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New words:
abroad, agile, Alliance, ambition, AMPLY, BOEM, bonding, Bulletin, CAA, caption, category, causation, CEQ, circumvent, CISA, cloud, compound, Congressional, coordinate, coordinating, Coordinator, cultural, defrauded, depositary, DHS, drought, empaneled, ESG, evacuated, expend, explaining, FCA, feasible, feedstock, frequency, GFANZ, Glasgow, halting, hear, heating, hydrological, ID, Ida, imaging, judge, Kingdom, launch, launched, lifecycle, mandatory, merge, meteorological, misinterpretation, Northern, NWPR, Ocean, offline, Omicron, optical, outage, outlook, Overnight, path, pause, preliminary, prepaid, prioritizing, prompted, prone, properly, reclassified, recompute, recreation, recruit, Reform, reinstituted, requisite, rescind, resume, resumed, resumption, royalty, scientific, sentiment, slight, societal, SOFR, sooner, speed, stationary, suspension, therefrom, therewith, trend, trillion, Trump, TSA, unclear, unconditionally, uneven, USD, vacated, vacating, variant, warmer
Removed:
Amoco, appointment, Atlanta, attractively, Baltimore, Bay, Bend, Brian, CFO, Cincinnati, commercialization, complementary, consisting, cumulative, Dayton, declining, determinable, Detroit, dividend, dollar, executing, Francisco, funded, Gerald, growing, introduction, Kellogg, leaving, link, Maret, Mercantile, movement, older, positioned, priced, retrospective, revision, San, Smith, sourcing, St, summation, tech, Tortoise, trust, venturing, world
Financial report summary
?Risks
- The Merger Agreement is subject to conditions, including some conditions that may not be satisfied on a timely basis, if at all. Failure to complete the Merger, or significant delays in completing the Merger, could negatively affect our business and financial results and the trading prices of our common units.
- We will be subject to business uncertainties while the Merger is pending, which could adversely affect our business.
- Because the Exchange Ratio is fixed and because the market price of the BP ADSs will fluctuate prior to the completion of the Merger, our public unitholders cannot be sure of the market value of the BP ADSs they will receive as Merger Consideration relative to the value of our common units they exchange.
- Events outside of our control, including a pandemic such as the global outbreak of COVID-19, variants of COVID-19, and the potential global recession could have a material adverse impact on our financial position, results of operations and cash flows.
- BP’s new business strategy to pivot from being an international oil company focused on producing resources to an integrated energy company focused on delivering solutions for customers may adversely affect our business, financial condition, results of operations, cash flows, and ability to make cash distributions to our unitholders.
- BP Products is under no obligation to enter into new minimum volume commitment agreements following their respective terms and may terminate its obligations earlier under certain specified circumstances, which could have a material adverse effect on our financial condition, results of operations, cash flows and ability to make distributions to our unitholders.
- We own certain assets through joint ventures that we do not operate, and our control of such assets is limited by provisions of the agreements we have entered into with our joint venture partners and by our percentage ownership in such joint ventures.
- If we are unable to obtain needed capital or financing on satisfactory terms to fund any future expansions of our asset base, our ability to make quarterly cash distributions may be diminished or our financial leverage could increase. Other than our revolving credit facility and term loan facility, we do not have any commitment with any of our affiliates or third parties to provide any direct or indirect financial assistance to us.
- If we are unable to make acquisitions on economically acceptable terms from BP or third parties, our future growth would be limited, and any acquisitions we may make may reduce, rather than increase, our cash flows and ability to make distributions to unitholders.
- Our operations are subject to many risks and operational hazards. If a significant accident or event occurs that results in a business interruption or shutdown for which we are not adequately insured, our operations and financial results could be materially and adversely affected.
- Our profitability and cash flow are dependent on our ability to maintain the current volumes of crude oil, natural gas, refined products or diluent that we transport, which often depend on actions and commitments by parties beyond our control. In order to maintain the volumes transported on our assets, our customers must continually obtain new supplies of crude oil, which is expensive, particularly in offshore Gulf of Mexico.
- If third-party pipelines, production platforms, refineries, caverns and other facilities interconnected to our pipelines become unavailable to transport, produce, refine or store crude oil, natural gas, refined products or diluent, our revenue and available cash could be adversely affected.
- Substantially all of the volumes that we transport through our onshore pipelines are dependent on the ongoing operation of the Whiting Refinery. A material decrease in the utilization of and/or demand for refined products or diluent from the Whiting Refinery could materially reduce the volumes of crude oil, refined products or diluent that we handle, which could adversely affect our financial condition, results of operations, cash flows and ability to make distributions to our unitholders.
- We are dependent on BP for a substantial majority of the crude oil, natural gas, refined products and diluent that we transport. If BP changes its business strategy, is unable for any reason, including financial or other limitations, to satisfy its obligations under our commercial agreements or significantly reduces the volumes transported through our pipelines, our revenue would decline and our financial condition, results of operations, cash flows, and ability to make distributions to our unitholders would be materially and adversely affected.
- Hurricanes and other severe weather conditions, natural disasters or other adverse events or conditions could damage our pipeline systems or disrupt the operations of our customers, which could adversely affect our operations and financial condition.
- Our environmental indemnification notification period has expired with our general partner.
- Our crude oil transportation operations are dependent upon demand for crude oil by refiners concentrated in particular regions, primarily in the Midwest and Gulf Coast.
- We face intense competition to obtain crude oil, natural gas and refined products volumes.
- Our insurance policies do not cover all losses, costs or liabilities that we may experience, and insurance companies that currently insure companies in the energy industry may cease to do so or substantially increase premiums.
- We are subject to pipeline safety laws and regulations, compliance with which may require significant capital expenditures, increase our cost of operations and affect or limit our business plans.
- Compliance with and changes in environmental, health and safety laws and regulations has a cost impact on our business, and failure to comply with such laws and regulations could have an impact on our assets, costs, revenue generation and growth opportunities. In addition, our customers are also subject to environmental laws and regulations, and any changes in these laws and regulations could result in significant added costs to comply with such requirements and delays or curtailment in pursuing production activities, which could reduce demand for our services.
- Our operations, and those of our customers and suppliers, are subject to a series of risks regarding climate change.
- Increasing attention to ESG matters and conservation matters may impact our business.
- Actions by the Biden Administration may limit the amount of production available to deliver through our pipelines.
- Subsidence and erosion could damage our pipelines, particularly along the Gulf Coast and offshore and the facilities that serve our customers, which could adversely affect our operations and financial condition.
- We may incur significant costs and liabilities as a result of pipeline integrity management program testing and any necessary pipeline repair or preventative or remedial measures.
- We may be unable to obtain or renew permits necessary for our operations or for growth and expansion projects, which could inhibit our ability to do business.
- Our asset inspection, maintenance or repair costs may increase in the future. In addition, there could be service interruptions due to unforeseen events or conditions or increased downtime associated with our pipelines that could have a material adverse effect on our business and results of operations.
- The tariff rates of our regulated assets are subject to review and possible adjustment by federal and state regulators, which could adversely affect our revenue and our ability to make distributions to our unitholders.
- Our fixed loss allowance exposes us to commodity prices.
- If we lose any of our key personnel, through attrition or reinvention, our ability to manage our business and continue our growth could be negatively impacted.
- Terrorist or cyber-attacks and threats, or escalation of military activity in response to these attacks, could have a material adverse effect on our business, financial condition or results of operations.
- Compliance with and changes in cybersecurity requirements has a cost impact on our business, and failure to comply with such laws and regulations could have an impact on our assets, costs, revenue generation and growth opportunities.
- Our business could be negatively impacted by cyberattacks targeting our computer and telecommunications systems and infrastructure, or targeting those of our third-party service providers.
- Restrictions in our revolving credit facility could adversely affect our business, financial condition, results of operations and ability to make quarterly cash distributions to our unitholders.
- Debt we incur in the future may limit our flexibility to obtain financing and to pursue other business opportunities.
- Increases in interest rates could adversely impact the price of our common units, our ability to issue equity or incur debt for acquisitions or other purposes and our ability to make cash distributions at our intended levels.
- The lack of diversification of our assets and geographic locations could adversely affect our ability to make distributions to our common unitholders.
- If we are deemed an “investment company” under the Investment Company Act of 1940, it could have a material adverse effect on our business and the price of our common units.
- BP Holdco owns and controls our general partner, which has sole responsibility for conducting our business and managing our operations. Our general partner and its affiliates, including BP Pipelines, may have conflicts of interest with us and have limited duties to us, and they may favor their own interests to our detriment and that of our unitholders.
- The board of directors of our general partner may modify or revoke our cash distribution policy at any time at its discretion. Our partnership agreement does not require us to pay any distributions at all.
- Our general partner intends to limit its liability regarding our obligations.
- We expect to distribute a significant portion of our cash available for distribution to our partners, which could limit our ability to grow and make acquisitions.
- Our general partner will be required to deduct Estimated Total Maintenance Spend from our operating surplus, which may result in less cash available for distribution to unitholders from operating surplus than if actual Total Maintenance Spend (total maintenance expenses and maintenance capital expenditures) were deducted.
- Our partnership agreement replaces our general partner’s fiduciary duties to holders of our units.
- Because our partnership agreement contains provisions that replace the standards to which our general partner would otherwise be held by state fiduciary duty law, it restricts the remedies available to holders of our units for actions taken by our general partner that might otherwise constitute breaches of fiduciary duty.
- BP Pipelines and other affiliates of our general partner may choose other common carriers for supply.
- The fees and reimbursements due to our general partner and its affiliates, including BP Pipelines, for services provided to us or on our behalf will reduce our cash available for distribution. In certain cases, the amount and timing of such reimbursements will be determined by our general partner and its affiliates, including BP Pipelines.
- The holder or holders of our incentive distribution rights may elect to cause us to issue common units to it in connection with a resetting of the target distribution levels related to the incentive distribution rights, without the approval of the conflicts committee of our general partner’s board of directors or the holders of our common units. This could result in lower distributions to holders of our common units.
- Unitholders have limited voting rights and are not entitled to elect our general partner or its directors, which could reduce the price at which our common units will trade.
- If you are a non-eligible holder, your common units may be subject to redemption.
- Even if holders of our common units are dissatisfied, they cannot initially remove our general partner without its consent.
- Our general partner interest or the control of our general partner may be transferred to a third party without unitholder consent.
- The incentive distribution rights may be transferred to a third party without unitholder consent.
- Our general partner has a limited call right that may require unitholders to sell their common units at an undesirable time or price.
- We may issue an unlimited number of additional partnership interests, including units ranking senior to the common units, without unitholder approval, which would dilute existing unitholder ownership interests.
- There are no limitations in our partnership agreement on our ability to issue units ranking senior to the common units.
- The market price of our common units could be adversely affected by sales of substantial amounts of our common units in the public or private markets, including sales by BP Holdco or other large holders.
- Our partnership agreement restricts the voting rights of unitholders owning 20% or more of our common units.
- Our partnership agreement designates the Court of Chancery of the State of Delaware as the exclusive forum for certain types of actions and proceedings that may be initiated by our unitholders, which would limit our unitholders’ ability to choose the judicial forum for disputes with us or our general partner’s directors, officers or other employees. Our partnership agreement also provides that any unitholder bringing an unsuccessful action will be obligated to reimburse us for any costs we have incurred in connection with such unsuccessful action.
- The price of our common units may fluctuate significantly, and unitholders could lose all or part of their investment.
- Unitholders’ liability may not be limited if a court finds that unitholder action constitutes control of our business.
- Unitholders may have liability to repay distributions.
- The NYSE does not require a publicly traded partnership like us to comply, and we do not intend to comply, with certain of its governance requirements generally applicable to corporations.
- Our tax treatment depends on our status as a partnership for federal income tax purposes and not being subject to a material amount of entity-level taxation. If the IRS were to treat us as a corporation for federal income tax purposes, or if we become subject to entity-level taxation for state tax purposes, our cash available for distribution to our unitholders would be substantially reduced.
- The tax treatment of publicly traded partnerships or an investment in our common units could be subject to potential legislative, judicial or administrative changes or differing interpretations, possibly applied on a retroactive basis.
- Our general partner may elect to convert or restructure the partnership to an entity taxable as a corporation for U.S. federal income tax purposes without unitholder consent.
- If the IRS were to contest the federal income tax positions we take, it may adversely impact the market for our common units, and the costs of any such contest would reduce our cash available for distribution to our unitholders.
- If the IRS makes audit adjustments to our income tax returns for tax years beginning after December 31, 2017, it (and some states) may assess and collect any taxes (including any applicable penalties and interest) resulting from such audit adjustments directly from us, in which case our cash available for distribution to our unitholders might be substantially reduced and our current and former unitholders may be required to indemnify us for any taxes (including any applicable penalties and interest) resulting from such audit adjustments that were paid on such unitholders' behalf.
- Even if unitholders do not receive any cash distributions from us, they will be required to pay taxes on their share of our taxable income.
- Tax gain or loss on the disposition of our common units could be more or less than expected.
- Unitholders may be subject to limitation on their ability to deduct interest expense incurred by us.
- Tax-exempt entities face unique tax issues from owning our common units that may result in adverse tax consequences to them.
- Non-U.S. Unitholders will be subject to U.S. taxes and withholding with respect to their income and gain from
- We treat each purchaser of our common units as having the same tax benefits without regard to the common units actually purchased. The IRS may challenge this treatment, which could adversely affect the value of our common units.
- We generally prorate our items of income, gain, loss and deduction between transferors and transferees of our common units each month based upon the ownership of our common units on the first day of each month, instead of on the basis of the date a particular common unit is transferred. The IRS may challenge this treatment, which could change the allocation of items of income, gain, loss and deduction among our unitholders.
- A unitholder whose common units are the subject of a securities loan (e.g., a loan to a “short seller” to cover a short sale of common units) may be considered to have disposed of those common units. If so, such unitholder would no longer be treated for tax purposes as a partner with respect to those common units during the period of the loan and could recognize gain or loss from the disposition.
- We have adopted certain valuation methodologies in determining a unitholder’s allocations of income, gain, loss and deduction. The IRS may challenge these methodologies or the resulting allocations, which could adversely affect the value of our common units.
- We are exposed to the credit risks, and certain other risks, of our customers, and any material nonpayment or nonperformance by our customers could reduce our ability to make distributions to our unitholders.
- Any expansion of existing assets or construction of new assets may not result in revenue increases and will be subject to regulatory, environmental, political, legal and economic risks, which could adversely affect our operations and financial condition.
- Potential disruption to our business and operations could occur if we do not address an incident effectively.
- If we fail to maintain an effective system of internal controls, we may not be able to accurately report our financial results or prevent fraud. As a result, current and potential unitholders could lose confidence in our financial reporting, which would harm our business and the trading price of our units.
Management Discussion
- Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
- Unless otherwise stated or the context otherwise indicates, all references to “we,” “our,” “us,” or similar expressions refer to the legal entity BP Midstream Partners LP (the "Partnership"). The term “our Parent” refers to BP Pipelines (North America), Inc. (“BP Pipelines”), any entity that wholly owns BP Pipelines, indirectly or directly, including BP America Inc. and BP p.l.c. (“BP”), and any entity that is wholly owned by the aforementioned entities, excluding BP Midstream Partners LP.
- Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the information included under Part I, Item 1 and 2. Business and Properties, Part I, Item 1A. Risk Factors and Part II, Item 8. Financial Statements and Supplementary Data. It should also be read together with “Cautionary Note Regarding Forward-Looking Statements” in this report.