common units representing non-cash consideration, that was made effective as of April 1, 2022. The cash portion was funded with borrowings from our Credit Agreement. The Hardisty South Terminal, which commenced operations in January 2019, primarily consists of railcar loading facilities with capacity of one and one-half 120-railcar unit trains of transloading capacity per day, or approximately 112,500 barrels per day, of takeaway capacity.

We accounted for our acquisition of the Hardisty South Terminal as a business combination under common control, whereby we recognized the acquisition of identifiable assets at historical costs and recast our prior financial statements for all periods presented. The following tables show the adjustments and resulting balance for each affected line item in our consolidated statements of operations for the periods indicated:


	Three Months Ended June 30, 2021
	USD Partners LP (1)		Hardisty South Acquisition		Eliminations (2)		Consolidated Results
	(in thousands)
Revenues
Terminalling services	$	30,992	$	57,989	$	—	$	88,981
Terminalling services — related party	1,111		2,101		(2,101)		1,111


Fleet leases — related party	983		—		—		983
Fleet services	—		—		—		—
Fleet services — related party	228		—		—		228
Freight and other reimbursables	207		3		—		210

Total revenues	33,521		60,093		(2,101)		91,513
Operating costs
Subcontracted rail services	3,523		1,181		—		4,704
Pipeline fees	6,398		20,227		—		26,625
Freight and other reimbursables	207		3		—		210
Operating and maintenance	2,602		234		—		2,836
Operating and maintenance — related party	2,101		—		(2,101)		—
Selling, general and administrative	2,411		282		—		2,693
Selling, general and administrative — related party	1,625		37,897				39,522

Depreciation and amortization	5,500		273		—		5,773
Total operating costs	24,367		60,097		(2,101)		82,363
Operating income	9,154		(4)		—		9,150
Interest expense	1,591		154		—		1,745
Loss associated with derivative instruments	718		—		—		718
Foreign currency transaction gain	(41)		(480)		—		(521)
Other expense (income), net	4		(1)		—		3
Income before income taxes	6,882		323		—		7,205
Provision for income taxes	166		153		—		319
Net income	$	6,716	$	170	$	—	$	6,886

(1)As previously reported in our Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2021.

(2)Represents business transactions between USDP and Hardisty South, whereby Hardisty South provided terminalling services for a third-party customer of USDP for contracted capacity that exceeded the transloading capacity that was available.


	Six Months Ended June 30, 2021
	USD Partners LP (1)		Hardisty South Acquisition		Eliminations (2)		Consolidated Results
	(in thousands)
Revenues
Terminalling services	$	59,097	$	71,015	$	—	$	130,112
Terminalling services — related party	2,214		4,191		(4,191)		2,214


Fleet leases — related party	1,967		—		—		1,967
Fleet services	24		—		—		24
Fleet services — related party	455		—		—		455
Freight and other reimbursables	363		5		—		368

Total revenues	64,120		75,211		(4,191)		135,140
Operating costs
Subcontracted rail services	6,664		2,214		—		8,878
Pipeline fees	12,444		25,122		—		37,566
Freight and other reimbursables	363		5		—		368
Operating and maintenance	5,434		549		—		5,983
Operating and maintenance — related party	4,191		—		(4,191)		—
Selling, general and administrative	5,467		511		—		5,978
Selling, general and administrative — related party	3,302		46,068				49,370

Depreciation and amortization	10,971		538		—		11,509
Total operating costs	48,836		75,007		(4,191)		119,652
Operating income	15,284		204		—		15,488
Interest expense	3,326		335		—		3,661
Gain associated with derivative instruments	(2,358)		—		—		(2,358)
Foreign currency transaction gain	(102)		(687)		—		(789)
Other income, net	(16)		—		—		(16)
Income before income taxes	14,434		556		—		14,990
Provision for income taxes	390		190		—		580
Net income	$	14,044	$	366	$	—	$	14,410

(1)As previously reported in our Quarterly Report on Form 10-Q for the six months ended June 30, 2021.

We recorded a cumulative adjustment totaling $2.3 million to the January 1, 2021 opening balance of our General Partner’s capital account associated with the recast of our financial statements due to our acquisition of the Hardisty South terminal entities.

3. NET INCOME PER LIMITED PARTNER INTEREST

Our net income is attributed to limited partners, in accordance with their respective ownership percentages. For periods prior to the cancellation of the IDRs and conversion of the General Partner units to a non-economic General Partner interest that resulted from the acquisition of the Hardisty South entities that became effective April 1, 2022, we used the two-class method when calculating the net income per unit applicable to limited partners, because we had more than one type of participating securities. For the prior periods, the classes of participating securities included Common Units, General Partner Units and IDRs. Prior to the acquisition, our net earnings were

allocated between the limited and general partners in accordance with our partnership agreement. As a result of the Hardisty South Terminal acquisition, the general partner units no longer participate in earnings or distributions, including IDRs. Our recast net income includes earnings related to the Hardisty South entities prior to our acquisition, which have been allocated to the General Partner.

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


	For the Three Months Ended June 30, 2022
	Common Units		General Partner Units		Total
	(in thousands, except per unit amounts)
Net income attributable to limited partner interests in USD Partners LP	$	3,805	$	—	$	3,805
Less: Distributable earnings (1)	4,292		—		4,292
Distributions in excess of earnings	$	(487)	$	—	$	(487)
Weighted average units outstanding (2)	33,378		—		33,378
Distributable earnings per unit (3)	$	0.13
Overdistributed earnings per unit (4)	(0.01)
Net income per limited partner unit (basic and diluted) (5)	$	0.12

(1)Represents the distributions payable for the period based upon the quarterly distribution amounts of $0.1235 per unit or $0.494 per unit on an annualized basis. Amounts presented for each class of units include a proportionate amount of the $170 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.

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

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

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

(5)Our computation of net income per limited partner unit excludes the effects of 1,373,347 equity-classified phantom unit awards outstanding as they were anti-dilutive for the period presented.


	For the Three Months Ended June 30, 2021
	Common Units		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	$	281	$	6,886
Less: Distributable earnings (2)	3,319		56		3,375
Excess net income	$	3,286	$	225	$	3,511
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 paid for the period based upon the quarterly distribution amount 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 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 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.


	For the Six Months Ended June 30, 2022
	Common Units		General Partner Units		Total
	(in thousands, except per unit amounts)
Net income attributable to general and limited partner interests in USD Partners LP (1)	$	12,647	$	(1,369)	$	11,278
Less: Distributable earnings (2)	7,925		3		7,928
Excess net income (distributions)	$	4,722	$	(1,372)	$	3,350
Weighted average units outstanding (3)	30,426		229		30,655
Distributable earnings per unit (4)	$	0.26
Underdistributed earnings per unit (5)	0.16
Net income per limited partner unit (basic and diluted) (6)	$	0.42

(2)Represents the per unit distribution paid of $0.1235 per unit for the three months ended March 31, 2022 and the per unit distributable of $0.1235 per unit for the three months ended June 30, 2022. Amounts presented for each class of units include a proportionate amount of the $167 thousand distributed and $170 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.

(6)Our computation of net income per limited partner unit excludes the effects of 1,373,347 equity-classified phantom unit awards outstanding as they were anti-dilutive for the period presented.


	For the Six Months Ended June 30, 2021
	Common Units		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	$	601	$	14,410
Less: Distributable earnings (2)	6,567		112		6,679
Excess net income	$	7,242	$	489	$	7,731
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

(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 distributed for the three months ended June 30, 2021. Amounts presented for each class of units include a proportionate amount of the $325 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.

(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.

4. REVENUES

Disaggregated Revenues

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 13. Segment Reporting for our disaggregated revenues by segment. Additionally, the below tables summarize the geographic data for our revenues:


	Three Months Ended June 30, 2022
	U.S.		Canada		Total
	(in thousands)
Third party	$	5,971	$	25,896	$	31,867
Related party	$	1,874	$	—	$	1,874


	Three Months Ended June 30, 2021
	U.S.		Canada		Total
	(in thousands)
Third party	$	9,854	$	79,337	$	89,191
Related party	$	2,322	$	—	$	2,322


	Six Months Ended June 30, 2022
	U.S.		Canada		Total
	(in thousands)
Third party	$	13,307	$	52,480	$	65,787
Related party	$	3,740	$	—	$	3,740


	Six Months Ended June 30, 2021
	U.S.		Canada		Total
	(in thousands)
Third party	$	17,492	$	113,012	$	130,504
Related party	$	4,636	$	—	$	4,636

Remaining Performance Obligations

The transaction price allocated to the remaining performance obligations associated with our Terminal and Fleet services agreements as of June 30, 2022 are as follows for the periods indicated:


	Six months ending December 31, 2022		2023		2024		2025		2026		Thereafter		Total
	(in thousands)
Terminalling Services (1) (2)	$	37,419	$	56,009	$	24,563	$	23,345	23,345		$	89,609	$	254,290
Fleet Services	598		—		—		—		—		—		598
Total	$	38,017	$	56,009	$	24,563	$	23,345	$	23,345	$	89,609	$	254,888

(1)A significant portion of our terminal 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 0.7865 U.S. dollars for each Canadian dollar at June 30, 2022.

(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 terminal services agreements that is based on crude oil pricing index differentials.

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.

Deferred Revenue

Our deferred revenue is a form of a contract liability and consists of amounts collected in advance from customers associated with their terminal and fleet services agreements and deferred revenues associated with make-up rights, which will be recognized as revenue when earned pursuant to the terms of our contractual arrangements. We currently recognize substantially all of the amounts we receive for minimum volume commitments as revenue when collected, since breakage associated with these make-up rights is currently approximately 99% based on our expectations around usage of these options. Accordingly, we had $0.1 million deferred revenues at June 30, 2022 for estimated breakage associated with the make-up rights options we granted to our customers. In addition, we had $1.4 million deferred revenues associated with make-up rights at December 31, 2021.

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, 2022:


	December 31, 2021		Cash Additions for Customer Prepayments		Balance Sheet Reclassification		Revenue Recognized		June 30, 2022
	(in thousands)
Deferred revenue (1)	$	7,575	$	2,697	$	—	$	(7,575)	$	2,697

Other current liabilities (2)	$	6,755	$	—	$	4,960	$	(1,973)	$	9,742
Other non-current liabilities (2)	$	9,482	$	718	$	(4,960)	$	—	$	5,240

(1) Includes deferred revenue of $0.1 million and $1.4 million at June 30, 2022 and December 31, 2021, respectively, for estimated breakage associated with the make-up right options we granted our customers as discussed above.

(2) 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 current liabilities” has been decreased by $101 thousand and “Other non-current liabilities” presented has been decreased by $142 thousand due to the impact of the change in the end of period exchange rate between June 30, 2022 and December 31, 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, 2022, in “Deferred revenue — related party” on our consolidated balance sheets associated with customer prepayments for our fleet lease agreements. We had no amounts at December 31, 2021. Refer to Note 7. Leases for additional discussion of our lease revenues.

5. RESTRICTED CASH

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,
	2022		2021
	(in thousands)
Cash and cash equivalents	$	4,333	$	8,350
Restricted Cash	3,947		7,687
Total cash, cash equivalents and restricted cash	$	8,280	$	16,037

6. PROPERTY AND EQUIPMENT

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


	June 30, 2022		December 31, 2021		Estimated Depreciable Lives (Years)
	(in thousands)
Land	$	10,254	$	10,298	N/A
Trackage and facilities	145,609		147,810		10-30
Pipeline	32,735		32,735		20-30
Equipment	26,132		27,014		3-20

Furniture	87		89		5-10
Total property and equipment	214,817		217,946
Accumulated depreciation	(65,737)		(60,953)
Construction in progress (1)	809		861
Property and equipment, net	$	149,889	$	157,854

(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 $2.6 million for the three months ended June 30, 2022 and 2021, and $5.3 million and $5.2 million for the six months ended June 30, 2022 and 2021, respectively.

We determined the expiration of a customer contract for terminal services at our Stroud Terminal was an event that required us to evaluate our Stroud Terminal asset group for impairment. Our projections of the undiscounted cash flows expected to be derived from the operation and disposition of the Stroud terminal asset group exceeded the carrying value of the asset group as of June 30, 2022, the date of our evaluation, indicating cash flows were expected to be sufficient to recover the carrying value of the Stroud Terminal asset group.

7. LEASES

Lessee

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


	Six Months Ended June 30, 2022
Weighted-average discount rate	5.3	%
Weighted average remaining lease term in years	2.66

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


		Three Months Ended June 30,				Six Months Ended June 30,
		2022		2021		2022		2021
	(in thousands)

Operating lease cost		$	1,390	$	1,508	$	2,905	$	2,987
Short term lease cost		130		48		161		92
Variable lease cost		13		9		31		27
Sublease income		(1,281)		(1,348)		(2,562)		(2,696)
Total		$	252	$	217	$	535	$	410

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, 2022 (in thousands):


2022	$	2,735
2023	147
2024	115
2025	114
2026	117
Thereafter	505
Total lease payments	$	3,733
Less: imputed interest	(268)
Present value of lease liabilities	$	3,465

Lessor

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 and lease income from our related party terminal services agreement associated with transloading renewable diesel at our West Colton Terminal that commenced in December 2021. Refer to Note 11. Transactions with Related Parties for additional discussion.


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
	(in thousands, except weighted average term)
Lease income (1)	$	2,494	$	2,169	$	4,980	$	4,354
Weighted average remaining lease term in years							3.50

(1)Lease income presented above includes lease income from related parties. Refer to Note 11. Transactions with Related Parties for additional discussion of lease income from a related party. In addition, lease income as discussed above totaling $1.6 million and $1.2 million for the three months ended June 30, 2022 and 2021, and $3.2 million and $2.4 million for the six months ended June 30, 2022 and 2021, respectively, is included in “Terminalling services” and “Terminalling services — related party” 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, 2022 (in thousands):


2022	$	4,912
2023	2,659
2024	2,663
2025	2,656
2026	2,430

Total	$	15,320

8. INTANGIBLE ASSETS

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


	June 30, 2022		December 31, 2021
	(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	(83,414)		(77,115)
Other	(70)		(65)
Total accumulated amortization	(83,484)		(77,180)
Total intangible assets, net	$	42,582	$	48,886

Amortization expense associated with intangible assets totaled $3.2 million for the three months ended June 30, 2022 and 2021, and $6.3 million for the six months ended June 30, 2022 and 2021.

9. DEBT

In November 2018, we amended and restated our revolving senior secured credit agreement, which we originally established in October 2014. We refer to the amended and restated senior secured credit agreement executed in November 2018, and as amended as described below, as the Credit Agreement and the original senior secured credit agreement as the Previous Credit Agreement. Our Credit Agreement amended and restated in its entirety our Previous Credit Agreement.

On October 29, 2021, we entered into an amendment to our Credit Agreement, with a syndicate of lenders. The amendment extends the maturity date of the agreement by one year. The aggregate borrowing capacity of the facility is $275 million and reflects the resignation of Citibank, N.A. as administrative agent and swing line lender under the facility and the appointment of Bank of Montreal as the successor administrative agent and swing line lender under the facility.

Our Credit Agreement matures on November 2, 2023. Our Credit Agreement provides us with the ability to request an additional one-year maturity date extension, subject to the satisfaction of certain conditions including consent of the lenders, and allows us the option to increase the maximum amount of credit available up to a total facility size of $390 million, subject to receiving increased commitments from lenders and satisfaction of certain conditions. The Credit Agreement includes financial covenants.

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.

In addition, prior to our acquisition, the Hardisty South entities had a Construction Loan Agreement and a corresponding Promissory Note, referred to collectively as the CLA, with BOKF, NA, dba Bank of Oklahoma which was originally established in September 2018. At December 31, 2021, the amended CLA had a maximum principal amount of $16.1 million and an interest rate of 3.25%. In March 2022, the agreement was amended to allow a related party subsidiary of our Sponsor, USD North America LP, to assume the outstanding obligations of the

Hardisty South entities to BOK by becoming a co-borrower. As a result, the debt was transferred by the Hardisty South entities to USD North America LP in March 2022.

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


	June 30, 2022		December 31, 2021
	(in thousands)
Construction loan agreement - Bank of Oklahoma	$	—	$	5,701
Credit Agreement	$	232,000	$	168,000
Less: Deferred financing costs, net	(1,452)		(2,080)
Less: Long-term debt, current portion	—		(4,251)
Total long-term debt, net	$	230,548	$	167,370

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


	June 30, 2022		December 31, 2021
	(in millions)
Aggregate borrowing capacity under Credit Agreement	$	275.0	$	275.0
Less: Amounts outstanding under the Credit Agreement	232.0		168.0

Available under the Credit Agreement based on capacity	$	43.0	$	107.0
Available under the Credit Agreement based on covenants (1)	$	43.0	$	80.0

(1) Pursuant to the terms of our Credit Agreement our borrowing capacity is limited to 4.5 times (5.0 times for the two quarters following a material acquisition) our trailing 12-month consolidated EBITDA, which equates to $63.6 million and $80.0 million of borrowing capacity available based on our covenants at June 30, 2022 and December 31, 2021, respectively. Our acquisition of Hardisty South, which was completed in April 2022, is treated as a material acquisition under the terms of our Credit Agreement. As a result, our borrowing capacity will be limited to 5.0 times our 12-month trailing consolidated EBITDA through December 31, 2022. However, at June 30, 2022, our available borrowings are limited by the capacity available under our Credit Agreement of $43.0 million, which is reflected in the table above.

The weighted average interest rate on our outstanding indebtedness was 3.31% and 2.39% at June 30, 2022 and December 31, 2021, respectively, without consideration to the effect of our derivative contracts. In addition to the interest we incur on our outstanding indebtedness, we paid commitment fees of 0.375% on unused commitments, which rate will vary based on our consolidated net leverage ratio, as defined in our Credit Agreement. At June 30, 2022, 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,
	2022		2021		2022		2021
	(in thousands)
Interest expense on the Credit Agreement	$	1,825	$	1,513	$	2,971	$	3,197

Amortization of deferred financing costs	272		232		628		464
Total interest expense	$	2,097	$	1,745	$	3,599	$	3,661

10. COLLABORATIVE ARRANGEMENT

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 $8.4 million and $26.6 million for the three months ended June 30, 2022 and 2021, respectively, and $16.9 million and $37.6 million for the six months ended June 30, 2022 and 2021, respectively, which are presented as “Pipeline fees” in our consolidated statements of operations.

11. TRANSACTIONS WITH RELATED PARTIES

Nature of Relationship with Related Parties

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, 2022, owns 17,308,226 of our common units representing a 51.9% limited partner interest in us. As of June 30, 2022, a value of up to $10.0 million of these common units were subject to a negative pledge supporting USDG’s revolving line of credit for working capital. 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, pursuant to our partnership agreement, 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 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.

Omnibus Agreement

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.

The total amounts charged to us under the Omnibus Agreement for the three months ended June 30, 2022 and 2021 was $2.6 million and $1.6 million, respectively, and for the six months ended June 30, 2022 and 2021 was $4.6 million and $3.3 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 $0.5 million and $1.4 million with respect to these costs at June 30, 2022 and December 31, 2021, respectively, included in “Accounts payable and accrued expenses — related party” in our consolidated balance sheets.

USD Services Agreement

Prior to our acquisition of the Hardisty South entities, USD and the Hardisty South entities entered into a services agreement for the provision of services related to the management and operation of transloading assets. Services provided consisted of financial and administrative, information technology, legal, management, human resources, and tax, among other services. The Hardisty South entities incurred $3.2 million pursuant to the

agreement for the six months ended June 30, 2022 and $37.8 million and $45.9 million of expense for the three and six months ended June 30, 2021, respectively, and these amounts are included in “Selling, general, and administrative - related party” in our consolidated statements of operations. There was no associated expense for the three months ended June 30, 2022 related to the agreement. Upon our acquisition of the Hardisty South entities effective April 1, 2022, this services agreement was cancelled and a similar agreement was established with us.

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, or ROFO, with respect to midstream projects developed by USDG. Payments made under the Stroud Terminal MSA during the periods presented in this Report are discussed below under the heading “Related Party Revenue and Deferred Revenue.”

Marketing Services Agreement - West Colton Terminal

In June 2021, we entered into a new Terminal 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 Terminal Services Agreement has an initial term of five years and commenced on December 1, 2021. We have modified our existing West Colton Terminal so that it now has the capability to transload renewable diesel in addition to the ethanol that it has been transloading.

In exchange for the new Terminal Services 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 Terminal 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 ROFO 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.

Contribution Agreement

On March 27, 2022, we entered into a Contribution, Conveyance and Assumption agreement, or the Contribution Agreement, with our sponsor to acquire 100% of the entities owning the Hardisty South Terminal assets from USDG as well as eliminate the IDRs and economic general partner interest of our Sponsor for a total consideration of $75.0 million in cash and approximately 5,751,136 common units representing limited partner

interests in us. We completed the transaction on April 6, 2022 with an effective date of April 1, 2022. Refer to Note 2. Hardisty South Terminal Acquisition for more information.

Related Party Revenue and Deferred Revenue

We have agreements to provide terminal and fleet services for USDM with respect to our Hardisty Terminal and terminal services with respect to our Stroud Terminal, which also include reimbursement to us for certain out-of-pocket expenses we incur, discussed in more detail below. Additionally, as previously discussed, we also entered into a new Terminal Services Agreement at our West Colton Terminal with USDCF that became effective December 31, 2021.

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. Effective August 2021, upon the commencement of the contract changes associated with the successful completion of the DRU project, the existing customer elected to fully terminate the volume commitments attributable to USDM at the Stroud Terminal, and therefore effective August 2021, we are no longer receiving a fixed fee payment from USDM. However, the Marketing Services Agreement is still effective for any future customer contracts obtained by USDM at the Stroud Terminal.

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,
	2022		2021		2022		2021
	(in thousands)
Terminalling services — related party	$	662	$	1,111	$	1,317	$	2,214
Fleet leases — related party	913		983		1,825		1,967
Fleet services — related party	299		228		598		455

	$	1,874	$	2,322	$	3,740	$	4,636

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, 2022		December 31, 2021
	(in thousands)
Accounts receivable — related party	$	334	$	2,051
Accounts payable and accrued expenses — related party (1)	$	46	$	12,707

Other current liabilities — related party (2)	$	32	$	64

(1)Does not include amounts payable to related parties associated with the Omnibus Agreement, as discussed above. In addition, the recasted balance at December 31, 2021, includes $12.6 million of payables to related parties attributable to the Hardisty South entities prior to our acquisition.

(2)Represents a contract liability associated with a lease agreement with USDM and cumulative revenue that has been deferred due to tiered billing provisions.

Cash Distributions

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 26, 2022	February 9, 2022	February 18, 2022	$	1,398	$	56
April 21, 2022	May 4, 2022	May 13, 2022	$	1,484	$	—

12. COMMITMENTS AND CONTINGENCIES

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.

13. SEGMENT REPORTING

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 to load and unload various grades of crude oil into and from railcars, as well as fixed fees per gallon to transload ethanol and renewable diesel from railcars, including related logistics services. We also facilitate rail-to-pipeline shipments of crude oil. Our Terminalling services segment also charges minimum monthly fees to store crude oil in tanks that are leased to our customers. The Fleet services segment provides customers with railcars and fleet services related to the transportation of liquid hydrocarbons under multi-year, take-or-pay contracts. Corporate activities are not considered a reportable segment, but are included to present shared services and financing activities which are not allocated to our established reporting segments.

Our segments offer different services and are managed accordingly. Our 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.


	Three Months Ended June 30, 2022
	Terminalling services		Fleet services		Corporate		Total
	(in thousands)
Revenues
Terminalling services	$	31,704	$	—	$	—	$	31,704
Terminalling services — related party	662		—		—		662

Fleet leases — related party	—		913		—		913
Fleet services	—		—		—		—
Fleet services — related party	—		299		—		299
Freight and other reimbursables	163		—		—		163

Total revenues	32,529		1,212		—		33,741
Operating costs
Subcontracted rail services	3,604		—		—		3,604
Pipeline fees	8,389		—		—		8,389
Freight and other reimbursables	163		—		—		163
Operating and maintenance	2,245		972		—		3,217
Selling, general and administrative	1,650		33		5,712		7,395

Depreciation and amortization	5,765		—		—		5,765
Total operating costs	21,816		1,005		5,712		28,533
Operating income (loss)	10,713		207		(5,712)		5,208
Interest expense	1		—		2,096		2,097
Gain associated with derivative instruments	—		—		(812)		(812)
Foreign currency transaction loss	41		1		101		143
Other income, net	(1)		(2)		(1)		(4)
Benefit from income taxes	(5)		(16)		—		(21)
Net income (loss)	$	10,677	$	224	$	(7,096)	$	3,805


	Three Months Ended June 30, 2021
	Terminalling services		Fleet services		Corporate		Total
	(in thousands)
Revenues
Terminalling services	$	88,981	$	—	$	—	$	88,981
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	179		31		—		210
Freight and other reimbursables — related party	—		—		—		—
Total revenues	90,271		1,242		—		91,513
Operating costs
Subcontracted rail services	4,704		—		—		4,704
Pipeline fees	26,625		—		—		26,625
Freight and other reimbursables	179		31		—		210
Operating and maintenance	1,843		993		—		2,836
Selling, general and administrative	39,234		73		2,908		42,215

Depreciation and amortization	5,773		—		—		5,773
Total operating costs	78,358		1,097		2,908		82,363
Operating income (loss)	11,913		145		(2,908)		9,150
Interest expense	154		—		1,591		1,745
Loss associated with derivative instruments	—		—		718		718
Foreign currency transaction loss (gain)	(423)		1		(99)		(521)
Other expense (income), net	4		—		(1)		3
Provision from income taxes	298		21		—		319
Net income (loss)	$	11,880	$	123	$	(5,117)	$	6,886


	Six Months Ended June 30, 2022
	Terminalling services		Fleet services		Corporate		Total
	(in thousands)
Revenues
Terminalling services	$	65,527	$	—	$	—	$	65,527
Terminalling services — related party	1,317		—		—		1,317

Fleet leases — related party	—		1,825		—		1,825
Fleet services	—		—		—		—
Fleet services — related party	—		598		—		598
Freight and other reimbursables	260		—		—		260

Total revenues	67,104		2,423		—		69,527
Operating costs
Subcontracted rail services	7,595		—		—		7,595
Pipeline fees	16,890		—		—		16,890
Freight and other reimbursables	260		—		—		260
Operating and maintenance	4,869		1,965		—		6,834
Selling, general and administrative	6,437		90		9,614		16,141

Depreciation and amortization	11,604		—		—		11,604
Total operating costs	47,655		2,055		9,614		59,324
Operating income (loss)	19,449		368		(9,614)		10,203
Interest expense	118		—		3,481		3,599
Gain associated with derivative instruments	—		—		(6,896)		(6,896)
Foreign currency transaction loss	1,739		1		50		1,790
Other income, net	(24)		(2)		(1)		(27)
Provision for income taxes	411		48		—		459
Net income	$	17,205	$	321	$	(6,248)	$	11,278

Total assets	$	219,658	$	2,549	$	11,615	$	233,822


	Six Months Ended June 30, 2021
	Terminalling services		Fleet services		Corporate		Total
	(in thousands)
Revenues
Terminalling services	$	130,112	$	—	$	—	$	130,112
Terminalling services — related party	2,214		—		—		2,214

Fleet leases — related party	—		1,967		—		1,967
Fleet services	—		24		—		24
Fleet services — related party	—		455		—		455
Freight and other reimbursables	305		63		—		368

Total revenues	132,631		2,509		—		135,140
Operating costs
Subcontracted rail services	8,878		—		—		8,878
Pipeline fees	37,566		—		—		37,566
Freight and other reimbursables	305		63		—		368
Operating and maintenance	3,992		1,991		—		5,983
Selling, general and administrative	48,653		165		6,530		55,348

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