| Equity |
EQUITY AND NET EARNINGS PER UNIT We had 73,947,231 of publicly held outstanding common units as of June 30, 2017. Additionally, Andeavor owned 34,055,042 of our common units and 2,202,880 of our general partner units (the 2% general partner interest) as of June 30, 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) | (195 | ) | | (85 | ) | | (280 | ) | Net earnings attributable to partners | 125 |
| | 77 |
| | 202 |
| Contributions (b) | 31 |
| | 2 |
| | 33 |
| Other | (2 | ) | | 5 |
| | 3 |
| Balance at June 30, 2017 | $ | 1,848 |
| | $ | (61 | ) | | $ | 1,787 |
|
| | (a) | Represents cash distributions declared and paid during the six months ended June 30, 2017, relating to the first quarter of 2017 and the fourth quarter of 2016. |
| | (b) | Includes Andeavor 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 June 30, 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
June 30, | | Six Months Ended
June 30, | | 2017 | | 2016 | | 2017 | | 2016 | Net earnings | $ | 110 |
| | $ | 76 |
| | $ | 202 |
| | $ | 161 |
| Special allocations of net earnings (“Special Allocations”) (a) | — |
| | — |
| | 1 |
| | — |
| Net earnings, including Special Allocations | 110 |
| | 76 |
| | 203 |
| | 161 |
| General partner’s distributions | (3 | ) | | (2 | ) | | (6 | ) | | (4 | ) | General partner’s IDRs (b) | (39 | ) | | (36 | ) | | (75 | ) | | (66 | ) | Limited partners’ distributions on common units | (105 | ) | | (85 | ) | | (206 | ) | | (161 | ) | Distributions greater than earnings | $ | (37 | ) | | $ | (47 | ) | | $ | (84 | ) | | $ | (70 | ) | General partner’s earnings: | | | | | | | | Distributions | $ | 3 |
| | $ | 2 |
| | $ | 6 |
| | $ | 4 |
| General partner’s IDRs (b) | 39 |
| | 36 |
| | 75 |
| | 66 |
| Allocation of distributions greater than earnings (c) | — |
| | (8 | ) | | (1 | ) | | (15 | ) | Total general partner’s earnings | $ | 42 |
| | $ | 30 |
| | $ | 80 |
| | $ | 55 |
| Limited partners’ earnings on common units: | | | | | | | | Distributions | $ | 105 |
| | $ | 85 |
| | $ | 206 |
| | $ | 161 |
| Special Allocations (a) | — |
| | — |
| | (1 | ) | | — |
| Allocation of distributions greater than earnings | (37 | ) | | (39 | ) | | (83 | ) | | (55 | ) | Total limited partners’ earnings on common units | $ | 68 |
| | $ | 46 |
| | $ | 122 |
| | $ | 106 |
| Weighted average limited partner units outstanding: | | | | | | | | Common units - basic | 108.0 |
| | 95.2 |
| | 106.4 |
| | 94.4 |
| Common units - diluted | 108.1 |
| | 95.2 |
| | 106.5 |
| | 94.4 |
| Net earnings per limited partner unit: | | | | | | | | Common - basic | $ | 0.63 |
| | $ | 0.48 |
| | $ | 1.15 |
| | $ | 1.12 |
| Common - diluted | $ | 0.63 |
| | $ | 0.48 |
| | $ | 1.15 |
| | $ | 1.12 |
|
| | (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 Dropdown Credit Facility in lieu of using all cash on hand to fund the Alaska Storage and Terminalling Assets acquisition. |
| | (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 and $25 million of IDRs waived by TLGP for the three and six months ended June 30, 2017, respectively. See Note 11 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 and $14 million for the three and six months ended June 30, 2016, respectively. There were no Predecessor losses for the three and six months ended June 30, 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 | $ | 0.910 |
| | $ | 140 |
| | February 14, 2017 | | February 3, 2017 | March 31, 2017 (a) | 0.940 |
| | 140 |
| | May 15, 2017 | | May 5, 2017 | June 30, 2017 (a)(b) | 0.971 |
| | 147 |
| | August 14, 2017 | | August 4, 2017 |
| | (a) | This distribution is net of $12.5 million of IDRs waived by TLGP for each of the three months ended June 30, 2017 and March 31, 2017. |
| | (b) | This distribution was declared on July 19, 2017 and will be paid on the date of distribution. |
|
| Earnings Per Share |
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 June 30, 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
June 30, | | Six Months Ended
June 30, | | 2017 | | 2016 | | 2017 | | 2016 | Net earnings | $ | 110 |
| | $ | 76 |
| | $ | 202 |
| | $ | 161 |
| Special allocations of net earnings (“Special Allocations”) (a) | — |
| | — |
| | 1 |
| | — |
| Net earnings, including Special Allocations | 110 |
| | 76 |
| | 203 |
| | 161 |
| General partner’s distributions | (3 | ) | | (2 | ) | | (6 | ) | | (4 | ) | General partner’s IDRs (b) | (39 | ) | | (36 | ) | | (75 | ) | | (66 | ) | Limited partners’ distributions on common units | (105 | ) | | (85 | ) | | (206 | ) | | (161 | ) | Distributions greater than earnings | $ | (37 | ) | | $ | (47 | ) | | $ | (84 | ) | | $ | (70 | ) | General partner’s earnings: | | | | | | | | Distributions | $ | 3 |
| | $ | 2 |
| | $ | 6 |
| | $ | 4 |
| General partner’s IDRs (b) | 39 |
| | 36 |
| | 75 |
| | 66 |
| Allocation of distributions greater than earnings (c) | — |
| | (8 | ) | | (1 | ) | | (15 | ) | Total general partner’s earnings | $ | 42 |
| | $ | 30 |
| | $ | 80 |
| | $ | 55 |
| Limited partners’ earnings on common units: | | | | | | | | Distributions | $ | 105 |
| | $ | 85 |
| | $ | 206 |
| | $ | 161 |
| Special Allocations (a) | — |
| | — |
| | (1 | ) | | — |
| Allocation of distributions greater than earnings | (37 | ) | | (39 | ) | | (83 | ) | | (55 | ) | Total limited partners’ earnings on common units | $ | 68 |
| | $ | 46 |
| | $ | 122 |
| | $ | 106 |
| Weighted average limited partner units outstanding: | | | | | | | | Common units - basic | 108.0 |
| | 95.2 |
| | 106.4 |
| | 94.4 |
| Common units - diluted | 108.1 |
| | 95.2 |
| | 106.5 |
| | 94.4 |
| Net earnings per limited partner unit: | | | | | | | | Common - basic | $ | 0.63 |
| | $ | 0.48 |
| | $ | 1.15 |
| | $ | 1.12 |
| Common - diluted | $ | 0.63 |
| | $ | 0.48 |
| | $ | 1.15 |
| | $ | 1.12 |
|
| | (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 Dropdown Credit Facility in lieu of using all cash on hand to fund the Alaska Storage and Terminalling Assets acquisition. |
| | (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 and $25 million of IDRs waived by TLGP for the three and six months ended June 30, 2017, respectively. See Note 11 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 and $14 million for the three and six months ended June 30, 2016, respectively. There were no Predecessor losses for the three and six months ended June 30, 2017. |
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