Shell Midstream Partners 8K Results of Operations and Financial Condition | SHLX 3 Nov 17

Exhibit 99.1



		• The partnership reported $72.6 million of net income attributable to the partnership, $100.7 million of net cash provided by operating activities, $92.2 million of adjusted EBITDA attributable to the partnership, and $83.9 million of cash available for distribution. • On October 17, Shell Midstream Partners closed on the purchase of a 50% equity ownership in Crestwood Permian Basin LLC, funded with cash on hand. • Third quarter distribution of $0.3180 per LP unit, up 4.6% from previous quarter, which supports the partnership's intent to deliver 20% annual distribution growth through 2018.

HOUSTON, November 3, 2017 – Shell Midstream Partners, L.P. (NYSE: SHLX), a growth-oriented mainstream midstream master limited partnership formed by Royal Dutch Shell plc (RDS), reported net income attributable to the partnership of $72.6 million for the third quarter of 2017, which equated to $0.31 per common limited partner unit. Shell Midstream Partners also generated adjusted earnings before interest, income taxes, depreciation and amortization attributable to the partnership of $92.2 million.

"Underlying performance across Shell Midstream Partners in the third quarter was good: throughput volumes increased across the portfolio, distribution growth remained in line with our promise, and we achieved a 1.1x coverage ratio for the quarter. And these positive results were accomplished despite the impact of Hurricane Harvey, which as everyone knows, was a significant event for

the Texas Gulf Coast" said John Hollowell, CEO of Shell Midstream Partners.

Total cash available for distribution was $83.9 million, about 5% lower than the prior quarter. The financial results of the quarter were largely impacted by the effects of Hurricane Harvey on Zydeco and Colonial, which in total accounted for about $10.0 million less operating income and cash available for distribution. This was tempered by better volume performance offshore and an increase in committed shipper demand at Zydeco.

The Board of Directors of the general partner previously declared a cash distribution of $0.3180 per limited partnership unit for the third quarter of 2017. This distribution represented an increase of 4.6% over the second quarter 2017 distribution and 21% increase over the third quarter 2016 distribution. This represents the eleventh consecutive quarter of distribution growth, which supports the partnership's intent to increase distributions by 20% in 2017 and 2018. The distribution coverage ratio was 1.1x for the third quarter.

FINANCIAL HIGHLIGHTS


•	Net income attributable to the partnership was $72.6 million, compared to $65.5 million for the prior quarter.


•	Net cash provided by operating activities was $100.7 million, compared to $78.6 million for the prior quarter.


•	Cash available for distribution was $83.9 million, compared to $88.7 million for the prior quarter, driven by better underlying performance offset by impacts from Hurricane Harvey.


•	Total cash distribution declared was $77.4 million resulting in a 1.1x coverage ratio.


•	Adjusted EBITDA attributable to the partnership was $92.2 million, compared to $82.7 million for the prior quarter.


•	As of September 30, 2017, the partnership had $171.9 million of consolidated cash and cash equivalents on hand. Net Debt to Adjusted EBITDA was 2.2x as of the end of the third quarter.


•	Net proceeds received from equity issuances of $275.0 million which were primarily used to repay $265.0 million of Debt.

Cash available for distribution and Adjusted EBITDA are non-GAAP supplemental financial measures. See reconciliation tables later in this press release.

ASSET HIGHLIGHTS

Significant Crude Systems and Related Storage

◦

Zydeco - Mainline volumes were 616 kbpd in the current quarter, compared to 589 kbpd in the prior quarter. Volumes were higher primarily due to an increase in committed shipper demand largely driven by Bakken crude supply into Nederland, in addition to the completion of the Caillou island maintenance project. Total operating income and cash available for distribution was higher due to better asset performance and lower maintenance spend, tempered by losses resulting from Hurricane Harvey.


◦	Mars - Volumes were 480 kbpd compared to 506 kbpd in the prior quarter. Decrease in volume was driven by shippers showing slight builds in inventory positions compared to prior quarter. Total operating income and cash available for distribution was up from the prior quarter due to an allowance oil sale.


◦	Poseidon - Volumes were 257 kbpd, consistent with the prior quarter. Total operating income and cash available for distribution was largely in line with the prior quarter.


◦	Auger - Volumes were 78 kbpd, higher than the prior quarter of 43 kbpd primarily due to the completion of two producer planned turnarounds. This has helped contribute to a total operating income and cash available for distribution increase from the prior quarter.


◦	Eastern Corridor - Volumes were 409 kbpd compared to 371 kbpd in the prior quarter. Increase in volume was primarily driven by new wells coming online from multiple fields.

Significant Refined Products Systems and Related Storage


◦	Refinery Gas Pipelines - Volumes were as expected backed by a long-term take or pay contract.


◦	Colonial - Dividends were $4.0 million, down $1.3 million from the prior quarter, primarily due to constrained supply from Texas Gulf Coast refineries during Hurricane Harvey.

ABOUT SHELL MIDSTREAM PARTNERS, L.P.

Shell Midstream Partners, headquartered in Houston, Texas, is a fee-based, growth-oriented midstream master limited partnership formed by Royal Dutch Shell to own, operate, develop and acquire pipelines and other midstream assets. Shell Midstream Partners' assets consist of interests in entities that own crude oil and refined products pipelines serving as key infrastructure to transport onshore and offshore crude oil production to Gulf Coast and Midwest refining markets and to deliver refined products from those markets to major demand centers, as well as interests in entities that own natural gas and refinery gas pipelines which transport offshore natural gas to market hubs and deliver refinery gas from refineries and plants to chemical sites along the Gulf Coast.

For more information on Shell Midstream Partners and the assets owned by the partnership, please visit www.shellmidstreampartners.com.

FORTHCOMING EVENTS

Shell Midstream Partners will hold a webcast at 10:00am CT to discuss the reported results and provide an update on partnership operations. Interested parties may listen to the conference call on Shell Midstream Partners’ website at www.shellmidstreampartners.com by clicking on the “2017 Third-Quarter Financial Results Webcast” link, found under the "Events and Conferences" section. A replay of the conference call will be available following the live webcast.

Unaudited Summarized Financial Statement Information



	For the Three Months Ended
(in millions of dollars)	September 30, 2017		June 30, 2017
Revenue ⁽¹⁾	$	94.4	$	86.8
Costs and expenses
Operations and maintenance	34.2		30.0
General and administrative	9.6		11.0
Depreciation, amortization and accretion	8.9		9.6
Property and other taxes	3.6		3.4
Total costs and expenses	56.3		54.0
Operating income	38.1		32.8
Income from equity investments	41.2		37.2
Dividend income from cost investments	4.8		6.2
Other income	0.1		—
Investment, dividend and other income	46.1		43.4
Interest expense, net	9.7		7.5
Income before income taxes	74.5		68.7
Income tax expense	—		—
Net income	74.5		68.7
Net income attributable to Parent	—		1.0
Less: Net income attributable to noncontrolling interests	1.9		2.2
Net income attributable to the Partnership	$	72.6	$	65.5
Less: general partner's interest in net income attributable to the Partnership	17.6		14.3
Limited Partners' interest in net income attributable to the Partnership	$	55.0	$	51.2

Net income per Limited Partner Unit – Basic and Diluted:
Common	$	0.31	$	0.29
Subordinated ⁽²⁾	$	—	$	—

Weighted average Limited Partner Units outstanding – Basic and Diluted (in millions):
Common units – public	90.2		88.4
Common units – SPLC	89.0		89.0
Subordinated units – SPLC ⁽²⁾	—

⁽¹⁾ Deferred revenue for the three months ended September 30, 2017 and June 30, 2017, including the impact of overshipments and expiring credits, was $2.3 million and $2.6 million, respectively.

⁽²⁾ The subordinated units converted into common units on February 15, 2017, and were considered outstanding common units for the entire period with respect to the weighted average number of units outstanding.



Reconciliation of Adjusted EBITDA and Cash Available for Distribution to Net Income
	For the Three Months Ended
(in millions of dollars)	September 30, 2017		June 30, 2017
Net income	$	74.5	$	68.7
Add:
Allowance oil reduction to net realizable value	—		0.3
Depreciation, amortization and accretion	8.9		9.6
Interest expense, net	9.7		7.5
Income tax expense	—		—
Cash distribution received from equity investments	42.5		38.9
Less:
Income from equity investments	41.2		37.2
Adjusted EBITDA	94.4		87.8
Less:
Adjusted EBITDA attributable to Parent	—		2.5
Adjusted EBITDA attributable to noncontrolling interests	2.2		2.6
Adjusted EBITDA attributable to the Partnership	92.2		82.7
Less:
Net interest paid attributable to the Partnership ⁽¹⁾	9.7		7.5
Maintenance capex attributable to the Partnership⁽²⁾	6.1		10.4
Add:
Net adjustments from volume deficiency payments attributable to the Partnership	4.4		0.4
Reimbursements from Parent included in partners' Capital	3.1		4.1
April 2017 divestiture attributable to the Partnership	—		19.4
Cash Available for Distribution Attributable to the Partnership	$	83.9	$	88.7

⁽¹⁾ Amount represents both paid and accrued interest attributable to the period.

⁽²⁾ For both the three months ended September 30, 2017 and June 30, 2017, the amount is inclusive of cash paid during the period, as well as accruals incurred for work performed during the period. Prior period amounts have not been changed and represent cash paid during the period.

See "Non-GAAP Financial Measures" later in this press release.



Reconciliation of Adjusted EBITDA and Cash Available for Distribution to Net Cash Provided by Operating Activities
	For the Three Months Ended
(in millions of dollars)	September 30, 2017		June 30, 2017
Net cash provided by operating activities	$	100.7	$	78.6
Add:
Interest expense, net	9.7		7.5
Income tax expense	—		—
Return of investment	3.9		2.4
Less:
Deferred revenue	3.6		1.9
Non-cash interest expense	0.2		0.1
Change in other assets and liabilities	16.1		(1.3		)
Adjusted EBITDA	94.4		87.8
Less:
Adjusted EBITDA attributable to Parent	—		2.5
Adjusted EBITDA attributable to noncontrolling interests	2.2		2.6
Adjusted EBITDA attributable to the Partnership	92.2		82.7
Less:
Net interest paid attributable to the Partnership ⁽¹⁾	9.7		7.5
Maintenance capex attributable to the Partnership⁽²⁾	6.1		10.4
Add:
Net adjustments from volume deficiency payments attributable to the Partnership	4.4		0.4
Reimbursements from Parent included in partners' Capital	3.1		4.1
April 2017 divestiture attributable to the Partnership	—		19.4
Cash Available for Distribution Attributable to the Partnership	$	83.9	$	88.7

⁽¹⁾ Amount represents both paid and accrued interest attributable to the period.

See "Non-GAAP Financial Measures" later in this press release.



Distribution Information

(in millions of dollars, except per-unit and ratio data)	For the Three Months Ended
	September 30, 2017		June 30, 2017
Quarterly distribution declared per unit	$	0.31800	$	0.30410

Adjusted EBITDA attributable to the Partnership ⁽¹⁾	$	92.2	$	82.7

Cash available for distribution attributable to the Partnership ⁽¹⁾	$	83.9	$	88.7

Distribution declared:
Limited Partner units – Common	$	59.7	$	53.9
Limited Partner units – Subordinated ⁽²⁾	—		—
General partner units	17.7		14.3
Total distribution declared	$	77.4	$	68.2

Coverage ratio ⁽⁴⁾	1.1		1.3

⁽¹⁾ Non-GAAP measures. See reconciliation tables earlier in this press release.

⁽²⁾ The subordinated units converted to common units on February 15, 2017.

⁽³⁾ Coverage ratio is equal to Cash Available for Distribution attributable to the partnership divided by total distribution declared.



Capital Expenditures
(in millions of dollars)	For the Three Months Ended
	September 30, 2017		June 30, 2017
Expansion capital expenditures	$	4.8	$	4.3
Maintenance capital expenditures	9.8		8.6
Total capital expenditures paid	$	14.6	$	12.9



Condensed Consolidated Balance Sheet Information
(in millions of dollars)	September 30, 2017		June 30, 2017
Cash and cash equivalents	$	171.9	$	135.4
Property, plant & equipment	608.9		614.3
Total assets	1,116.7		1098.7
Total related party debt	1,000.6		1265.4
Total equity	24.2		(252.5		)



Pipeline and Terminal Volumes and Revenue per Barrel
	For the Three Months Ended
	September 30, 2017		June 30, 2017
Pipeline throughput (thousands of barrels per day) ⁽¹⁾
Zydeco – Mainlines	616		589
Zydeco – Other segments	253		368
Zydeco total system	869		957
Mars total system	480		506
Bengal total system	583		608
Poseidon total system	257		257
Auger total system	78		43
Delta total system	234		218
Na Kika total System	40		38
Odyssey total system	135		115
Other systems	314		308

Terminals ⁽²⁾
Lockport terminaling throughput and storage volumes	136		195

Revenue per barrel ($ per barrel)
Zydeco total system ⁽³⁾	$	0.69	$	0.65
Mars total system ⁽³⁾	1.43		1.35
Bengal total system ⁽³⁾	0.34		0.32
Auger total system ⁽³⁾	1.14		1.03
Delta total system ⁽³⁾	0.54		0.53
Na Kika total System ⁽³⁾	0.74		0.71
Odyssey total system ⁽³⁾	0.89		0.95
Lockport total system ⁽⁴⁾	0.31		0.23

⁽¹⁾Pipeline throughput is defined as the volume of delivered barrels.

⁽²⁾ Terminaling throughput is defined as the volume of delivered barrels and storage is defined as the volume of stored barrels.

⁽³⁾ Based on reported revenues from transportation and allowance oil divided by delivered barrels over the same time period. Actual tariffs charged are based on shipping points along the pipeline system, volume and length of contract.

⁽⁴⁾ Based on reported revenues from transportation and storage divided by delivered and stored barrels over the same time period. Actual rates are based on contract volume and length.

FORWARD LOOKING STATEMENTS

This press release includes various “forward-looking statements.” All statements other than statements of historical fact are, or may be deemed to be, forward-looking statements. Forward-looking statements are statements of future expectations that are based on management’s current expectations and assumptions and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in these statements. Forward-looking statements include, among other things, statements expressing management’s expectations, beliefs, estimates, forecasts, projections and assumptions. You can identify our forward-looking statements by words such as “anticipate”, “believe”, “estimate”, “expect”, “forecast”, “goals”, “objectives”, “outlook”, “intend”, “plan”, “predict”, “project”, “risks”, “schedule”, “seek”, “target”, “could”, “may”, “should” or “would” or other similar expressions that convey the uncertainty of future events or outcomes. These statements are accompanied by cautionary language identifying important factors, though not necessarily all such factors, which could cause future outcomes to differ materially from those set forth in forward-looking statements. In particular, expressed or implied statements concerning future growth, future actions, closing and funding of acquisitions, future drop downs, volumes, capital requirements, conditions or events, future impact of prior acquisitions, future operating results or the ability to generate sales, income

or cash flow or the amount of distributions are forward-looking statements. Forward-looking statements are not guarantees of performance. They involve risks, uncertainties and assumptions. Future actions, conditions or events and future results of operations may differ materially from those expressed in these forward-looking statements. Forward-looking statements speak only as of the date of this press release, November 3, 2017, and we disclaim any obligation to update such statements for any reason, except as required by law. All forward-looking statements contained in this document are expressly qualified in their entirety by the cautionary statements contained or referred to in this paragraph. Many of the factors that will determine these results are beyond our ability to control or predict. These factors include the risk factors described in Part I, Item 1A. “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2016, as updated by the information in our other filings with the SEC. If any of those risks occur, it could cause our actual results to differ materially from those contained in any forward-looking statement. Because of these risks and uncertainties, you should not place undue reliance on any forward-looking statement.

NON-GAAP FINANCIAL MEASURES

This press release includes the terms Adjusted EBITDA and cash available for distribution. We believe that the presentation of Adjusted EBITDA and cash available for distribution provides useful information to investors in assessing our financial condition and results of operations. Adjusted EBITDA and cash available for distribution are non-GAAP supplemental financial measures that management and external users of our condensed consolidated financial statements, such as industry analysts, investors, lenders and rating agencies, may use to assess:


•	our operating performance as compared to other publicly traded partnerships in the midstream energy industry, without regard to historical cost basis or, in the case of Adjusted EBITDA, financing methods;


•	the ability of our business to generate sufficient cash to support our decision to make distributions to our unitholders;


•	our ability to incur and service debt and fund capital expenditures; and


•	the viability of acquisitions and other capital expenditure projects and the returns on investment of various investment opportunities.

The GAAP measures most directly comparable to Adjusted EBITDA and cash available for distribution are net income and net cash provided by operating activities. These non-GAAP measures should not be considered as alternatives to GAAP net income or net cash provided by operating activities. Adjusted EBITDA and cash available for distribution have important limitations as analytical tools because they exclude some but not all items that affect net income and net cash provided by operating activities. They should not be considered in isolation or as substitutes for analysis of our results as reported under GAAP. Additionally, because Adjusted EBITDA and cash available for distribution may be defined differently by other companies in our industry, our definition of Adjusted EBITDA and cash available for distribution may not be comparable to similarly titled measures of other companies, thereby diminishing their utility.

References in this press release to Adjusted EBITDA refer to net income before income taxes, net interest expense, gain or loss from disposition of fixed assets, allowance oil reduction to net realizable value, and depreciation, amortization and accretion, plus cash distributed to Shell Midstream Partners, L.P. from equity investments for the applicable period, less income from equity investments. We define Adjusted EBITDA attributable to Shell Midstream Partners as Adjusted EBITDA less Adjusted EBITDA attributable to noncontrolling interests. References to cash available for distribution refer to Adjusted EBITDA attributable to Shell Midstream Partners, less maintenance capital expenditures attributable to Shell Midstream Partners, net interest paid, cash reserves and income taxes paid, plus net adjustments from volume deficiency payments attributable to Shell Midstream Partners and certain one-time payments not reflected in net income. Cash available for distribution will not reflect changes in working capital balances.

November 3, 2017

The information in this Report reflects the unaudited consolidated financial position and results of Shell Midstream Partners, L.P.

Inquiries:

Shell Media Relations

Americas: +1 832 337 4355

Shell Investor Relations

North America: +1 832 337 2034

Shell Midstream Partners (SHLX) 8-KResults of Operations and Financial Condition