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New words:
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Removed:
accepting, adding, adjacent, admission, affirming, AIV, Alexander, Anadarko, anchor, Anderson, appealed, applicability, assignment, Ball, bearing, Berney, borne, Bridge, BSM, Buckeye, bundled, Bynum, career, CBCA, Church, Civilian, clarifying, clarity, clear, complain, compression, conserve, converged, Converse, core, counter, Creighton, cured, CVR, Dartmouth, deadline, delisted, Delphin, denying, depict, deprive, desirable, destroyed, disclaim, Distinction, diversified, dual, Dutton, Edgerton, EPU, expiration, exploring, Felipe, Floor, Frank, Freeman, furnish, Geophysical, George, Goldberg, Goldman, hearing, Henry, Highway, Howard, hundred, Hunter, installed, Jeffrey, John, join, Kayne, KEP, KIA, Kim, language, LBM, leaving, Leonard, lightning, Logan, Loverro, Lynn, Mannix, marginally, MarkWest, Matelich, Matlin, Michael, Mineral, minimizing, Moore, Mystery, Nickell, ninety, noteworthy, NRGP, NRGY, NY, observer, Omaha, origination, Osborne, PAA, path, PCT, Pennsylvania, Philip, played, Poseidon, post, powered, procedure, producer, promised, prorationing, protest, RAUM, Raymond, reconciling, refinery, remanded, restructured, reversing, reviewing, Richard, Rubicon, ruled, ruling, run, San, SemGroup, settling, Shell, Shipping, stabilization, stabilized, Stanley, stimulation, stipulate, strike, structuring, Summit, Superfund, supersede, swept, tighten, traditional, Triad, trial, Trump, Tulane, TX, unbundled, unclear, undertaken, underwriter, underwriting, unilaterally, unrealized, updated, upfront, Virginia, Wahrhaftig, Wharton
Financial report summary
?Competition
Suncor Energy • Anadarko Petroleum • Occidental Petroleum • Select Energy Services • Enbridge • ONEOK • Magellan Midstream Partners • Crestwood Equity Partners • Energy Transfer • Crestwood Equity PartnersRisks
- Failure to complete, or significant delays in completing, the Take-Private Merger could negatively affect the trading price of our Class A shares and our future business and financial results.
- Class A shareholders will not receive dividends with respect to their Class A shares during the pendency of the transactions contemplated by the Take-Private Merger Agreement.
- Lawsuits have been filed against TGE and the board of directors of our general partner challenging the Take-Private Merger, and any injunctive relief or adverse judgment for monetary damages could prevent the Take-Private Merger from occurring or could materially adversely affect our business, financial condition and operating results.
- While the Take-Private Merger Agreement is in effect, we may be limited in our ability to pursue other business opportunities, and our business may be otherwise adversely affected.
- The Take-Private Merger may not be consummated even if our shareholders approve the Take-Private Merger proposal.
- If the Take-Private Merger does not occur, neither we nor our shareholders will benefit from the expenses we have incurred in the pursuit of the Take-Private Merger.
- The Take-Private Merger is a taxable transaction for U.S. federal income tax purposes, and the U.S. federal income tax consequences to our shareholders will depend on each shareholder's particular situation.
- We may not have sufficient cash from operations following the establishment of cash reserves and payment of fees and expenses, including cost reimbursements to our general partner and its affiliates, to enable us to pay the quarterly cash dividend at the current dividend level, or at all, to holders of our Class A shares.
- If we are not able to renew or replace expiring customer contracts at favorable rates or on a long-term basis, our financial condition, results of operations, cash flows and ability to make quarterly cash dividends to our Class A shareholders will be adversely affected.
- We are exposed to the creditworthiness and performance of our customers, suppliers and contract counterparties, and any material nonpayment or nonperformance by one or more of these parties could adversely affect our financial condition, cash flows, and operating results.
- We depend on certain key customers for a significant portion of our revenues and are exposed to credit risks of these customers. The loss of or material nonpayment or nonperformance by any of these key customers could adversely affect our cash flow and results of operations.
- If we are unable to make acquisitions on economically acceptable terms, our future growth will be limited, and the acquisitions we do make may reduce, rather than increase, our cash generated from operations on a per share basis.
- Constructing new assets subjects us to risks of project delays, cost overruns and lower-than-anticipated volumes of natural gas or crude oil once a project is completed. Our operating cash flows from our capital projects may not be immediate or meet our expectations.
- If we are unable to obtain needed capital or financing on satisfactory terms our ability to make quarterly cash dividends may be diminished or our financial leverage could increase.
- The Throughput and Deficiency Agreements for the Pony Express System and some of our service agreements with respect to our water business services contain provisions that can reduce the cash flow stability that the agreements were designed to achieve.
- We may not be able to compete effectively in our midstream services activities and our business is subject to the risk of a capacity overbuild of midstream energy infrastructure in the areas where we operate.
- Certain of the contracts on the Pony Express System contain most favored nations rights, limiting flexibility to offer certain capacity to new shippers.
- If third-party pipelines or other facilities interconnected to our systems become partially or fully unavailable, if the volumes we transport do not meet the quality requirements of such pipelines or facilities, or if claims are made against us for events that occur downstream of our interconnection with third-party facilities, our revenues and our ability to make quarterly cash dividends to our Class A shareholders could be adversely affected.
- The lack of diversification of our assets and geographic locations could adversely affect our ability to make quarterly cash dividends to our Class A shareholders.
- Our operations are dependent on our rights and ability to receive or renew the required permits and other approvals from governmental authorities and other third parties.
- Difficult conditions in the global capital markets, the credit markets and the economy in general could negatively affect our business and results of operations.
- The amount of cash we have available for dividends to Class A shareholders depends primarily on our cash flow rather than on our profitability, which may prevent us from making dividends, even during periods in which we record net income.
- Our success depends on the supply and demand for natural gas and crude oil.
- Any significant decrease in available supplies of hydrocarbons in our areas of operation, or redirection of existing hydrocarbon supplies to other markets, could adversely affect our business and operating results. Persistent low commodity prices could result in lower throughput volumes and reduced cash flows.
- Our natural gas, crude oil and liquids operations, including the rates charged on our natural gas and crude oil pipeline systems, are subject to extensive regulation by federal, state and local regulatory authorities, which could have a material adverse effect on our business, financial condition, and results of operations.
- The FERC's treatment of income taxes could affect the rates charged on our natural gas and crude oil pipeline systems which could adversely affect our business, results of operations, financial condition and ability to make quarterly cash dividends to our Class A shareholders.
- We are subject to numerous hazards and operational risks.
- Our business could be negatively impacted by security threats, including cyber security threats, and related disruptions.
- If we are unable to protect our information and telecommunication systems against disruptions or failures, our operations could be disrupted.
- Increasing regulatory focus on privacy and security issues and expanding laws could impact our business models, expose us to increased liability, subject us to lawsuits, investigations and other liabilities and restrictions on our operations that could significantly and adversely affect our business.
- Our insurance coverage may not be adequate.
- Our pipeline integrity program may impose significant costs and liabilities on us, while increased regulatory requirements relating to the integrity of our pipeline systems may require us to make additional capital and operating expenditures to comply with such requirements.
- Our operations are subject to governmental laws and regulations relating to the protection of the environment, which may expose us to significant costs, liabilities and expenditures that could exceed our current expectations.
- Climate change regulation at the federal, state or regional levels could result in increased operating and capital costs for us and reduced demand for our services.
- Increased regulation of hydraulic fracturing could affect our operations and result in reductions or delays in production by our customers, which could have a material adverse impact on our revenues.
- Our produced water disposal operations may be subject to additional regulation and liability or claims of environmental damages.
- Produced water injection well operations and hydraulic fracturing may cause induced seismicity.
- Certain portions of our transportation, storage and processing facilities have been in service for several decades. There could be unknown events or conditions or increased maintenance or repair expenses and downtime associated with our facilities that could have a material adverse effect on our business and results of operations.
- We have certain long-term fixed priced natural gas and crude oil transportation contracts that cannot be adjusted even if our costs increase. As a result, our costs could exceed our revenues.
- A significant amount of the revenue currently generated by our Gathering, Processing & Terminalling segment depends on whether our customers actually use our services. A period of low usage will reduce our revenue in our Gathering, Processing & Terminalling segment and could result in an impairment of the goodwill at the Midstream Facilities reporting unit within this segment.
- We are exposed to direct commodity price risk in our Gathering, Processing & Terminalling segment, including certain of TMID's contracts and the utilization of commodity derivatives by Stanchion, and our exposure to direct commodity price risk may increase in the future.
- The TEP revolving credit facility and the indentures governing the TEP senior notes contain certain restrictions which could adversely affect our business, financial condition, results of operations and ability to make quarterly cash dividends to our Class A shareholders.
- Our future indebtedness levels may limit our flexibility to obtain financing and to pursue other business opportunities.
- Increases in interest rates could adversely impact our Class A share price, our ability to issue equity or incur indebtedness for acquisitions or other purposes and our ability to make quarterly cash dividends at our intended levels.
- Rockies Express has a substantial amount of indebtedness and Rockies Express may not be able to generate a sufficient amount of cash flow to meet its debt service obligations.
- Rockies Express' revolving credit facility contains certain restrictions which could limit its financial flexibility and increase its financing costs.
- We do not own most of the land on which our assets are located, which could disrupt our operations and subject us to increased costs.
- A shortage of skilled labor in the midstream industry could reduce labor productivity and increase costs, which could have a material adverse effect on our business and results of operations.
- If we fail to develop or maintain an effective system of internal controls, we may not be able to accurately report our financial results or prevent fraud. As a result, shareholders could lose confidence in our financial reporting, which would harm our business and the trading price of our Class A shares.
- New technologies, including those involving recycling of produced water or the replacement of water in fracturing fluid, may adversely affect our future results of operations and financial condition.
- Rockies Express is a joint venture and our investment could be adversely affected by our lack of sole decision-making authority.
- Our membership interest in Rockies Express is subject to a right of first refusal, which may make it more difficult to sell our interest in Rockies Express in the future.
- Our partnership agreement requires that we distribute our available cash on a quarterly basis, which could limit our ability to grow and make acquisitions.
- Restrictions in TEP's and Rockies Express' respective credit facilities and the indentures governing TEP's and Rockies Express' existing senior notes could limit their ability to make distributions, thereby limiting our ability to make quarterly cash dividends to our Class A shareholders. Any credit facility we enter into in the future could pose similar restrictions that would further limit our ability to make quarterly cash dividends.
- Our shareholders do not vote in the election of our general partner's directors. The Sponsor Entities own a sufficient number of shares to allow them to prevent the removal of our general partner and to strongly influence all other matters requiring shareholder approval.
- Our general partner may cause us to issue additional Class A shares or other equity securities, including equity securities that are senior to our Class A shares, without your approval, which may adversely affect you.
- You may not have limited liability if a court finds that shareholder action constitutes control of our business.
- Our partnership agreement restricts the rights of shareholders owning 20% or more of our shares.
- Future sales of our Class A shares in the public market, including sales of Class A shares by the Exchange Right Holders after the exercise of the Exchange Right, could reduce our Class A share price, and any additional capital raised by us through the sale of equity or convertible securities may dilute your ownership in us.
- A valuation allowance on our deferred tax asset could reduce our earnings.
- The NYSE does not require a limited partnership like us to comply with certain of its corporate governance requirements.
- We may incur liability as a result of our ownership of TEP's general partner.
- Conflicts of interest may arise as a result of our organizational structure and the relationships among us, our general partner, and its direct and indirect owners, which include BIP, the Sponsor Entities and their affiliated entities and owners.
- Our partnership agreement replaces our general partner's fiduciary duties to holders of our Class A shares with contractual standards governing its duties.
- Our partnership agreement restricts the remedies available to holders of our Class A shares for actions taken by our general partner that might otherwise constitute breaches of fiduciary duty.
- Our general partner's affiliates may compete with us.
- Our general partner has a call right that may require you to sell your Class A shares at an undesirable time or price.
- The tax treatment of TEP depends on it not being subject to a material amount of entity-level taxation by individual states. If TEP becomes subject to material additional amounts of entity-level taxation for state tax purposes, it would reduce the amount of cash available for dividends to us and increase the portion of our dividends treated as taxable dividends.
- We may incur substantial corporate income tax liabilities on our allocable share of TEP income.
- Compliance with and changes in tax laws could adversely affect our performance.
- If the IRS makes audit adjustments to TEP's income tax returns for tax years beginning after 2017, it may collect any resulting taxes (including any applicable penalties and interest) directly from TEP, in which case TEP may require its unitholders and former unitholders to reimburse it for such taxes (including any applicable penalties or interest) or, if TEP is required to bear such payment, TEP's cash available for distribution to TEP's unitholders might be substantially reduced.
- Taxable gain or loss on the sale of our Class A shares could be more or less than expected.
- Our current tax treatment may change, which could affect the value of our Class A shares or reduce our cash available for dividends.
- Any decrease in our Class A share price could adversely affect our amount of cash available for dividends.
- The IRS Form 1099-DIV that you receive from your broker may over-report your dividend income with respect to our shares for U.S. federal income tax purposes, and failure to report your dividend income in a manner consistent with the IRS Form 1099-DIV that you receive from your broker may cause the IRS to assert audit adjustments to your U.S. federal income tax return. If you are a non-U.S. holder of our shares, your broker or other withholding agent may overwithhold taxes from dividends paid to you, in which case you generally would have to timely file a U.S. tax return or an appropriate claim for refund in order to claim a refund of the overwithheld taxes.
Management Discussion
- Revenues. Total revenues were $868.5 million for the year ended December 31, 2019 compared to $793.3 million for the year ended December 31, 2018, which represents an increase of $75.3 million, or 9%, in total revenues. The overall increase in revenue was largely driven by increased revenues of $56.2 million and $42.2 million in the Gathering, Processing & Terminalling and Crude Oil Transportation segments, respectively, partially offset by a $22.4 million increase in eliminations of intersegment revenue and decreased revenues of $0.7 million in the Natural Gas Transportation segment, as discussed further below.
- Operating costs and expenses. Operating costs and expenses were $515.8 million for the year ended December 31, 2019 compared to $442.6 million for the year ended December 31, 2018, which represents an increase of $73.2 million, or 17%. The overall increase in operating costs and expenses was driven by increased operating costs and expenses of $47.0 million, $27.2 million, and $2.7 million in the Gathering, Processing & Terminalling, Crude Oil Transportation, and Natural Gas Transportation segments, respectively, partially offset by decreased operating costs and expenses of $3.7 million in the Corporate and Other segment. The decrease in Corporate and Other expenses was primarily driven by a $22.4 million increase in eliminations of intersegment operating costs and expenses, partially offset by a $20.2 million increase in corporate general and administrative costs due to an increase in equity-based compensation costs related to the accelerated vesting of certain Equity Participation Shares as a result of the March 2019 Blackstone Acquisition and other events that occurred in 2019.
- Equity in earnings of unconsolidated investments. Equity in earnings of unconsolidated investments was $325.4 million and $306.8 million for the years ended December 31, 2019 and 2018, respectively. Equity in earnings of unconsolidated investments of $325.4 million for the year ended December 31, 2019 primarily reflects our portion of earnings and the $34.0 million of amortization of a negative basis difference associated with our aggregate 75% membership interest in Rockies Express, as well as equity in earnings related to our 51% membership interests in Pawnee Terminal and Powder River Gateway of $5.9 million and $3.1 million, respectively. Equity in earnings of unconsolidated investments of $306.8 million for the year ended December 31, 2018 primarily reflects our portion of earnings and the $35.9 million of amortization of a negative basis difference associated with our aggregate 75% membership interest in Rockies Express, inclusive of the additional 25.01% membership interest acquired in February 2018, as well as $4.2 million of equity in earnings related to our 51% membership interest in Pawnee Terminal. The overall increase was primarily driven by a $13.0 million increase in equity in earnings from Rockies Express as a result of lower interest expense due to the repayment of Rockies Express' $550 million of 6.85% senior notes due July 15, 2018 and the refinancing of Rockies Express' $525 million of 6.00% senior notes due January 15, 2019, the additional 25.01% membership interest acquired in February 2018, and the proceeds from the contract termination discussed in Note 20 – Legal and Environmental Matters. These increases were partially offset by lower west-end revenue as a result of contract expirations and the tax expense recognized during the year ended December 31, 2019 as a result of the Ohio Supreme Court decision discussed in Note 20 – Legal and Environmental Matters.