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OFFON

BP MIDSTREAM PARTNERS LP

(BPMP)
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BP MIDSTREAM PARTNERS LP : MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS (form 10-Q)

05/06/2021 | 08:05am EDT
Unless otherwise stated or the context otherwise indicates, all references to
"we," "our," "us," 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.

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 ended December 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 by BP
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 with BP 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
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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 across the 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 on River 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 of March 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 with BP
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 or FERC-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 ended March 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
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•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 the U.S. and global economy and capital markets
is uncertain. We did experience some reduction in volumes on River 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 ended March 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 ended March
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
Midwestern U.S. and Gulf Coast markets, our pipelines have access to customers
in various regions of the United States and Canada 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 the FERC, the Environmental
Protection Agency and the Department of Transportation. On June 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 to FERC's policies regarding
income tax costs and return on equity. On December 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 commencing July 1, 2021. However, requests for
rehearing of the December 2020 order establishing this indexing amount were
filed with FERC, and those requests remain pending, with rehearing granted for
purposes of extending the time FERC 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 the FERC 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
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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 with BP Pipelines. BP Pipelines has granted us a
right of first offer with respect to its retained ownership interest in Mardi
Gras and all of its interests in midstream pipeline systems and assets related
thereto in the contiguous United States and offshore Gulf of Mexico that were
owned by BP 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 particularly BP 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


On June 13, 2019, a building fire occurred at the Griffith 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 ended March 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 of March
31, 2021 and December 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
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Results of Operations

The following tables and discussion contain a summary of condensed consolidated results of operations for the three months ended March 31, 2021 and 2020.

                                                                 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  

$ 41.7


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
* See Reconciliation of Non-GAAP Measures below.


                                       25
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                                                                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 March 31, 2021 Compared to Three Months Ended March 31, 2020


Total revenue from wholly owned assets decreased by approximately $1.1 million
or 3.6% for the three months ended March 31, 2021, compared to the three months
ended March 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 on River 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 on River 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 March 31, 2021, compared to the three months ended March 31, 2020.


Income from equity method investments decreased by $1.0 million or 3.2% for the
three months ended March 31, 2021, compared to the three months ended March 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 ended
March 31, 2021, compared to the three months ended March 31, 2020, due to lower
interest rates tied to LIBOR.

                                       26
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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).

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                                                                  Three Months Ended March 31,
                                                                   2021                    2020
                                                                    (in

millions 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                    3.4

Distribution 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 of March
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
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$110.0 million per year in the aggregate, based on the number of common units
outstanding as of March 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


On April 15, 2021, the Partnership declared a cash distribution of $0.3475 per
limited partner unit to unitholders of record on April 29, 2021, for the three
months ended March 31, 2021. All of the subordinated units were converted into
common units on February 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

On October 30, 2017, the Partnership entered into a $600.0 million unsecured
revolving credit facility agreement with an affiliate of BP. The credit facility
terminates on October 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
of BP 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 $468.0 million from the credit facility. This amount was outstanding at December 31, 2019, and repaid on March 13, 2020 using funds from the Term Loan Facility Agreement.

Term Loan Facility Agreement


On February 24, 2020, the Partnership entered into a $468.0 million Term Loan
Facility Agreement ("term loan") with an affiliate of BP. On March 13, 2020,
proceeds were used to repay outstanding borrowings under the existing credit
facility. The term loan has a final repayment date of February 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 of March 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 ended March 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 ended March 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 $44.0 million and $44.3 million in the three months ended March 31, 2021 and 2020, respectively. The $0.3 million decrease was due to distributions to non-controlling interest.

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 ended March 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 ended March 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 March 31, 2020 were $0.7 million, primarily associated with the Griffith Station Electrical and Controls project.


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.

© Edgar Online, source Glimpses

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