v3.7.0.1
Equity (Notes)
 3 Months Ended
Mar. 31, 2017
Equity [Abstract]  
Equity
EQUITY AND NET EARNINGS PER UNIT

We had 73,947,231 common public units outstanding as of March 31, 2017. Additionally, Tesoro owned 34,055,042 of our common units and 2,202,880 of our general partner units (the 2% general partner interest) as of March 31, 2017, which together constitutes a 33% ownership interest in us.

UNIT ISSUANCE. We closed a registered public offering of 5,000,000 common units representing limited partner interests at a public offering price of $56.19 per unit on February 27, 2017. The net proceeds of $281 million were used to repay borrowings outstanding under our Revolving Credit Facility and for general partnership purposes. Also, general partner units of 101,980 were issued for proceeds of $6 million.

CHANGE IN THE CARRYING AMOUNT OF OUR EQUITY (in millions)
 
Partnership
 
Total
 
Common
 
General Partner
 
Balance at December 31, 2016
$
1,608

 
$
(66
)
 
$
1,542

Proceeds from issuance of units, net of issuance costs
281

 
6

 
287

Distributions to unitholders and general partner (a)
(94
)
 
(46
)
 
(140
)
Net earnings attributable to partners
55

 
37

 
92

Contributions (b)
21

 
1

 
22

Other
(2
)
 
4

 
2

Balance at March 31, 2017
$
1,869

 
$
(64
)
 
$
1,805



(a)
Represents cash distributions declared and paid during the three months ended March 31, 2017, relating to the fourth quarter of 2016.
(b)
Includes Tesoro and TLGP contributions to the Partnership primarily related to reimbursements for capital spending pursuant predominantly to the Amended Omnibus Agreement and the Carson Assets Indemnity Agreement.

NET EARNINGS PER UNIT. We use the two-class method when calculating the net earnings per unit applicable to limited partners, because we have more than one participating security. At March 31, 2017, our participating securities consist of common units, general partner units and IDRs. Net earnings earned by the Partnership are allocated between the common and general partners in accordance with our partnership agreement. We base our calculation of net earnings per unit on the weighted average number of common limited partner units outstanding during the period.

Diluted net earnings per unit include the effects of potentially dilutive units on our common units, which consist of unvested service and performance phantom units. Distributions less than or greater than earnings are allocated in accordance with our partnership agreement.
 
NET EARNINGS PER UNIT (in millions, except per unit amounts)
 
Three Months Ended March 31,
 
2017
 
2016
Net earnings
$
92

 
$
85

Special allocations of net earnings (“Special Allocations”) (a)
1

 
—

Net earnings, including Special Allocations
93

 
85

General partner’s distributions
(3
)
 
(2
)
General partner’s IDRs (b)
(36
)
 
(30
)
Limited partners’ distributions on common units
(101
)
 
(76
)
Distributions greater than earnings
$
(47
)
 
$
(23
)
General partner’s earnings:
 
 
 
Distributions
$
3

 
$
2

General partner’s IDRs (b)
36

 
30

Allocation of distributions greater than earnings (c)
(1
)
 
(7
)
Total general partner’s earnings
$
38

 
$
25

Limited partners’ earnings on common units:
 
 
 
Distributions
$
101

 
$
76

Special Allocations (a)
(1
)
 
—

Allocation of distributions greater than earnings
(46
)
 
(16
)
Total limited partners’ earnings on common units
$
54

 
$
60

Weighted average limited partner units outstanding:
 
 
 
Common units - basic
104.8

 
93.6

Common units - diluted
104.9

 
93.6

Net earnings per limited partner unit:
 
 
 
Common - basic
$
0.51

 
$
0.64

Common - diluted
$
0.51

 
$
0.64

 
(a)
Normal allocations according to percentage interests are made after giving effect, if any, to priority income allocations in an amount equal to incentive cash distributions fully allocated to the general partner and any special allocations. The adjustment reflects the special allocation to common units held by TLGP for the interest incurred in connection with borrowings on the Revolving Credit Facility in lieu of using all cash on hand to fund the North Dakota Gathering and Processing Assets acquisition during the three months ended March 31, 2017.
(b)
IDRs entitle the general partner to receive increasing percentages, up to 50%, of quarterly distributions in excess of $0.3881 per unit per quarter. The amount above reflects earnings distributed to our general partner net of $12.5 million of IDRs waived by TLGP for the three months ended March 31, 2017. See Note 12 of our Annual Report on Form 10-K for the year ended December 31, 2016 for further discussion related to IDRs.
(c)
We have revised the historical allocation of general partner earnings to include the Predecessors’ losses of $7 million for the three months ended March 31, 2016. There were no Predecessor losses for the three months ended March 31, 2017.

CASH DISTRIBUTIONS
 
Our partnership agreement, as amended, sets forth the calculation to be used to determine the amount and priority of cash distributions that the limited partner unitholders and general partner will receive.
 
QUARTERLY DISTRIBUTIONS
Quarter Ended
Quarterly Distribution Per Unit
 
Total Cash Distribution including general partner IDRs (in millions)
 
Date of Distribution
 
Unitholders Record Date
December 31, 2016
$
0.91

 
$
140

 
February 14, 2017
 
February 3, 2017
March 31, 2017 (a)
0.94

 
140

 
May 15, 2017
 
May 5, 2017
 
(a)
This distribution was declared on April 19, 2017 and will be paid on the date of distribution. This distribution is net of $12.5 million of IDRs waived by TLGP for the three months ended March 31, 2017.
Earnings Per Share
EQUITY AND NET EARNINGS PER UNIT

We had 73,947,231 common public units outstanding as of March 31, 2017. Additionally, Tesoro owned 34,055,042 of our common units and 2,202,880 of our general partner units (the 2% general partner interest) as of March 31, 2017, which together constitutes a 33% ownership interest in us.

UNIT ISSUANCE. We closed a registered public offering of 5,000,000 common units representing limited partner interests at a public offering price of $56.19 per unit on February 27, 2017. The net proceeds of $281 million were used to repay borrowings outstanding under our Revolving Credit Facility and for general partnership purposes. Also, general partner units of 101,980 were issued for proceeds of $6 million.

CHANGE IN THE CARRYING AMOUNT OF OUR EQUITY (in millions)
 
Partnership
 
Total
 
Common
 
General Partner
 
Balance at December 31, 2016
$
1,608

 
$
(66
)
 
$
1,542

Proceeds from issuance of units, net of issuance costs
281

 
6

 
287

Distributions to unitholders and general partner (a)
(94
)
 
(46
)
 
(140
)
Net earnings attributable to partners
55

 
37

 
92

Contributions (b)
21

 
1

 
22

Other
(2
)
 
4

 
2

Balance at March 31, 2017
$
1,869

 
$
(64
)
 
$
1,805



(a)
Represents cash distributions declared and paid during the three months ended March 31, 2017, relating to the fourth quarter of 2016.
(b)
Includes Tesoro and TLGP contributions to the Partnership primarily related to reimbursements for capital spending pursuant predominantly to the Amended Omnibus Agreement and the Carson Assets Indemnity Agreement.

NET EARNINGS PER UNIT. We use the two-class method when calculating the net earnings per unit applicable to limited partners, because we have more than one participating security. At March 31, 2017, our participating securities consist of common units, general partner units and IDRs. Net earnings earned by the Partnership are allocated between the common and general partners in accordance with our partnership agreement. We base our calculation of net earnings per unit on the weighted average number of common limited partner units outstanding during the period.

Diluted net earnings per unit include the effects of potentially dilutive units on our common units, which consist of unvested service and performance phantom units. Distributions less than or greater than earnings are allocated in accordance with our partnership agreement.
 
NET EARNINGS PER UNIT (in millions, except per unit amounts)
 
Three Months Ended March 31,
 
2017
 
2016
Net earnings
$
92

 
$
85

Special allocations of net earnings (“Special Allocations”) (a)
1

 
—

Net earnings, including Special Allocations
93

 
85

General partner’s distributions
(3
)
 
(2
)
General partner’s IDRs (b)
(36
)
 
(30
)
Limited partners’ distributions on common units
(101
)
 
(76
)
Distributions greater than earnings
$
(47
)
 
$
(23
)
General partner’s earnings:
 
 
 
Distributions
$
3

 
$
2

General partner’s IDRs (b)
36

 
30

Allocation of distributions greater than earnings (c)
(1
)
 
(7
)
Total general partner’s earnings
$
38

 
$
25

Limited partners’ earnings on common units:
 
 
 
Distributions
$
101

 
$
76

Special Allocations (a)
(1
)
 
—

Allocation of distributions greater than earnings
(46
)
 
(16
)
Total limited partners’ earnings on common units
$
54

 
$
60

Weighted average limited partner units outstanding:
 
 
 
Common units - basic
104.8

 
93.6

Common units - diluted
104.9

 
93.6

Net earnings per limited partner unit:
 
 
 
Common - basic
$
0.51

 
$
0.64

Common - diluted
$
0.51

 
$
0.64

 
(a)
Normal allocations according to percentage interests are made after giving effect, if any, to priority income allocations in an amount equal to incentive cash distributions fully allocated to the general partner and any special allocations. The adjustment reflects the special allocation to common units held by TLGP for the interest incurred in connection with borrowings on the Revolving Credit Facility in lieu of using all cash on hand to fund the North Dakota Gathering and Processing Assets acquisition during the three months ended March 31, 2017.
(b)
IDRs entitle the general partner to receive increasing percentages, up to 50%, of quarterly distributions in excess of $0.3881 per unit per quarter. The amount above reflects earnings distributed to our general partner net of $12.5 million of IDRs waived by TLGP for the three months ended March 31, 2017. See Note 12 of our Annual Report on Form 10-K for the year ended December 31, 2016 for further discussion related to IDRs.
(c)
We have revised the historical allocation of general partner earnings to include the Predecessors’ losses of $7 million for the three months ended March 31, 2016. There were no Predecessor losses for the three months ended March 31, 2017.

CASH DISTRIBUTIONS
 
Our partnership agreement, as amended, sets forth the calculation to be used to determine the amount and priority of cash distributions that the limited partner unitholders and general partner will receive.
 
QUARTERLY DISTRIBUTIONS
Quarter Ended
Quarterly Distribution Per Unit
 
Total Cash Distribution including general partner IDRs (in millions)
 
Date of Distribution
 
Unitholders Record Date
December 31, 2016
$
0.91

 
$
140

 
February 14, 2017
 
February 3, 2017
March 31, 2017 (a)
0.94

 
140

 
May 15, 2017
 
May 5, 2017
 
(a)
This distribution was declared on April 19, 2017 and will be paid on the date of distribution. This distribution is net of $12.5 million of IDRs waived by TLGP for the three months ended March 31, 2017.