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Shell Midstream Partners announces its fourth quarter 2017 unaudited results

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World Pipelines,

Shell Midstream Partners, L.P., a growth-oriented mainstream midstream master limited partnership formed by Royal Dutch Shell plc (RDS), reported net income attributable to the partnership of US$86.4 million for 4Q17, which equated to US$0.35 per common limited partner unit.

Shell Midstream Partners also generated adjusted earnings before interest, income taxes, depreciation and amortisation attributable to the partnership of $118.7 million and cash available for distribution of $97 million.

"This was an important year for Shell Midstream Partners," said John Hollowell, CEO, Shell Midstream Partners. "We continued to deliver against our strategy, taking steps to diversify our portfolio, both in terms of asset classes and geography, all while sustaining our growth promises. Specifically, we acquired approximately US$1.5 billion of assets from Shell - all high quality, strategic midstream assets that play an integral role in connecting North America's energy infrastructure."

During the fourth quarter, Shell Midstream Partners completed the acquisition of strategic infrastructure assets from Shell for US$825 million, the partnership's largest acquisition to date. As part of the acquisition, Shell Midstream Partners further diversified its portfolio with the acquisition of Triton West LLC, which owns 5 refined products terminals located in the Pacific Northwest, Midwest and Gulf Coast. In addition, Shell Midstream Partners acquired 41.48% of the issued and outstanding membership interest in LOCAP LLC, an additional 22.9% interest in Mars Oil Pipeline Company LLC, an additional 22% interest in Odyssey Pipeline L.L.C., and an additional 10% interest in Explorer Pipeline Company.

The Board of Directors of the general partner previously declared a cash distribution of US$0.333 per limited partner unit for 4Q17. This distribution represented an increase of 4.7% over 3Q17 distribution and 20% increase over the 4Q16 distribution. 

Financial highlights

  • Net income attributable to the partnership was US$86.4 million, compared to US$72.6 million for the prior quarter, primarily driven by the acquisition completed in December 2017.
  • Cash available for distribution was US$97 million, compared to US$83.9 million for the prior quarter, representing a 15.6% increase q/q.
  • Adjusted EBITDA attributable to the partnership was US$118.7 million compared to US$92.2 million for the prior quarter, representing an increase of 28.5% above the third quarter.
  • As of 31 December 2017, the partnership had US$137.7 million of consolidated cash and cash equivalents on hand and US$1.8 billion of total debt outstanding.
  • A new $1 billion long-term debt facility was put in place effective 1 December 2017. The weighted average interest rate for 2017 was 2.7%.
  • Following the end of the quarter, the partnership raised approximately $980 million gross proceeds in common equity, including a US$300 million private sale of common units to Shell. The partnership used the funds to pay down outstanding debt under its credit facilities and for general partnership purposes. Future growth in 2018 will be funded with cash on hand and debt.

Asset highlights

Onshore crude and refined products pipelines:

Zydeco - The partnership saw steady demand to move onshore and offshore crude to key markets in Louisiana. Mainline volumes were 649 000 bpd in the current quarter, compared to 616 000 bpd in the prior quarter largely due to normalised operations following Hurricane Harvey impacts in 3Q17.

Colonial - Dividends returned to normal following 3Q17 impacts from Hurricane Harvey.

Explorer - Volumes were in line with expectations. Dividends paid in 4Q17 were in line with the new ownership interest of 12.62%.

Offshore Crude Pipelines:

Auger - Volumes were 26 000 bpd, down from the prior quarter of 78 000 bpd due to outages at the Enchilada platform.

Mars - Volumes were 449 000 bpd compared to 480 000 bpd in the prior quarter. Third quarter volumes were largely driven by deliveries out the caverns.

Poseidon - Volumes were 240 000 bpd, slightly lower than the prior quarter of 257 000 bpd.

Odyssey - Volumes were 98 000 bpd, lower than the prior quarter of 135 000 bpd primarily due to outages at Delta House.

Terminals and Storage

Lockport - Storage volumes were slightly higher than the prior quarter. The terminal is currently 80% utilised.

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