CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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1.
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DESCRIPTION OF BUSINESS, BASIS OF PRESENTATION, AND SIGNIFICANT ACCOUNTING POLICIES
|
Description of Business
As used in this report, the terms “Partnership,” “we,” “our,” or “us” refer to Valero Energy Partners LP, one or more of its subsidiaries, or all of them taken as a whole. Our “general partner” refers to Valero Energy Partners GP LLC, an indirect wholly owned subsidiary of Valero Energy Corporation, and “Valero” refers collectively to Valero Energy Corporation and its subsidiaries, other than Valero Energy Partners LP, any of its subsidiaries, or its general partner.
We are a master limited partnership formed by Valero in
July 2013
to own, operate, develop, and acquire crude oil and refined petroleum products pipelines, terminals, and other logistics assets. Our assets consist of crude oil and refined petroleum products pipeline and terminal systems in the United States (U.S.) Gulf Coast and U.S. Mid-Continent regions that are integral to the operations of
ten
of Valero’s refineries. We generate revenues
from fee-based transportation and terminaling activities.
Basis of Presentation
General
These unaudited financial statements have been prepared in accordance with U.S. generally accepted accounting principles (GAAP) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X of the Securities Exchange Act of 1934. Accordingly, they do not include all of the information and notes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation have been included. All such adjustments are of a normal recurring nature unless disclosed otherwise. Operating results for the
three months ended
March 31, 2018
are not necessarily indicative of the results that may be expected for the year ending December 31, 2018.
The balance sheet as of
December 31, 2017
has been derived from our audited financial statements as of that date. For further information, refer to our financial statements and notes thereto included in our annual report on Form 10-K for the year ended
December 31, 2017
.
Acquisitions from Valero
The acquisitions of the Parkway pipeline and the Port Arthur terminal (both defined in Note
2
) from Valero on November 1, 2017 were accounted for as transfers of assets between entities under the common control of Valero. Accordingly, we recorded these asset acquisitions on our balance sheet at Valero’s carrying value as of the acquisition date, and our prior period financial statements and financial information were not retrospectively adjusted for these acquisitions.
Reclassifications
In connection with our adoption of Financial Accounting Standards Board (FASB) Accounting Standards Codification Topic 606, “Revenue from Contracts with Customers,” (Topic 606) on January
1, 2018, which is more fully described below, we have separately reflected (i)
revenues from lease contracts and (ii)
revenues from contracts with our customer. Because of this presentation of our revenues, we have also separately reflected cost of revenues and depreciation expense associated with lease contracts and contracts with our customer. Prior period amounts have been reclassified to conform to the 2018 presentation.
VALERO ENERGY PARTNERS LP
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Significant Accounting Policies
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from these estimates. On an ongoing basis, we review our estimates based on currently available information. Changes in facts and circumstances may result in revised estimates.
Revenue Recognition
We adopted the provisions of Topic 606 on January 1, 2018, as described below in “Accounting Pronouncements Adopted On January 1, 2018.” Accordingly, our revenue recognition accounting policy has been revised to reflect the adoption of this standard.
General
We generate revenues from fee-based transportation and terminaling activities to transport and store crude oil and refined petroleum products using our pipelines and terminals under commercial agreements with Valero. Certain schedules under these agreements are classified as operating leases, with such revenues reflected as revenues from lease contracts on our statements of income. The remaining schedules under these agreements are service arrangements accounted for as revenues from contracts with our customer, and are reflected as revenues from contracts with customer on our statements of income.
Revenue from Lease Contracts
Lease revenues are recognized on a straight-line basis over the lease term. Contingent lease revenues are recognized for volumes in excess of minimum throughput commitments.
Revenue from Contracts with Customer
At contract inception, we assess the services promised in our contracts and identify a performance obligation for each promise to transfer to our customer a service (or bundle of services) that is distinct. Revenue from contracts with our customer is recognized over time at the amount of consideration we expect to receive as our performance obligation is satisfied.
Our service primarily includes the delivery of crude oil and refined petroleum products that are ratably lifted by or delivered to our customer for its future use or future sale to its end customers. Under our transportation service agreements, the service provided is the delivery of crude oil and refined petroleum products to various points in our pipeline system. Although the products are delivered on a batch basis, we deliver a series of similar goods consecutively over time, therefore, the service is treated as a single performance obligation. Under our terminaling service agreement, the services provided for each terminal are the receipt, storage, and delivery of crude oil and refined petroleum products. These services are treated as a single performance obligation as we perform the service with the same pattern of transfer to our customer over time for which progress towards satisfying the performance obligation can be measured uniformly. The above performance obligations under the transportation service agreements and the terminaling service agreement are satisfied over time because (i) our customer simultaneously receives and consumes the benefits provided by our performance and (ii) another entity would not need to substantially reperform the work that we have completed to date.
Our transaction price is based on a contractual rate, which may vary depending on volumes transported on a quarterly basis within each quarterly period. Some schedules contain a quarterly tier-pricing structure,
VALERO ENERGY PARTNERS LP
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
whereby one rate is charged for volumes up to a certain number of average barrels per day and a reduced rate is charged for excess average barrels per day. For schedules that include such variable consideration, we estimate the factors driving the variable consideration to determine the transaction price. Our schedule with our customer states the final terms of the sale, including the description, quantity, and price of each service delivered. We invoice our customer the contractual rate based on the greater of throughput volumes or minimum throughput commitments. Payment is typically due in full within 10 days of receipt of billing, which occurs monthly. In the normal course of business, we do not have obligations for returns or refunds.
Accounting Pronouncements Adopted on January
1, 2018
Topic 606
Effective January
1, 2018, we adopted the provisions of Topic
606, which clarifies the principles for recognizing revenue and supersedes previous revenue recognition requirements under “Revenue Recognition (Topic
605),” using the modified retrospective method of adoption as permitted by the standard. Under
t
his method, the cumulative effect of initially applying the standard is recognized as an adjustment to the opening balance of partners’ capital, and revenues reported in the periods prior to the date of adoption are not changed. We elected to apply the transition guidance to individual contracts with our customer that were not completed as of the date of adoption. There was no material impact to our financial position as a result of adopting Topic 606; therefore, there was no cumulative-effect adjustment to partners’ capital as of January
1, 2018. Additionally, there was no material impact to our financial position or results of operations as of and for the
three months ended
March 31, 2018
. See “Revenue Recognition” above for a discussion of our accounting policy affected by our adoption of Topic 606. Also see Note
5
for further information on our revenues. We implemented new processes in order to monitor ongoing compliance with accounting and disclosure requirements.
ASU No. 2016-01
In January 2016, the FASB issued Accounting Standards Update (ASU) No. 2016-01, “Financial Instruments—Overall (Subtopic 825-10),” (ASU No. 2016-01) to enhance the reporting model for financial instruments regarding certain aspects of recognition, measurement, presentation, and disclosure. Effective January
1, 2018, we adopted the provisions of ASU No. 2016-01 using the cumulative-effect method of adoption as required by the ASU. The adoption of this ASU did not affect our financial position or our results of operations as of or for the
three months ended
March 31, 2018
, but it resulted in reduced disclosures as it eliminated the requirement to disclose the methods and significant assumptions used to estimate the fair value of financial instruments.
Accounting Pronouncement Not Yet Adopted
Topic 842
In February 2016, the FASB issued “Leases (Topic 842)” (Topic 842) to increase the transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. This new standard is effective for annual reporting periods beginning after December 15, 2018, and interim reporting periods within those annual periods, with early adoption permitted. We will adopt this new standard on January 1, 2019, and we expect to use the modified retrospective method of adoption. We are enhancing our contracting and lease evaluation systems and related processes, and we are developing a new lease accounting system to capture our leases and support the required disclosures. During 2018, we will continue to monitor the adoption process to ensure compliance with accounting and disclosure requirements. We also continue the integration of our lease accounting system
VALERO ENERGY PARTNERS LP
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
with our general ledger, and we will make modifications to the related procurement and payment processes. We anticipate this standard will have a material impact on our financial position by increasing our assets and liabilities by equal amounts through the recognition of right-of-use assets and lease liabilities for our operating leases. However, we do not expect adoption to have a material impact on our results of operations or liquidity.
In connection with the following acquisitions, we entered into various agreements with Valero, including additional schedules to our commercial agreements, an omnibus agreement, a services and secondment agreement, and lease agreements for the use of land on which our assets are located.
Red River Crude System
On
January 18, 2017
, we acquired a
40
percent undivided interest in (i) the Hewitt segment of Plains All American Pipeline, L.P.’s (Plains) Red River pipeline (the Hewitt segment), (ii)
two
150,000
shell barrel capacity tanks located at Hewitt Station in Hewitt, Oklahoma (the Hewitt Storage Tanks), and (iii) a pipeline connection from Hewitt Station to Wasson Station (the Wasson Interconnect) (collectively, the Red River crude system) for total cash consideration of
$71.8 million
, which we funded with our cash on hand. This acquisition was accounted for as an acquisition of assets.
The Hewitt segment consists of an approximately 138-mile, 16-inch crude oil pipeline with
150,000
barrels per day of throughput capacity that originates at Plains Marketing L.P.’s Cushing, Oklahoma terminal and ends at Hewitt Station. The pipeline supports Valero’s Ardmore Refinery and began supplying crude oil to Valero in January 2017. We retain a right to participate in any future expansions of the pipeline.
We also entered into a Joint Ownership Agreement (JOA) and an Operating and Administrative Services Agreement with Plains concurrent with this acquisition. The JOA provides us with access to the remaining
60
percent of the capacity of the Hewitt Storage Tanks and the Wasson Interconnect and continues until terminated by mutual agreement. This access arrangement is accounted for as an operating lease. The administrative agreement facilitates the day-to-day operations and management functions of the pipeline for an initial
five
-year term and automatically renews for successive
five
-year terms.
Parkway Pipeline
On
November 1, 2017
, we acquired Parkway Pipeline LLC, a subsidiary of Valero, that owns and operates an approximately 140-mile, 16-inch refined petroleum products pipeline (Parkway pipeline) with
110,000
barrels per day of capacity that transports refined petroleum products from Valero’s St. Charles Refinery, located in Norco, Louisiana, to Collins, Mississippi for supply into the Plantation and Colonial pipeline systems. We paid to Valero cash consideration of
$200.0 million
. We funded the cash distribution with
$82.0 million
of our cash on hand and
$118.0 million
of borrowings under our revolving credit facility. This acquisition was accounted for as a transfer of assets between entities under the common control of Valero.
Port Arthur Terminal
On
November 1, 2017
, we acquired Valero Partners Port Arthur, LLC, a subsidiary of Valero that owns certain terminaling assets (Port Arthur terminal) that support Valero’s Port Arthur Refinery for total consideration of
$308.0 million
, which consisted of (i) a cash distribution of
$262.0 million
and (ii) the
VALERO ENERGY PARTNERS LP
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
issuance of
1,081,315
common units and
22,068
general partner units to Valero having an aggregate value of
$46.0 million
. We funded the cash distribution with
$262.0 million
of borrowings under our revolving credit facility. This acquisition was accounted for as a transfer of assets between entities under the common control of Valero.
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3.
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RELATED-PARTY TRANSACTIONS
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Summary of Transactions
Related-Party Agreements
Effective
March 31, 2017
, we entered into a commercial agreement with Diamond Green Diesel Holdings LLC (DGD), a joint venture consolidated by Valero, to construct and operate a rail loading facility located at Valero’s St. Charles Refinery for the purpose of loading DGD’s renewable diesel onto railcars. The construction of the rail loading facility was completed in April 2017, and we began providing services to DGD in May 2017. In addition, we constructed a new
180,000
barrel storage tank and began leasing to DGD in April 2018. This commercial agreement, which includes both the rail loading facility and the storage tank, has an initial term that ends on
June 30, 2033
, and contains minimum commitments for DGD’s use of the assets.
Revenues
–
Related Party
Revenues – related party include revenues from lease contracts and revenues from contracts with our customer, as further described in Note
5
.
Related-Party Expenses
The related-party expenses include costs of revenues, expenses, or financing activities provided to us by Valero and are reflected in the supplemental information disclosure on our statements of income.
Insurance Recoveries
As of
March 31, 2018
, we had a $
983,000
receivable from Valero related to property damage claims associated with Hurricane Harvey primarily at our Houston terminal and Port Arthur products system.
Concentration Risk
All of our related-party balances resulted from transactions with Valero. Therefore, we are subject to the business risks associated with Valero’s business.
VALERO ENERGY PARTNERS LP
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
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4.
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DEBT AND NOTES PAYABLE
–
RELATED PARTY
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Debt
Debt, at stated values consisted of the following (in thousands):
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Maturity
Date
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March 31, 2018
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|
December 31, 2017
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|
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|
Revolving credit facility
|
November 2020
|
|
$
|
—
|
|
|
$
|
410,000
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|
Senior Notes, 4.375%
|
December 2026
|
|
500,000
|
|
|
500,000
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|
Senior Notes, 4.5%
|
March 2028
|
|
500,000
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|
|
—
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|
Net unamortized discount and debt issuance costs
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|
|
(10,885
|
)
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|
(4,717
|
)
|
Debt
|
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|
$
|
989,115
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|
|
$
|
905,283
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Revolving Credit Facility
We have a
$750.0 million
senior unsecured revolving credit facility agreement (the Revolver) that matures in
November 2020
. We have the option to increase the aggregate commitments under the Revolver to
$1.0 billion
, subject to certain restrictions. The Revolver also provides for the issuance of letters of credit of up to
$100.0 million
. Borrowings under the Revolver bear interest at a variable rate.
During the
three months ended
March 31, 2018
, we made a debt repayment of
$410.0 million
on our Revolver as discussed below. There was no significant activity related to our Revolver during the
three months ended
March 31, 2017
.
Senior Notes
On March 29, 2018, we issued in a public offering
$500.0 million
aggregate principal amount of our
4.5
percent Senior Notes due
March 15, 2028
(
4.5
percent Senior Notes). Gross proceeds from this debt issuance totaled
$498.3 million
before deducting the underwriting discount and other debt issuance costs totaling
$4.6 million
. We used the proceeds to repay the outstanding balance of
$410.0 million
on our Revolver and a portion of the outstanding balance under one of our Loan Agreements (defined below) with Valero.
The
4.5
percent Senior Notes are unsecured and contain various customary restrictive covenants that, among other things, limit our ability to create or permit to exist liens, or to enter into any sale and leaseback transactions, with respect to principal properties, and limit our ability to merge or consolidate with any other entity or transfer or dispose of all or substantially all of our assets. These covenants will be subject to a number of important qualifications and limitations. The
4.5
percent Senior Notes are not currently guaranteed by any of our subsidiaries. If in the future any of our subsidiaries becomes a borrower or guarantor under, or grants any lien to secure any obligations pursuant to, the Revolver, then we will cause such subsidiary to guarantee the
4.5
percent Senior Notes. Interest is payable semi-annually on March 15 and September 15, commencing on September 15, 2018.
Notes Payable
–
Related Party
We have two subordinated credit agreements with Valero (the Loan Agreements). Borrowings on the Loan Agreements bear interest at a variable rate, which was
3.16418
percent and
2.86069
percent as of
March 31, 2018
and
December 31, 2017
, respectively.
VALERO ENERGY PARTNERS LP
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
During the
three months ended
March 31, 2018
, we paid down
$85.0 million
under one of the Loan Agreements. There was no activity under the Loan Agreements for the
three months ended
March 31, 2017
. The outstanding balance of these Loan Agreements was
$285.0 million
and
$370.0 million
as of
March 31, 2018
and
December 31, 2017
, respectively.
Other Disclosures
Interest and debt expense, net of capitalized interest was as follows (in
thousands):
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|
|
|
|
|
|
|
|
|
Three Months Ended
March 31,
|
|
2018
|
|
2017
|
Interest and debt expense incurred
|
$
|
12,018
|
|
|
$
|
8,392
|
|
Less: Capitalized interest
|
110
|
|
|
103
|
|
Interest and debt expense, net of capitalized interest
|
$
|
11,908
|
|
|
$
|
8,289
|
|
Disaggregation of Revenues
Revenues – related party disaggregated by activity type were as follows (in
thousands):
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|
|
|
|
|
|
|
|
|
|
|
|
|
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Pipeline
Transportation
|
|
Terminaling
|
|
Storage
and Other
|
|
Total
|
Three Months Ended March 31, 2018:
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|
|
|
|
|
|
Revenues from lease contracts
|
$
|
18,247
|
|
|
$
|
86,941
|
|
|
$
|
138
|
|
|
$
|
105,326
|
|
Revenues from contracts with customer
|
13,121
|
|
|
12,333
|
|
|
1,162
|
|
|
26,616
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|
Total revenues – related party
|
$
|
31,368
|
|
|
$
|
99,274
|
|
|
$
|
1,300
|
|
|
$
|
131,942
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, 2017:
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|
|
|
|
|
|
Revenues from lease contracts
|
$
|
10,350
|
|
|
$
|
70,627
|
|
|
$
|
135
|
|
|
$
|
81,112
|
|
Revenues from contracts with customer
|
12,825
|
|
|
11,879
|
|
|
—
|
|
|
24,704
|
|
Total revenues – related party
|
$
|
23,175
|
|
|
$
|
82,506
|
|
|
$
|
135
|
|
|
$
|
105,816
|
|
Receivables from Contracts with Customer
Our receivables from contracts with our customer are included in receivables – related party. These balances were
$8.2 million
and
$8.3 million
as of
March 31, 2018
and
January 1, 2018
, respectively.
VALERO ENERGY PARTNERS LP
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Remaining Performance Obligations
As of
March 31, 2018
, future revenues expected to be recognized for the fixed component of the transaction price of our remaining performance obligations from contracts with our customer with an original expected duration of greater than one year were as follows (in thousands):
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|
|
|
|
|
Remainder of 2018
|
|
$
|
62,205
|
|
2019
|
|
81,215
|
|
2020
|
|
81,426
|
|
2021
|
|
81,215
|
|
2022
|
|
81,215
|
|
Thereafter
|
|
116,994
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|
Total
|
|
$
|
504,270
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|
Operating Leases – Lessor
As described in Note
1
, certain schedules under our commercial agreements with Valero are considered operating leases under U.S. GAAP. These agreements contain minimum throughput commitments and escalation clauses to adjust transportation tariffs and terminaling and storage fees to reflect changes in price indices. Revenues from lease contracts are reflected separately on our statements of income. The components of our revenues from lease contracts were as follows (in thousands):
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|
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|
|
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|
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|
Three Months Ended
March 31,
|
|
|
|
2018
|
|
2017
|
Minimum lease revenues
|
|
$
|
89,124
|
|
|
$
|
68,448
|
|
Contingent lease revenues
|
|
16,202
|
|
|
12,664
|
|
Revenues from lease contracts
|
|
$
|
105,326
|
|
|
$
|
81,112
|
|
As of
March 31, 2018
, future minimum rentals to be received related to these noncancelable commercial agreements were as follows (in thousands):
|
|
|
|
|
|
Remainder of 2018
|
|
$
|
271,114
|
|
2019
|
|
359,842
|
|
2020
|
|
360,828
|
|
2021
|
|
359,842
|
|
2022
|
|
359,842
|
|
Thereafter
|
|
2,899,476
|
|
Total minimum rentals to be received
|
|
$
|
4,610,944
|
|
VALERO ENERGY PARTNERS LP
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Our partnership agreement prescribes the amount and priority of cash distributions that our limited partners and general partner will receive. Our distributions are declared subsequent to quarter end. The table below summarizes information related to our quarterly cash distributions that have been declared since January 1,
2017
:
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarterly
Period
Ended
|
|
Total
Quarterly
Distribution
(per unit)
|
|
Total Cash
Distribution
(in thousands)
|
|
Declaration
Date
|
|
Record
Date
|
|
Distribution
Date
|
March 31, 2018
|
|
$
|
0.5275
|
|
|
$
|
52,826
|
|
|
April 19, 2018
|
|
May 1, 2018
|
|
May 9, 2018
|
December 31, 2017
|
|
0.5075
|
|
|
50,055
|
|
|
January 24, 2018
|
|
February 5, 2018
|
|
February 13, 2018
|
September 30, 2017
|
|
0.4800
|
|
|
46,242
|
|
|
October 19, 2017
|
|
November 1, 2017
|
|
November 9, 2017
|
June 30, 2017
|
|
0.4550
|
|
|
42,111
|
|
|
July 19, 2017
|
|
August 1, 2017
|
|
August 10, 2017
|
March 31, 2017
|
|
0.4275
|
|
|
38,043
|
|
|
April 20, 2017
|
|
May 2, 2017
|
|
May 11, 2017
|
December 31, 2016
|
|
0.4065
|
|
|
34,895
|
|
|
January 20, 2017
|
|
February 2, 2017
|
|
February 10, 2017
|
The following table reflects the allocation of total cash distributions to the general and limited partners and distribution equivalent right (DER) payments applicable to the period in which the distributions and DERs were earned (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
March 31,
|
|
|
2018
|
|
2017
|
General partner:
|
|
|
|
|
Distributions, excluding incentive distribution rights (IDRs)
|
|
$
|
1,056
|
|
|
$
|
595
|
|
IDRs
|
|
15,234
|
|
|
8,307
|
|
Total general partner’s distributions
|
|
16,290
|
|
|
8,902
|
|
Limited partners:
|
|
|
|
|
Common – public
|
|
11,859
|
|
|
9,605
|
|
Common – Valero
|
|
24,671
|
|
|
19,531
|
|
Total limited partners’ distributions
|
|
36,530
|
|
|
29,136
|
|
DERs
|
|
6
|
|
|
5
|
|
Total cash distributions
|
|
$
|
52,826
|
|
|
$
|
38,043
|
|
VALERO ENERGY PARTNERS LP
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
|
|
7.
|
NET INCOME PER LIMITED PARTNER UNIT
|
We calculate net income available to limited partners based on the distributions pertaining to each period’s net income. After considering the appropriate period’s distributions, the remaining undistributed earnings or excess distributions over earnings, if any, are allocated to the general partner, limited partners, and other participating securities in accordance with the contractual terms of our partnership agreement and as prescribed under the two-class method. Participating securities include IDRs and awards under our Valero Energy Partners LP 2013 Incentive Compensation Plan that receive DERs. However, the terms of our partnership agreement limit the general partner’s incentive distribution to the amount of available cash, which, as defined in our partnership agreement, is net of reserves deemed appropriate. As such, IDRs are not allocated undistributed earnings or distributions in excess of earnings in the calculation of net income per limited partner unit.
Basic net income per limited partner unit is determined pursuant to the two-class method for master limited partnerships. The two-class method is an earnings allocation formula that is used to determine earnings to our general partner, common unitholders, and participating securities according to (i) distributions pertaining to each period’s net income and (ii) participation rights in undistributed earnings.
Diluted net income per limited partner unit is also determined using the two-class method, unless the treasury stock method is more dilutive. For the
three months ended
March 31, 2018
and
2017
, we used the two-class method to determine diluted net income per limited partner unit. We did not have any potentially dilutive instruments outstanding during the
three months ended
March 31, 2018
and
2017
.
VALERO ENERGY PARTNERS LP
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Net income per unit was computed as follows (in thousands, except per unit amounts):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General
Partner
|
|
Limited
Partners
Common
Units
|
|
Restricted
Units
|
|
Total
|
Three Months Ended March 31, 2018:
|
|
|
|
|
|
|
|
|
Allocation of net income to determine net income available to limited partners:
|
|
|
|
|
|
|
|
|
Distributions, excluding general partner’s IDRs
|
|
$
|
1,056
|
|
|
$
|
36,530
|
|
|
$
|
—
|
|
|
$
|
37,586
|
|
General partner’s IDRs
|
|
15,234
|
|
|
—
|
|
|
—
|
|
|
15,234
|
|
DERs
|
|
—
|
|
|
—
|
|
|
6
|
|
|
6
|
|
Distributions and DERs declared
|
|
16,290
|
|
|
36,530
|
|
|
6
|
|
|
52,826
|
|
Undistributed earnings
|
|
265
|
|
|
12,986
|
|
|
2
|
|
|
13,253
|
|
Net income available to
limited partners – basic and diluted
|
|
$
|
16,555
|
|
|
$
|
49,516
|
|
|
$
|
8
|
|
|
$
|
66,079
|
|
|
|
|
|
|
|
|
|
|
Net income per limited partner common unit – basic and diluted:
|
|
|
|
|
|
|
|
|
Weighted-average units outstanding
|
|
|
|
69,250
|
|
|
|
|
|
Net income per limited partner common unit – basic and diluted
|
|
|
|
$
|
0.72
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, 2017:
|
|
|
Allocation of net income to determine net income available to limited partners:
|
|
|
|
|
|
|
|
|
Distributions, excluding general partner’s IDRs
|
|
$
|
595
|
|
|
$
|
29,136
|
|
|
$
|
—
|
|
|
$
|
29,731
|
|
General partner’s IDRs
|
|
8,307
|
|
|
—
|
|
|
—
|
|
|
8,307
|
|
DERs
|
|
—
|
|
|
—
|
|
|
5
|
|
|
5
|
|
Distributions and DERs declared
|
|
8,902
|
|
|
29,136
|
|
|
5
|
|
|
38,043
|
|
Undistributed earnings
|
|
565
|
|
|
19,525
|
|
|
4
|
|
|
20,094
|
|
Net income available to
limited partners – basic and diluted
|
|
$
|
9,467
|
|
|
$
|
48,661
|
|
|
$
|
9
|
|
|
$
|
58,137
|
|
|
|
|
|
|
|
|
|
|
Net income per limited partner common unit – basic and diluted:
|
|
|
|
|
|
|
|
|
Weighted-average units outstanding
|
|
|
|
67,664
|
|
|
|
|
|
Net income per limited partner common unit – basic and diluted
|
|
|
|
$
|
0.72
|
|
|
|
|
|
VALERO ENERGY PARTNERS LP
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Unit Activity
Activity in the number of units was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Limited Partners
|
|
General
Partner
Valero
|
|
|
|
|
Common
Unitholders
Public
|
|
Common
Unitholder
Valero
|
|
|
Total
|
Balance as of December 31, 2016
|
|
21,738,692
|
|
|
45,687,271
|
|
|
1,375,721
|
|
|
68,801,684
|
|
Unit-based compensation
|
|
5,997
|
|
|
—
|
|
|
—
|
|
|
5,997
|
|
Units issued under ATM Program
|
|
733,601
|
|
|
—
|
|
|
—
|
|
|
733,601
|
|
General partner units issued to maintain 2% interest
|
|
—
|
|
|
—
|
|
|
15,412
|
|
|
15,412
|
|
Balance as of March 31, 2017
|
|
22,478,290
|
|
|
45,687,271
|
|
|
1,391,133
|
|
|
69,556,694
|
|
|
|
|
|
|
|
|
|
|
Balance as of December 31, 2017
|
|
22,487,586
|
|
|
46,768,586
|
|
|
1,413,391
|
|
|
70,669,563
|
|
Unit-based compensation
|
|
5,898
|
|
|
—
|
|
|
—
|
|
|
5,898
|
|
General partner units issued to maintain 2% interest
|
|
—
|
|
|
—
|
|
|
120
|
|
|
120
|
|
Balance as of March 31, 2018
|
|
22,493,484
|
|
|
46,768,586
|
|
|
1,413,511
|
|
|
70,675,581
|
|
ATM Program
On September 16, 2016, we entered into an equity distribution agreement pursuant to which we may offer and sell from time to time our common units having an aggregate offering price of up to
$350.0 million
based on amounts, at prices, and on terms to be determined by market conditions and other factors at the time of our offerings (such continuous offering program, or at-the-market program, referred to as our “ATM Program”). As of
March 31, 2018
, we have sold common units having an aggregate value of
$45.5 million
under our ATM Program, resulting in
$304.5 million
remaining available.
There were no issuances of equity under our ATM Program for the
three months ended
March 31, 2018
. The table below summarizes activities of the common units issued under our ATM Program and general partner units issued to maintain the
2.0
percent general partner interest in the Partnership for the
three months ended
March 31, 2017
(in
thousands, except unit amounts):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Units
Issued
|
|
Total
Proceeds
|
|
Offering
Costs
|
|
Net
Proceeds
|
Common – public
|
|
733,601
|
|
|
$
|
35,296
|
|
|
$
|
414
|
|
|
$
|
34,882
|
|
General partner
|
|
15,412
|
|
|
739
|
|
|
—
|
|
|
739
|
|
Transfers to (from) Partners
Subsequent to the expiration of the subordination period on August 10, 2016, all of our common units have equal rights, including rights to distributions and to our net assets in the event of liquidation. As a result, a reallocation of the carrying values of our public common unitholders’ interest in us and Valero’s common
VALERO ENERGY PARTNERS LP
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
unitholder interest in us is required when a change in ownership occurs in order for the portion of those carrying values associated with activity subsequent to the subordination period to be equal to the respective unitholders’ ownership interests (in units) in us.
|
|
9.
|
SUPPLEMENTAL CASH FLOW INFORMATION
|
In order to determine net cash provided by operating activities, net income is adjusted by, among other things, changes in current assets and current liabilities as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
March 31,
|
|
|
|
2018
|
|
2017
|
Decrease (increase) in current assets:
|
|
|
|
|
Receivables – related party
|
|
$
|
367
|
|
|
$
|
1,115
|
|
Receivables
|
|
435
|
|
|
340
|
|
Prepaid expenses and other
|
|
(27
|
)
|
|
(355
|
)
|
Increase (decrease) in current liabilities:
|
|
|
|
|
Accounts payable
|
|
(6,003
|
)
|
|
(171
|
)
|
Accounts payable – related party
|
|
4,277
|
|
|
(31
|
)
|
Accrued liabilities
|
|
782
|
|
|
122
|
|
Accrued liabilities – related party
|
|
(775
|
)
|
|
(2,152
|
)
|
Accrued interest payable
|
|
3,951
|
|
|
5,525
|
|
Accrued interest payable – related party
|
|
(134
|
)
|
|
681
|
|
Taxes other than income taxes payable
|
|
(2,404
|
)
|
|
(706
|
)
|
Changes in current assets and current liabilities
|
|
$
|
469
|
|
|
$
|
4,368
|
|
Cash flows related to interest paid were as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
March 31,
|
|
|
|
2018
|
|
2017
|
Interest paid
|
|
$
|
7,911
|
|
|
$
|
1,908
|
|
Noncash investing and financing activities that affected recognized assets or liabilities for the
three months ended
March 31, 2018
and
2017
were as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
March 31,
|
|
|
|
2018
|
|
2017
|
Increase (decrease) in accounts payable related to capital expenditures
|
|
$
|
1,013
|
|
|
$
|
(2,583
|
)
|
Noncash capital contributions from Valero for capital projects
|
|
10,540
|
|
|
9,220
|
|
Offering costs included in accounts payable
|
|
1,266
|
|
|
—
|
|
In addition to the activities in the preceding table, noncash financing activities for the
three months ended
March 31, 2018
and
2017
included the transfers to (from) partners to reflect the impact of ownership changes occurring as a result of the grant of restricted units made to each of our three independent directors and the issuance of equity under our ATM Program, respectively, as described in Note
8
.
VALERO ENERGY PARTNERS LP
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
|
|
10.
|
FAIR VALUE OF FINANCIAL INSTRUMENTS
|
Financial instruments that we recognize in our balance sheets at their carrying amounts are shown in the table below along with their associated fair values (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair
Value
Hierarchy
|
|
March 31, 2018
|
|
December
31, 2017
|
|
|
|
|
Carrying
Amount
|
|
Fair
Value
|
|
Carrying
Amount
|
|
Fair
Value
|
Financial assets:
|
|
|
|
|
|
|
|
|
|
|
Cash and temporary cash investments
|
|
Level 1
|
|
$
|
71,485
|
|
|
$
|
71,485
|
|
|
$
|
42,052
|
|
|
$
|
42,052
|
|
Financial liabilities:
|
|
|
|
|
|
|
|
|
|
|
Debt:
|
|
|
|
|
|
|
|
|
|
|
Revolver
|
|
Level 2
|
|
—
|
|
|
—
|
|
|
410,000
|
|
|
410,000
|
|
Senior Notes
|
|
Level 2
|
|
989,115
|
|
|
1,002,800
|
|
|
495,283
|
|
|
523,800
|
|
Notes payable – related party
|
|
Level 2
|
|
285,000
|
|
|
285,000
|
|
|
370,000
|
|
|
370,000
|
|