Acquisitions (Notes) | 9 Months Ended |
Sep. 30, 2013 |
Business Combinations [Abstract] | ' |
Acquisitions | ' |
ACQUISITIONS |
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Carson Terminal Assets Acquisition |
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As part of our strategy to make capital investments to expand our existing asset base, we purchased the Carson Terminal Assets, effective June 1, 2013, in exchange for total consideration of $640.0 million, comprised of $544.0 million in cash financed with borrowings under our amended revolving credit facility (the “Revolving Credit Facility”) and the remaining $96.0 million in partnership units. The equity was comprised of 1,445,561 common units and 29,501 general partner units. The Carson Terminal Assets were part of BP’s Southern California refining and marketing business that Tesoro acquired on June 1, 2013. The Carson Terminal Assets Acquisition occurred immediately after Tesoro’s acquisition of the assets from BP. |
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Commercial Agreements. We entered into commercial agreements with Tesoro in connection with the Carson Terminal Assets Acquisition under which Tesoro commits to provide us with minimum throughput volumes of refined products and minimum fees for dedicated storage. See Note C for additional information regarding commercial agreements and amendments to other agreements with related parties in connection with this acquisition. |
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Financial Information. Tesoro retained responsibility for remediation of known environmental liabilities due to the use or operation of the Carson Terminal Assets prior to the acquisition (“Pre-Closing”) and has indemnified the Partnership for any losses incurred by the Partnership arising out of those remediation obligations. The indemnification for unknown Pre-Closing remediation liabilities is limited to five years. The property, plant and equipment was recorded by TLLP at Tesoro’s historical cost, which is equal to the fair value of the Carson Terminal Assets on June 1, 2013, based on Tesoro’s preliminary assessment of the fair value of the assets acquired and liabilities assumed, pending the completion of an independent valuation. Based on the analysis performed, Tesoro’s historical cost was estimated to be $400.0 million. The Carson Terminal Assets were not considered a stand-alone business in Tesoro’s valuation process, which resulted in a lower allocated fair value for the Carson Terminal Assets. There have been no changes to the preliminary value of the Carson Terminal Assets during the three months ended September 30, 2013. Any subsequent adjustments as a result of the completion of the independent valuation will be reflected as adjustments to the equity of the Partnership. The following was recorded as of June 1, 2013, the date of the Carson Terminal Assets Acquisition (in thousands): |
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Prepayments and other | $ | 208 | | | | | | | | | | | | | |
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Property, plant and equipment | 400,000 | | | | | | | | | | | | | |
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Capital lease obligation | (1,185 | ) | | | | | | | | | | | | |
Preliminary value of Carson Terminal Assets | $ | 399,023 | | | | | | | | | | | | | |
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We have not provided disclosure of pro forma revenues and earnings as if the Carson Terminal Assets had been operating as part of our operations during all periods presented in these financial statements. BP managed and operated the Carson Terminal Assets as part of its refining operations, and historical U.S. GAAP financial information specific to the Carson Terminal Assets is not available. As a result, preparing pro forma information was determined to be impracticable. |
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Northwest Products System Acquisition |
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On June 19, 2013, TLLP completed the Northwest Products System Acquisition, which is consistent with our business strategy to pursue accretive acquisitions of complementary assets and provides an opportunity to provide additional fee-based logistics services to Tesoro and third parties. The purchase price for the Northwest Products System was $354.8 million. The amount paid at closing was reduced by an advance deposit of $40.0 million that was paid in December 2012 upon execution of the asset sale and purchase agreements. The Partnership financed the acquisition with proceeds from the public offering of common units on January 14, 2013 (the “January Offering”). |
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In accordance with the amended asset sale and purchase agreements, Chevron retained financial and operational responsibility to remediate the site of the release of diesel fuel that occurred at the Northwest Products System near Willard, Utah on March 18, 2013 (the “Diesel Pipeline Release”) for a period of two years, in addition to paying any monetary fines and penalties assessed by any government authority arising from this incident. See Note H for additional information regarding the environmental liabilities associated with the Northwest Products System Acquisition. Pursuant to the regulatory review process associated with the Northwest Products System Acquisition, we agreed to divest our current refined products terminal in Boise, Idaho within approximately six months of the closing date. We have classified the carrying value of the Boise terminal as assets held-for-sale in other current assets in our condensed consolidated balance sheet as of September 30, 2013. The carrying value of the Boise terminal did not exceed the fair value as of September 30, 2013. |
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Commercial Agreements. All third-party terminal agreements and any contracts between Chevron and other Chevron affiliates were assigned to TLLP for the Northwest Products System. The refined products pipeline and the jet fuel pipeline are common carrier pipelines regulated by the Federal Energy Regulatory Commission. |
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Financial Information. We accounted for the Northwest Products System Acquisition using the acquisition method of accounting, which requires, among other things, that assets acquired at their fair values and liabilities assumed be recognized on the balance sheet as of the acquisition date. Our condensed consolidated balance sheet as of September 30, 2013 reflects the purchase price allocations based on an assessment of the fair value of the assets acquired and liabilities assumed, pending additional review of environmental liabilities assumed. No changes have been recorded to the purchase price allocation during the three months ended September 30, 2013. The table below presents the preliminary acquisition date purchase price allocation (in thousands): |
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Prepayments and other | $ | 53 | | | | | | | | | | | | | |
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Property, plant and equipment | 358,362 | | | | | | | | | | | | | |
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Goodwill | 8,738 | | | | | | | | | | | | | |
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Other noncurrent assets | 4,500 | | | | | | | | | | | | | |
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Other current liabilities | (12,196 | ) | | | | | | | | | | | | |
Noncurrent liabilities | (4,700 | ) | | | | | | | | | | | | |
Total purchase price | $ | 354,757 | | | | | | | | | | | | | |
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The Partnership initially recognized an estimated $16.6 million of environmental liabilities assumed in connection with the Northwest Products System Acquisition, of which $11.9 million was related to a Corrective Action Order (“the CAO”) issued on March 22, 2013. Remaining environmental liabilities related to the CAO were $9.8 million as of September 30, 2013 and were included in accrued environmental liabilities in our condensed consolidated balance sheet. Other current liabilities also include adjustments for accrued property tax liabilities that we assumed on the acquisition date. The other $4.7 million of environmental liabilities assumed in connection with the Northwest Products System Acquisition is included in noncurrent liabilities in our condensed consolidated balance sheet. See Note H for further information regarding environmental liabilities related to the Northwest Products System. |
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The following unaudited pro forma condensed combined consolidated results of operations for the three and nine months ended September 30, 2013 and 2012 are presented as if the Northwest Products System Acquisition had been completed on January 1, 2012. |
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| Three Months Ended | | Nine Months Ended |
September 30, | September 30, |
| 2013 | | 2012 | | 2013 | | 2012 |
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Revenues | $ | 93,777 | | | $ | 57,383 | | | $ | 227,013 | | | $ | 146,901 | |
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Net income | 21,053 | | | 20,388 | | | 63,744 | | | 48,890 | |
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Net income attributable to partners | 21,053 | | | 19,425 | | | 63,744 | | | 49,298 | |
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Net income per limited partner unit: | | | | | | | |
Common - basic | $ | 0.37 | | | $ | 0.48 | | | $ | 1.12 | | | $ | 1.21 | |
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Common - diluted | $ | 0.37 | | | $ | 0.48 | | | $ | 1.11 | | | $ | 1.2 | |
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Subordinated - basic and diluted | $ | 0.37 | | | $ | 0.4 | | | $ | 1.1 | | | $ | 1.12 | |
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The pro forma condensed combined consolidated results of operations reflect adjustments to the Partnership’s condensed statements of combined consolidated operations to give effect to the following: |
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• | historical revenues and direct operating expenses for the Northwest Products System; | | | | | | | | | | | | | | |
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• | the indemnification of remediation efforts in response to the Diesel Pipeline Release; see Note H for additional discussion on the Diesel Pipeline Release; | | | | | | | | | | | | | | |
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• | depreciation expense based on the acquisition date fair value of the Northwest Products System; and | | | | | | | | | | | | | | |
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• | the impact of units issued in the January Offering on the weighted average units outstanding. | | | | | | | | | | | | | | |
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Carson Terminal Assets and Northwest Products System Post-Acquisition Financial Information |
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The operations of the Carson Terminal Assets and the Northwest Products System are reported in our Terminalling, Transportation and Storage segment. The following amounts associated with the Carson Terminal Assets Acquisition and the Northwest Products System Acquisition, subsequent to each respective acquisition date, are included in our condensed statements of combined consolidated operations of TLLP (in thousands): |
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| Three Months Ended | | Nine Months Ended | | | | | | | | |
30-Sep-13 | 30-Sep-13 | | | | | | | | |
Carson Terminal Assets: | | | | | | | | | | | |
Total operating revenues | $ | 23,391 | | | $ | 30,571 | | | | | | | | | |
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Net income attributable to partners | 8,795 | | | 11,578 | | | | | | | | | |
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Costs associated with the acquisition (a) | — | | | 1,216 | | | | | | | | | |
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Northwest Products System: | | | | | | | | | | | |
Total operating revenues | 13,563 | | | 15,278 | | | | | | | | | |
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Net income attributable to partners | 1,869 | | | 2,318 | | | | | | | | | |
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Costs associated with the acquisition (a) | 652 | | | 3,382 | | | | | | | | | |
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(a) | Costs associated with the acquisitions, including costs to integrate the business, are included in the general and administrative expenses of TLLP in our condensed statements of combined consolidated operations. | | | | | | | | | | | | | | |
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2012 Acquisitions |
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We completed the Martinez Marine Terminal Acquisition, the Long Beach Assets Acquisition and the Anacortes Rail Facility Acquisition in 2012 from Tesoro and entered into commercial agreements in connection with these acquisitions under which Tesoro commits to provide us with minimum monthly throughput volumes of crude oil and refined products. See our Annual Report on Form 10-K for the year ended December 31, 2012 for additional information regarding these acquisitions and the commercial agreements with related parties in connection with these acquisitions. |