BP MIDSTREAM PARTNERS LP Unless otherwise stated or the context otherwise indicates, all references to "we," "our," "us," refer to the legal entityBP Midstream Partners LP (the "Partnership"). The term "our Parent" refers toBP Pipelines (North America), Inc. ("BP Pipelines "), any entity that wholly ownsBP Pipelines , indirectly or directly, includingBP America Inc. and BP p.l.c. ("BP"), and any entity that is wholly owned by the aforementioned entities, excludingBP Midstream Partners LP . The following management discussion and analysis of financial conditions and results of operations should be read in conjunction with the unaudited financial statements and accompanying notes in this quarterly report and our Annual Report on Form 10-K for the year endedDecember 31, 2020 (the "Partnership's 2020 10-K"). All amounts are in millions of dollars, unless otherwise indicated.
Partnership Overview
We are a fee-based, growth-oriented master limited partnership formed byBP Pipelines , an indirect wholly owned subsidiary of BP, to own, operate, develop and acquire pipelines and other midstream assets. For additional information regarding the assets and interests owned by the Partnership, refer to Note 1 -
Business and Basis of Presentation in the Notes to Condensed Consolidated Financial Statements.
Business Environment, Market Conditions and Outlook
The impact to the energy industry from the decline in demand for petroleum and petroleum-based products resulting from the response to the global outbreak of COVID-19 have been unprecedented. Management continues to monitor the challenging macro environment. For risks associated with these and other factors, refer to "Risk Factors" in the Partnership's 2020 10-K. Management continues to work closely withBP Pipelines , as operator of our assets under the Omnibus Agreement, to ensure appropriate practices are adopted for continued functioning of our assets as well as mitigation strategies for any office or worksite where COVID-19 may be detected. 19 --------------------------------------------------------------------------------
COVID-19
In the third quarter of 2020, the relaxation of containment measures led to a resurgence of COVID-19 cases. This resurgence continued into the fourth quarter and resulted in the reinstatement of containment measures and restrictions, which has lowered demand for petroleum and petroleum-based products. In the first quarter of 2021, vaccine rollouts ramped up nationwide. This has led to the energy market seeing demand recovery driven by increases in road and air transportation. The vaccination effort has continued into the second quarter and we believe this will result in a further reduction of containment measures and restrictions thereby increasing demand recovery to a new normal, particularly as the summer season approaches. In addition to the increase in vaccinations, certain regions acrossthe United States have lifted, and continue to lift, certain restrictions previously imposed to contain the spread of COVID-19. While overall demand has improved from fourth quarter lows, moderate improvements in market conditions and energy demand have occurred during the first quarter of 2021. Uncertainties related to COVID-19 continue to affect the oil and gas industry, including the risk of new virus strains and renewed restrictions and the uncertainty of successful administration of effective treatments and vaccines.
Potential Impacts to Demand and Our Operations
In the first quarter of 2021, we experienced a slight reduction in volumes on our onshore pipelines compared to the fourth quarter of 2020 as a result of apportionment on the Enbridge mainline impacting BP2 and COVID-19 related demand impacts onRiver Rouge , partially offset by increased seasonal demand for diluent on Diamondback.BP Products previously executed new MVC agreements for a three-year term which continue to provide downside protection to the Partnership, however the minimum volume thresholds were reduced from 2020 levels for BP2 and Diamondback. As a result, we could experience a negative financial impact if volumes shipped on our pipelines remain below such minimum commitments due to reduced consumer demand. Refer to Part I, Item 1 and 2, Business and Properties - Our Commercial Agreements with BP - Minimum Volume Commitment Agreements in the Partnership's 2020 10-K for additional information. Demand remained steady on our offshore pipelines in the first quarter of 2021. For our offshore joint ventures, we expect demand to be resilient, as offshore projects are larger capital projects planned over many years and less impacted by temporary changes in capital investment. To limit the impact of COVID-19, BP and our other customers, as well as third-party operators of our pipelines, have implemented various protocols for both onshore and offshore personnel; however, these protocols may not prove to be successful. There is risk of decreased volumes with respect to our offshore operations if operators take actions to reduce operations in response to demand declines or increasingly limited storage availability or are unable to control COVID-19 infections on platforms and are required to shut-in. Additionally, we expect the shippers on our offshore pipelines to continue to find buyers for their production; however, they may not be successful. We continue to monitor our liquidity position. As ofMarch 31, 2021 , our liquidity was$261.4 million , consisting of$129.4 million of cash and cash equivalents and$132.0 million available under our existing credit facility with BP. Our only outstanding indebtedness is$468.0 million borrowed under our term loan with an affiliate of BP, and there are no principal payments due until 2025. We are in compliance with the covenants contained in both our revolving credit facility and term loan, both of which include the requirement to maintain a consolidated leverage ratio, which is calculated as total indebtedness to consolidated EBITDA, not to exceed 5.0 to 1.0, subject to a temporary increase in such ratio to 5.5 to 1.0 in connection with certain material acquisitions. For additional information, refer to " Capital Resources and Liquidity " and
Note 6 - Debt for additional information.
As noted above,BP Pipelines and the third-party operators of our assets have taken steps and continue to actively work to mitigate the evolving challenges and continuing impact of the COVID-19 pandemic on our operations, financial condition, cash flows and liquidity. However, there is no certainty that the measures we take will be ultimately sufficient.
How We Evaluate Our Operations
Partnership management uses a variety of financial and operating metrics to
analyze performance. These metrics are significant factors in assessing
operating results and profitability and include: (i) safety and environmental
metrics, (ii) revenue (including FLA) from throughput and utilization; (iii)
operating expenses and maintenance spend; (iv) Adjusted EBITDA (as defined
below); and (v) cash available for distribution (as defined below).
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--------------------------------------------------------------------------------Preventative Safety and Environmental Metrics
We are committed to maintaining and improving the safety, reliability and efficiency of Partnership operations. As noted above, we have worked withBP Pipelines and the third-party operators of our assets to ensure that COVID-19 response and business continuity plans have been implemented across all of our assets and operations. We have implemented reporting programs requiring all employees and contractors of our Parent who provide services to us to record environmental and safety related incidents. The Partnership's management team uses these existing programs and data to evaluate trends and potential interventions to deliver on performance targets. We integrate health, occupational safety, process safety and environmental principles throughout Partnership operations to reduce and eliminate environmental and safety related incidents. Throughput We have historically generated substantially all of our revenue under long-term agreements orFERC -regulated generally applicable tariffs by charging fees for the transportation of products through our pipelines. The amount of revenue we generate under these agreements depends in part on the volumes of crude oil, natural gas, refined products and diluent on our pipelines. Refer to Part I, Item 1 and 2, Business and Properties - Our Commercial Agreements with BP - Minimum Volume Commitment Agreements in the Partnership's 2020 10-K for additional information. Volumes on pipelines are primarily affected by the supply of, and demand for, crude oil, natural gas, refined products and diluent in the markets served directly or indirectly by Partnership assets. Results of operations are impacted by our ability to: •utilize any remaining unused capacity on, or add additional capacity to, Partnership pipeline systems; •increase throughput volumes on Partnership pipeline systems by making connections to existing or new third-party pipelines or other facilities, primarily driven by the anticipated supply of and demand for crude oil, natural gas, refined products and diluent; •identify and execute organic expansion projects; and •increase throughput volumes via acquisitions.
Storage Utilization
Storage utilization is a metric that we use to evaluate the performance of our storage and terminalling assets. We define storage utilization as the percentage of the contracted capacity in barrels compared to the design capacity of the tank.
Operating Expenses and Total Maintenance Spend
Operating Expenses
Management seeks to maximize profitability by effectively managing operating
expenses. These expenses are comprised primarily of labor expenses (including
contractor services), general materials, supplies, minor maintenance, utility
costs (including electricity and fuel) and insurance premiums. Utility costs
fluctuate based on throughput volumes and the grades of crude oil and types of
refined products we handle. Other operating expenses generally remain relatively
stable across broad ranges of throughput volumes but can fluctuate from period
to period depending on the mix of activities performed during that period.
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--------------------------------------------------------------------------------Total Maintenance Spend - Wholly Owned Assets
We calculate Total Maintenance Spend as the sum of maintenance expenses and maintenance capital expenditures, excluding any reimbursable maintenance capital expenditures. We track these expenses on a combined basis because it is useful to understanding total maintenance requirements. Total Maintenance Spend for the three months endedMarch 31, 2021 and 2020, respectively, is shown in the table below: Three Months Ended March 31, 2021 2020 (in millions of dollars) Wholly Owned Assets Maintenance expenses $ 0.8 $ 0.3 Maintenance capital expenditures 0.8 0.7 Maintenance capital recovery(1) (0.1) (0.6) Total Maintenance Spend - Wholly Owned Assets $ 1.5
$ 0.4
(1)Relates to the portion of maintenance capital for the Griffith Station Incident reimbursable by insurance.
The Partnership seeks to maximize profitability by effectively managing maintenance expenses, which consist primarily of safety and environmental integrity programs. We seek to manage maintenance expenses on owned and operated pipelines by scheduling maintenance over time to avoid significant variability in maintenance expenses and minimize impact on cash flows, without compromising our commitment to safety and environmental stewardship. Maintenance expenses represent the costs we incur that do not significantly extend the useful life or increase the expected output of property, plant and equipment. These expenses include pipeline repairs, replacements of immaterial sections of pipelines, inspections, equipment rentals and costs incurred to maintain compliance with existing safety and environmental standards, irrespective of the magnitude of such compliance expenses. Maintenance expenses may vary significantly from period to period because certain expenses are the result of scheduled safety and environmental integrity programs, which occur on a multi-year cycle and require substantial outlays. Maintenance capital expenditures represent expenditures to sustain operating capacity or operating income over the long term. Examples of maintenance capital expenditures include expenditures made to purchase new or replacement assets or extend the useful life of existing assets. These expenditures includes repairs and replacements of storage tanks, replacements of significant sections of pipelines and improvements to an asset's safety and environmental standards.
Adjusted EBITDA and Cash Available for Distribution
The Partnership defines Adjusted EBITDA as net income before net interest
expense, income taxes, gain or loss from disposition of property, plant and
equipment, and depreciation and amortization, plus cash distributed to the
Partnership from equity method investments for the applicable period, less
income from equity method investments. The Partnership defines Adjusted EBITDA
attributable to the Partnership as Adjusted EBITDA less Adjusted EBITDA
attributable to non-controlling interests. We present these financial measures
because we believe replacing our proportionate share of our equity method
investments' net income with the cash received from such equity method
investments more accurately reflects the cash flow from our business, which is
meaningful to our investors.
We compute and present cash available for distribution and define it as Adjusted
EBITDA attributable to the Partnership less maintenance capital expenditures
attributable to the Partnership, net interest paid/received, cash reserves,
income taxes paid and net adjustments from volume deficiency payments
attributable to the Partnership. Cash available for distribution does not
reflect changes in working capital balances.
Adjusted EBITDA and cash available for distribution are non-GAAP supplemental
financial measures, which are metrics that management and external users of our
consolidated financial statements, such as industry analysts, investors, lenders
and rating agencies, may use to assess:
•operating performance as compared to other publicly traded partnerships in the
midstream energy industry, without regard to historical cost basis or financing
methods;
•ability to generate sufficient cash to support decisions to make distributions
to our unitholders;
22
--------------------------------------------------------------------------------•ability to incur and service debt and fund capital expenditures; and •viability of acquisitions and other capital expenditure projects and the returns on investment of various investment opportunities.
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. The GAAP measures most directly comparable to Adjusted EBITDA and cash available for distribution are net income and net cash provided by operating activities, respectively. Adjusted EBITDA and cash available for distribution should not be considered as an alternative 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. You should not consider Adjusted EBITDA or cash available for distribution in isolation or as a substitute 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 its utility. Refer to "Reconciliation of Non-GAAP Measures" section below for the reconciliation of net income and cash provided by operating activities to Adjusted EBITDA and cash available for distribution.
Factors Affecting Our Business
Partnership business can be negatively affected by sustained downturns or slow growth in the economy in general and is impacted by shifts in supply and demand dynamics, the mix of services requested by the customers of our pipelines, competition and changes in regulatory requirements affecting our customers' operations. The ultimate magnitude and duration of the COVID-19 pandemic, resulting governmental restrictions on the mobility of consumers and the related impact on crude oil prices and theU.S. and global economy and capital markets is uncertain. We did experience some reduction in volumes onRiver Rouge in the first quarter of 2021. As of the date of this Quarterly Report, all of our assets remain operational.
Customers
BP is our primary customer. Total revenue from BP represented 97.3% and 96.7% of our revenues for the three months endedMarch 31, 2021 and 2020, respectively. BP's volumes represented approximately 94.7% and 93.5% of the aggregate total volumes transported on the Wholly Owned Assets for the three months endedMarch 31, 2021 and 2020, respectively. In addition, we transport and store crude oil, natural gas and diluent for a mix of third-party customers, including crude oil producers, refiners, marketers and traders, and Partnership assets are connected to other crude oil, natural gas and diluent pipeline systems. In addition to serving directly connected MidwesternU.S. andGulf Coast markets, our pipelines have access to customers in various regions ofthe United States andCanada through interconnections with other major pipelines. Customers use our transportation and terminalling services for a variety of reasons. Producers of crude oil require the ability to deliver their product to market and frequently enter into firm transportation contracts to ensure that they will have sufficient capacity available to deliver their product to delivery points with greatest market liquidity. Marketers and traders generate income from buying and selling crude oil, natural gas, refined products and diluent to capitalize on price differentials over time or between markets. Our customer mix can vary over time and largely depends on the crude oil, natural gas, refined products and diluent supply and demand dynamics in our markets. Regulation Interstate common carrier pipelines are subject to regulation by various federal, state and local agencies including theFERC , theEnvironmental Protection Agency and theDepartment of Transportation . OnJune 18, 2020 ,FERC issued a Notice of Inquiry requesting comments on a proposed oil pipeline index using the PPI-FG plus 0.09% as the index level, and requested comments on whether and how the index should reflect changes toFERC's policies regarding income tax costs and return on equity. OnDecember 17, 2020 , in Docket No. RM20-14-000,FERC issued an order establishing a new index level of PPI-FG plus 0.78% for the five-year period commencingJuly 1, 2021 . However, requests for rehearing of theDecember 2020 order establishing this indexing amount were filed withFERC , and those requests remain pending, with rehearing granted for purposes of extending the timeFERC has to review these requests.FERC's final application of its indexing rate methodology for the next five-year term of index rates may impact our revenues associated with any transportation services we may provide pursuant to rates adjusted by theFERC oil pipeline index. For more information on federal, state and local regulations affecting our business, refer to Part I, Item 1 and 2. Business and Properties in the Partnership's 2020 10-K. 23 --------------------------------------------------------------------------------
Acquisition Opportunities
The Partnership plans to pursue acquisitions of complementary assets from BP as well as third parties subject to market conditions (including the ongoing effects of COVID-19) and our ability to obtain attractive financing. We may also pursue acquisitions jointly withBP Pipelines .BP Pipelines has granted us a right of first offer with respect to its retained ownership interest inMardi Gras and all of its interests in midstream pipeline systems and assets related thereto in the contiguousUnited States and offshoreGulf of Mexico that were owned byBP Pipelines when we were established. Neither BP nor any of its affiliates are under any obligation, however, to sell or offer to sell us additional assets or to pursue acquisitions jointly with us, and we are under no obligation to buy any additional assets from them or to pursue any joint acquisitions with them. We will focus our acquisition strategy on transportation and midstream assets within the crude oil, natural gas and refined products sectors. We believe that we are well positioned to acquire midstream assets from BP, and particularlyBP Pipelines , as well as third parties, should such opportunities arise. Identifying and executing acquisitions will be a key part of our strategy. However, if we do not make acquisitions on economically acceptable terms, our future growth will be limited, and the acquisitions we do make may reduce, rather than increase, our available cash.
Financing
We expect to fund future capital expenditures primarily from external sources, including borrowings under our credit facility and potential future issuances of equity and debt securities. We intend to make cash distributions to unitholders at a minimum distribution rate of$0.2625 per unit per quarter ($1.05 per unit on an annualized basis). Based on the terms of our cash distribution policy, we expect that we will distribute to unitholders and the General Partner, as the holder of IDRs, most of the cash generated by operations.
Griffith Station Incident
OnJune 13, 2019 , a building fire occurred at theGriffith Station on BP2. Management performed an evaluation of the assets and determined that an impairment was required. We have incurred$0.1 million for response expense during each of the three months endedMarch 31, 2021 and 2020. Our assets are insured with a deductible of$1.0 million per incident. Total costs associated with the incident were offset with an insurance receivable of$2.5 million under "Other current assets" on our condensed consolidated balance sheets as ofMarch 31, 2021 andDecember 31, 2020 . In the event that insurance proceeds exceed the receivable balance, such amounts would be recognized as a gain. Refer to Part II, Item 8, Note 13 - Commitments and Contingencies in the Partnership's 2020 10-K for additional information. 24 --------------------------------------------------------------------------------
Results of Operations
The following tables and discussion contain a summary of condensed consolidated
results of operations for the three months ended
Three Months Ended March 31,
2021 2020
(in millions of dollars)
Revenue $ 29.6 $ 30.7
Costs and expenses
Operating expenses 4.7 5.2
Maintenance expenses 0.8 0.3
General and administrative 4.6 4.8
Depreciation 0.7 0.7
Property and other taxes 0.2 0.1
Total costs and expenses 11.0 11.1
Operating income 18.6 19.6
Income from equity method investments 30.3 31.3
Interest expense, net 1.1 3.4
Net income 47.8 47.5
Less: Net income attributable to non-controlling interests 5.8 5.8
Net income attributable to the Partnership $ 42.0 Adjusted EBITDA* $ 49.5
6.4 6.7
Adjusted EBITDA attributable to the Partnership $ 43.1 $ 47.8
* See Reconciliation of Non-GAAP Measures below.
25
--------------------------------------------------------------------------------
Three Months Ended March 31,
Pipeline throughput (thousands of barrels per day)(1) 2021 2020
Onshore
BP2 295 286
Diamondback 65 82
River Rouge 61 73
Total Wholly Owned Assets 421 441
Offshore
Mars 498 537
Caesar 157 185
Cleopatra(2) 16 21
Proteus 259 225
Endymion 259 225
Mardi Gras Joint Ventures 691 656
Ursa 77 95
Average revenue per barrel ($ per barrel)(3)
Total Wholly Owned Assets $ 0.78 $ 0.76
Mars 1.33 1.39
Mardi Gras Joint Ventures 0.56 0.60
Ursa 0.85 0.87
(1)Pipeline throughput is defined as the volume of delivered barrels.
(2)Natural gas is converted to oil equivalent at 5.8 million cubic feet per one
thousand barrels.
(3)Based on reported revenues from transportation and allowance oil divided by
delivered barrels over the same time period.
Three Months Ended
Total revenue from wholly owned assets decreased by approximately$1.1 million or 3.6% for the three months endedMarch 31, 2021 , compared to the three months endedMarch 31, 2020 , due to the following factors: •Decrease of$2.2 million in tariff revenue driven by a decrease of$1.3 million on Diamondback, a$1.5 million decrease onRiver Rouge , partially offset by an increase of$0.6 million on BP2. •Throughput volume decreased by 2.2 million barrels driven by a 1.6 million decrease on Diamondback, a 1.1 million decrease onRiver Rouge , partially offset by a 0.5 million increase on BP2. •Increase of$1.1 million or 73.3% in FLA revenue from BP2 driven by an increase in throughput volume and an increase in FLA prices realized.
Total costs and expenses was flat in the three months ended
Income from equity method investments decreased by$1.0 million or 3.2% for the three months endedMarch 31, 2021 , compared to the three months endedMarch 31, 2020 , primarily due to lower throughput on Mars and Caesar, slightly offset by higher production from Appomattox, which transports volume through Proteus and Endymion. Interest expense decreased by$2.3 million or 67.6% in the three months endedMarch 31, 2021 , compared to the three months endedMarch 31, 2020 , due to lower interest rates tied to LIBOR. 26 --------------------------------------------------------------------------------
Reconciliation of Non-GAAP Measures
The following tables present a reconciliation of Adjusted EBITDA to net income
and to net cash provided by operating activities, the most directly comparable
GAAP financial measures, for each of the periods indicated.
Three Months Ended March 31,
2021 2020
(in millions of dollars)
Reconciliation of Adjusted EBITDA and Cash Available for
Distribution to Net Income
Net income $ 47.8 $ 47.5
Add:
Depreciation 0.7 0.7
Interest expense, net 1.1 3.4
Cash distributions received from equity method investments 30.2 34.2
Less:
Income from equity method investments 30.3 31.3 Adjusted EBITDA 49.5 54.5
Less:
Adjusted EBITDA attributable to non-controlling interests 6.4 6.7 Adjusted EBITDA attributable to the Partnership 43.1 47.8
Add:
Net adjustments from volume deficiency agreements 0.2 0.1 Maintenance capital recovery(1) 0.1 0.6
Less:
Net interest paid/(received) 1.1 7.2 Maintenance capital expenditures 0.8 0.7 Cash reserves(2) 0.3 (3.5) Cash available for distribution attributable to the Partnership $ 41.2$ 44.1
(1)Relates to the portion of maintenance capital for the Griffith Station Incident reimbursable by insurance. (2)Reflects cash reserved due to timing of interest payment(s).
27
--------------------------------------------------------------------------------
Three Months Ended March 31,
2021 2020
(inmillions of dollars) Reconciliation of Adjusted EBITDA and Cash Available for Distribution to Net Cash Provided by Operating Activities Net cash provided by operating activities
$ 48.0 $ 48.9
Add:
Interest expense, net 1.1 3.4Distribution in excess of earnings from equity method investments
1.9 2.8
Less:
Changes in other assets and liabilities 1.4 0.5 Non-cash adjustments 0.1 0.1 Adjusted EBITDA 49.5 54.5 Less: Adjusted EBITDA attributable to non-controlling interests 6.4 6.7 Adjusted EBITDA attributable to the Partnership 43.1 47.8
Add:
Net adjustments from volume deficiency agreements 0.2 0.1 Maintenance capital recovery(1) 0.1 0.6
Less:
Net interest paid/(received) 1.1 7.2 Maintenance capital expenditures 0.8 0.7 Cash reserves(2) 0.3 (3.5) Cash available for distribution attributable to the Partnership $ 41.2$ 44.1
(1)Relates to the portion of maintenance capital for the Griffith Station Incident reimbursable by insurance. (2)Reflects cash reserved due to timing of interest payment(s).
Capital Resources and Liquidity
Currently, we expect our primary ongoing sources of liquidity to be cash generated from operations (including distribution from our equity method investments), and, as needed, borrowings under our existing credit facility. The entities in which we own an interest may also incur debt. We believe that cash generated from these sources will be sufficient to meet our short-term working capital requirements and long-term capital expenditure requirements and to make quarterly cash distributions. Based upon current expectations for the fiscal year 2021, we believe that our cash on hand, cash flow from operations and borrowings available under our credit facility will be sufficient to fund our operations for 2021. As ofMarch 31, 2021 , our liquidity was$261.4 million , consisting of$129.4 million of cash and cash equivalents and$132.0 million available under our existing credit facility with BP. Our only outstanding indebtedness is$468.0 million borrowed under our term loan with an affiliate of BP, and there are no principal payments due until 2025. Additionally, there is risk of decreased volumes with respect to the offshore operations if operators take actions to reduce operations in response to demand declines or increasingly limited storage availability or are unable to control COVID-19 infections on platforms and are required to shut-in. In the longer term, if there was a decrease in demand and such decrease persisted throughout 2021 or longer, we may not be able to continue to generate similar levels of operating cash flow and our liquidity and capital resources may not be sufficient to make our current levels of cash distributions to unitholders or even meet our minimum quarterly distribution. We continue to actively work to mitigate the evolving challenges and growing impact of COVID-19 on our operations, financial condition, cash flows and liquidity. However, there is no certainty that the measures we take will be ultimately sufficient.
Cash Distributions
The board of directors of our general partner has adopted a cash distribution policy pursuant to which we intend to pay a minimum quarterly distribution of$0.2625 per unit per quarter, which equates to approximately$27.5 million per quarter, or 28 --------------------------------------------------------------------------------$110.0 million per year in the aggregate, based on the number of common units outstanding as ofMarch 31, 2021 . We intend to pay such distributions to the extent we have sufficient cash after the establishment of cash reserves and the payment of expenses, including payments to our general partner and its affiliates.
Subordinated Unit Conversion
OnApril 15, 2021 , the Partnership declared a cash distribution of$0.3475 per limited partner unit to unitholders of record onApril 29, 2021 , for the three months endedMarch 31, 2021 . All of the subordinated units were converted into common units onFebruary 12, 2021 . As a result, on the date of record, there were no subordinated units outstanding, and therefore, no portion of the cash distribution has been allocated to the limited partners' subordinated units. Refer to Note 8 - Net Income Per Limited Partner Unit for additional information. Revolving Credit Facility OnOctober 30, 2017 , the Partnership entered into a$600.0 million unsecured revolving credit facility agreement with an affiliate of BP. The credit facility terminates onOctober 30, 2022 and provides for certain covenants, including the requirement to maintain a consolidated leverage ratio, which is calculated as total indebtedness to consolidated EBITDA (as defined in the credit facility), not to exceed 5.0 to 1.0, subject to a temporary increase in such ratio to 5.5 to 1.0 in connection with certain material acquisitions. In addition, the limited liability company agreement of our general partner requires the approval ofBP Holdco prior to the incurrence of any indebtedness that would cause our leverage ratio to exceed 4.5 to 1.0. The credit facility also contains customary events of default, such as (i) nonpayment of principal when due, (ii) nonpayment of interest, fees or other amounts, (iii) breach of covenants, (iv) misrepresentation, (v) cross-payment default and cross-acceleration (in each case, to indebtedness in excess of$75.0 million ) and (vi) insolvency. Additionally, the credit facility limits our ability to, among other things: (i) incur or guarantee additional debt, (ii) redeem or repurchase units or make distributions under certain circumstances; and (iii) incur certain liens or permit them to exist. Indebtedness under this facility bears interest at the 3-month London Interbank Offered Rate ("LIBOR") plus 0.85%. This facility includes customary fees, including a commitment fee of 0.10% and a utilization fee of 0.20%.
In the fourth quarter of 2018, we borrowed
Term Loan Facility Agreement
OnFebruary 24, 2020 , the Partnership entered into a$468.0 million Term Loan Facility Agreement ("term loan") with an affiliate of BP. OnMarch 13, 2020 , proceeds were used to repay outstanding borrowings under the existing credit facility. The term loan has a final repayment date ofFebruary 24, 2025 , and provides for certain covenants, including the requirement to maintain a consolidated leverage ratio, which is calculated as total indebtedness to consolidated EBITDA, not to exceed 5.0 to 1.0, subject to a temporary increase in such ratio to 5.5 to 1.0 in connection with certain material acquisitions. Simultaneous with this transaction, we entered into a First Amendment to Short Term Credit Facility Agreement ("First Amendment") whereby the lender added a provision that indebtedness under both the term loan and credit facility shall not exceed$600.0 million . All other terms of the credit facility remain the same. As ofMarch 31, 2021 , the Partnership was in compliance with the covenants contained in the credit facility and term loan.
Cash Flows from Operations
Operating Activities. We generated$48.0 million and$48.9 million in cash flow from operating activities in the three months endedMarch 31, 2021 and 2020, respectively. The$0.9 million decrease was primarily from a$1.8 million net decrease from operations principally due to a decrease in revenue and distributions of earnings received from equity method investments offset by a$0.9 million increase from changes in working capital. Investing Activities. Cash flow used by investing activities was$1.5 million and cash flows generated by investing activities was$2.1 million in the three months endedMarch 31, 2021 and 2020, respectively. The$3.6 million decrease was primarily due to a$2.7 million increase in capital expenditures and$0.9 million decrease in distributions in excess of earnings from equity method investments. 29 --------------------------------------------------------------------------------
Financing Activities. Cash flow used in financing activities was
Capital Expenditures
Our operations can be capital intensive, requiring investment to expand, upgrade or enhance existing operations and to meet environmental and operational regulations. Our capital requirements consist of maintenance capital expenditures and expansion capital expenditures, both as defined in our partnership agreement. We are required to distinguish between maintenance capital expenditures and expansion capital expenditures in accordance with our Partnership agreement. A summary of capital expenditures associated with ongoing projects related to the Wholly Owned Assets, for the three months endedMarch 31, 2021 and 2020, is shown in the table below: Three Months Ended March 31, 2021 2020 (in millions of dollars) Cash spent on expansion capital expenditures $ 2.6 $ - Cash spent on maintenance capital expenditures 0.8 0.7 Decrease in accrued capital expenditures (2.1) -
Decrease in capital expenditures reimbursable to our Parent
(0.3) -
Total capital expenditures incurred $ 1.0 $ 0.7
Capital expenditures reported on the condensed consolidated statement of cash flows for the three months endedMarch 31, 2021 were$3.4 million . We incurred$2.6 million expansion capital expenditures for an onshore capacity increase project and$0.8 maintenance capital expenditures primarily associated with flow computer upgrades and the Griffith Station Electrical and Controls project.
Capital expenditures for the three months ended
Contractual Obligations
There were no material changes to contractual obligations as disclosed in the Partnership's 2020 10-K.
Off-Balance Sheet Arrangements
The Partnership has not entered into any transactions, agreements or other contractual arrangements that would result in off-balance sheet liabilities.
Critical Accounting Policies and Estimates
There have been no material changes to critical accounting policies as disclosed in the Partnership's 2020 10-K.
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