8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K/A

(Amendment No. 2)

CURRENT REPORT

Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

Date of Report (date of earliest event reported): May 9, 2018

Shell Midstream Partners, L.P.

(Exact name of registrant as specified in its charter)

Delaware	001-36710	46-5223743
(State or other jurisdiction of incorporation or organization)	(Commission File Number)	(I.R.S. Employer Identification No.)

150 N. Dairy Ashford, Houston, Texas 77079

(Address of principal executive offices and zip code)

(832) 337-2034

(Registrant’s telephone number, including area code)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions: 

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) 

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Explanatory Note

This Current Report on Form 8-K/A (Amendment No. 2) amends and supplements the Current Report on Form 8-K/A (Amendment No. 1) of Shell Midstream Partners, L.P. (the “Partnership”), dated May 9, 2018 and filed with the Securities and Exchange Commission on June 6, 2018 (the “Amended Form 8-K”), which reported under Item 9.01(a) the audited historical financial statements of Amberjack Pipeline Company LLC, a Delaware limited liability company (“Amberjack”), as of and for the year ended December 31, 2017 and related notes to the financial statements. In addition, the Amended Form 8-K reported under Item 9.01(b) the unaudited pro forma consolidated financial statements of the Partnership as of and for the year ended December 31, 2017.

As reported in a Current Report on Form 8-K filed by the Partnership on May 14, 2018 (the “Initial Form 8-K”), the Partnership closed the acquisition of an ownership interest in Amberjack, which is comprised of 75% of the issued and outstanding Series A membership interests of Amberjack and 50% of the issued and outstanding Series B ownership interests of Amberjack, on May 11, 2018 (the “May 2018 Acquisition”).

This amendment includes unaudited historical financial statements and updated unaudited pro forma financial information of Amberjack as required by Item 9.01. Except as set forth below, the Initial Form 8-K and Amended Form 8-K are unchanged.

Item 9.01Financial Statements and Exhibits.

(a)    Financial Statements of Businesses Acquired.

The unaudited historical financial statements of Amberjack as of March 31, 2018 and for the three months ended March 31, 2018 and 2017 and related notes to the financial statements, a copy of which is filed as Exhibit 99.1 hereto and incorporated herein by reference.

(b)     Pro Forma Financial Information.

Unaudited pro forma consolidated statement of income of the Partnership for the nine months ended September 30, 2018, a copy of which is filed as Exhibit 99.2 hereto and incorporated herein by reference.

(d)     Exhibits.

Number	Description
99.1	The unaudited historical financial statements of Amberjack Pipeline Company LLC as of March 31, 2018 and for the three months ended March 31, 2018 and 2017 and related notes to the financial statements.
99.2	The unaudited pro forma consolidated statement of income of Shell Midstream Partners, L.P. for the nine months ended September 30, 2018.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

SHELL MIDSTREAM PARTNERS, L.P.
By:	Shell Midstream Partners GP LLC,
	its general partner
By:	/s/ Lori M. Muratta
	Lori M. Muratta
	Vice President, General Counsel and Secretary

Date: November 2, 2018

EX-99.1

Exhibit 99.1

AMBERJACK PIPELINE COMPANY LLC

Financial Statements (Unaudited)

March 31, 2018 and 2017

Index

Balance Sheets (Unaudited)	2
Statements of Income (Unaudited)	3
Statement of Members' Capital (Unaudited)	4
Statements of Cash Flow (Unaudited)	5
Condensed Notes to Financial Statements (Unaudited)	6-12

1

AMBERJACK PIPELINE COMPANY LLC

BALANCE SHEETS

March 31, 2018 and December 31, 2017

	March 31, 2018			December 31, 2017
	(unaudited)
ASSETS
Current assets
Cash and cash equivalents	$	7,811,818		$	27,745,601
Accounts receivable, net
Related parties	12,855,929			9,674,673
Third parties, net	9,344,189			8,813,043
Materials and supplies inventory	5,019,639			5,019,639
Allowance oil, net	2,003,958			783,711
Other current assets	1,202,053			1,706,183
Total current assets	38,237,586			53,742,850
Property, plant and equipment	1,086,074,661			1,086,004,238
Accumulated depreciation	(213,296,564		)	(202,641,216		)
Property, plant and equipment, net	872,778,097			883,363,022
Prepaid and other deferred charges	5,078,632			5,152,153
Advance for operations due from related party	300,000			300,000
Total assets	$	916,394,315		$	942,558,025
LIABILITIES and MEMBERS' CAPITAL
Current liabilities
Accounts payable and accrued liabilities	$	312,892		$	1,516,642
Payable to related parties	4,891,668			3,846,297
Other current liabilities	167,757			167,757
Total current liabilities	5,372,317			5,530,696
Long-term liabilities and deferred income	4,249,923			4,291,863
Commitments and contingencies (Note 7)
Members' capital	906,772,075			932,735,466
Total liabilities and members' capital	$	916,394,315		$	942,558,025

The accompanying notes are an integral part of these financial statements (unaudited).

2

AMBERJACK PIPELINE COMPANY LLC

STATEMENTS OF INCOME (UNAUDITED)

Three Months Ended March 31, 2018 and 2017

	March 31, 2018		March 31, 2017
Revenue
Related parties	$	34,480,157	$	28,981,816
Third parties	27,621,239		25,590,585
Total revenue	62,101,396		54,572,401
Operating costs and expenses
Operations	3,230,349		2,937,198
Maintenance	2,085,159		2,958,796
General and administrative	2,380,001		1,947,162
Depreciation and amortization	10,728,869		9,036,988
Property taxes	5,483		5,850
Net loss (gain) from pipeline operations	280,139		(281,580		)
Total costs and expenses	18,710,000		16,604,414
Operating income	43,391,396		37,967,987
Other income and expense
Other income and expense	41,939		42,957
Interest income	3,274		3,132
Net Income	$	43,436,609	$	38,014,076

The accompanying notes are an integral part of these financial statements (unaudited).

3

AMBERJACK PIPELINE COMPANY LLC

STATEMENT OF MEMBERS' CAPITAL (UNAUDITED)

Three Months Ended March 31, 2018

	Shell Pipeline Company LP			Chevron Pipe Line Company			Total
Members' capital at December 31, 2017	$	481,100,958		$	451,634,508		$	932,735,466
Net income	22,617,820			20,818,789			43,436,609
Cash distributions	(36,250,000		)	(33,150,000		)	(69,400,000		)
Members' capital at March 31, 2018	$	467,468,778		$	439,303,297		$	906,772,075

The accompanying notes are an integral part of these financial statements (unaudited).

4

AMBERJACK PIPELINE COMPANY LLC

STATEMENTS OF CASH FLOW (UNAUDITED)

Three Months Ended March 31, 2018 and 2017

	March 31, 2018			March 31, 2017
Cash flows from operating activities
Net income	$	43,436,609		$	38,014,076
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization	10,728,869			9,036,988
Bad debt expense	—			(1,018		)
Net loss (gain) from pipeline operations	280,139			(281,580		)
Changes in working capital
(Increase) decrease in accounts receivable	(3,712,402		)	1,662,985
(Increase) in materials & supplies inventory and allowance oil	(1,500,386		)	(1,067,059		)
Decrease in prepaid and other deferred charges	504,130			695,056
Increase in accounts payable and accrued liabilities	826,491			2,377,047
(Decrease) in other long-term liability	(41,940		)	(209,696		)
Increase in other short-term liability	—			167,757
Net cash provided by operating activities	50,521,510			50,394,556
Cash flows from investing activities
Capital expenditures	(1,055,293		)	(3,388,392		)
Net cash used in investing activities	(1,055,293		)	(3,388,392		)
Cash flows from financing activities
Distributions to members	(69,400,000		)	(56,950,000		)
Net cash used in financing activities	(69,400,000		)	(56,950,000		)
(Decrease) in cash and cash equivalents	(19,933,783		)	(9,943,836		)
Cash and cash equivalents at the beginning of the period	27,745,601			20,047,663
Cash and cash equivalents at the end of the period	$	7,811,818		$	10,103,827
Supplemental cash flow disclosures
Change in accrued capital expenditures	$	(984,870	)	$	(2,727,365	)

The accompanying notes are an integral part of these financial statements (unaudited).

5

AMBERJACK PIPELINE COMPANY LLC

CONDENSED NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

MARCH 31, 2018 and 2017

1.Organization and Business

Amberjack Pipeline Company LLC (Amberjack or the Company) is a Delaware Limited Liability Company (LLC) which owns and operates a pipeline system for the transportation of crude oil from the Green Canyon, Ewing Bank and Grand Isle areas in the Gulf of Mexico to the intersection with the Mars Oil Pipeline Company’s pipeline at Fourchon, Louisiana. The Company, which was formed in 2005 from a previous partnership, is owned by Shell Pipeline Company LP (Shell Pipeline), an indirect wholly owned subsidiary of Shell Oil Company (Shell Oil) and Chevron Pipe Line Company (Chevron). Both Shell Pipeline and Chevron contributed cash and certain pipeline related assets to the Company and are referred to as Members of the Company.

The Members were previously partners in Amberjack Pipeline Company (the Partnership), a Texas general partnership formed in 1996 conducting business currently undertaken by the Company. Operations commenced December 15, 1997, upon completion of the first lateral line. Two additional lateral lines were completed in 1998. On March 16, 2005, the Partnership adopted a plan of conversion to continue its existence in the organizational form of the Company. The Company has two series of ownership interests, all the assets and liabilities of the former Partnership became the assets and liabilities of Amberjack Series A (Series A) units of the Company, 75% owned by Shell Pipeline, and 25% owned by Chevron. Amberjack Series B (Series B) units are owned 50% by Shell Pipeline and 50% by Chevron. The proceeds from the issuance of the Series B units were used to fund the construction of the Tahiti pipeline.

In accordance with Exhibit A of the LLC Agreement of Amberjack Pipeline Company (LLC Agreement) dated March 16, 2005, the relative sharing ratios between the Members for all revenues, costs, and expenses are 75% to Shell Pipeline and 25% to Chevron for Series A units and 50% to Shell Pipeline and 50% to Chevron for Series B units.

2.Significant Accounting Policies

The following significant accounting policies are practiced by the Company and are presented as an aid to understanding the financial statements (unaudited).

Basis of Presentation

The accompanying financial statements (unaudited) have been prepared in accordance with accounting principles generally accepted in the United States (U.S. GAAP).

Use of Estimates

The preparation of financial statements (unaudited) in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements (unaudited) and accompanying notes. Actual results could differ from those estimates. Management believes that the estimates are reasonable.

Cash and Cash Equivalents

Cash and cash equivalents is comprised of cash on deposit at the bank.

Accounts Receivable

The Company’s accounts receivable is primarily from purchasers and shippers of crude oil and, to a lesser extent, purchasers of natural gas liquids and natural gas storage. These purchasers include, but are not limited to refiners, producers, marketing and trading companies and financial institutions that are active in the physical and financial commodity markets. The majority of the Company’s accounts receivable relate to the Company’s crude oil supply and logistics activities that can generally be described as high volume and low margin activities.

The Company reviews all outstanding accounts receivable balances on a monthly basis and records a reserve for amounts that the Company expects will not be fully recovered. The Company does not apply actual balances against the reserve until the Company has exhausted substantially all collection efforts. The Company’s allowance for doubtful accounts totaled $0 at March 31, 2018 and December 31, 2017.

Inventories

Inventories of materials and supplies are carried at the lower of average cost or market.

6

Allowance Oil

A loss allowance factor of 0.1% per barrel is incorporated into applicable crude oil tariffs to offset evaporation and other losses in transit. Allowance oil represents the net difference between the tariff product loss allowance volumes and the actual volumetric losses. The Company takes title to any excess loss allowance when product losses are within an allowed level, and the Company converts that product to cash periodically at prevailing market prices.

Allowance oil is valued at cost using the average market price for the relevant type of crude oil during the month product was transported. At the end of each reporting period, the Company assesses the carrying value of the Company’s allowance oil and makes any adjustments necessary to reduce the carrying value to the applicable net realizable value. The Company recorded a reduction to allowance oil of $0 at March 31, 2018 and December 31, 2017.

Gains and Losses from Pipeline Operations

The Company experiences volumetric gains and losses from its pipeline operations that may arise from factors such as shrinkage, or measurement inaccuracies within tolerable limits. Gains and losses are presented net in the Statements of Income (unaudited) caption “Net loss (gain) from pipeline operations.”

Property, Plant, and Equipment

Property, plant, and equipment is stated at its historical cost of construction, or upon acquisition, at either the fair value of the assets acquired or the historical carrying value to the entity that placed the asset in service. Expenditures for major renewals and betterments are capitalized while minor replacements, maintenance and repairs, which do not improve or extend asset life are expensed when incurred. For constructed assets, all construction-related direct labor and material costs, as well as indirect construction costs are capitalized. Gains and losses on the disposition of assets are recognized in the Balance Sheet (unaudited) against the accumulated depreciation unless the retirement was an abnormal or extraordinary item.

The Company computes depreciation using the straight-line method based on estimated economic lives. Historically, the Company applied composite depreciation rates from 3.33% to 20% to functional groups of property having similar economic characteristics. Following the composite method of depreciation, the gains and losses from ordinary disposals or retirements of property, plant, and equipment normally would be credited or charged to accumulated depreciation. The gains and losses from the disposal of the raw construction material are recognized on the income statement (unaudited).

In late 2017, the Company contracted an independent energy consulting firm to perform a depreciation study which provided new average remaining useful lives for the property, plant and equipment held by the Company.  The results of the study show the following new average remaining lives: 20 to 23 years for right of way, line pipe, line pipe fittings, pipeline construction; 11 to 19 years for buildings, pumping equipment, other station equipment, office furniture and equipment; 14 to 17 years for communication systems, vehicles and other work equipment (Oil Tanks and delivery facilities are no longer applicable to the Company).  The new composite depreciation rates range from 2.9% to 5.9%. Annual depreciation expense in 2018 and future years to increase by approximately $6,500,000 as compared to 2017.

Prepaid and Other Deferred Charges

Prepaid and other deferred charges represent payment to Shell GOM Pipeline Company LLC (SGPC) for the upgrade and replacement of equipment at Green Canyon Block 19 (GC 19) common facilities platform. This platform is owned by SGPC, and is used by the Company and other parties. The project was completed in 2016 and the share of the Company in the costs are amortized over the asset useful life of 30 years.

Asset Retirement Obligations

Asset retirement obligations represent legal and constructive obligations associated with the retirement of long-lived assets that result from acquisition, construction, development and/or normal use of the asset. The Company records liabilities for obligations related to the retirement and removal of long-lived assets used in our businesses at fair value on a discounted basis when they are incurred and can be reasonably estimated. Amounts recorded for the related assets are increased by the amount of these obligations. Over time, the liabilities increase due to the change in their present value, and the initial capitalized costs are depreciated over the useful lives of the related assets. The liabilities are eventually extinguished when settled at the time the asset is taken out of service.

The Company continues to evaluate the Company’s asset retirement obligations and future developments could impact the amounts the Company records. The demand for the Company’s pipelines depends on the ongoing demand to move crude oil through the system. Although individual assets will be replaced as needed, we expect our pipelines will continue to exist for an indefinite useful life. As such, there is uncertainty around the timing of any asset retirement activities. As a result, the Company determined that there is not sufficient information to make a reasonable estimate of the asset retirement obligations

7

for the Company’s assets and the Company has not recognized any asset retirement obligations as of March 31, 2018 and December 31, 2017.

Impairments of Long-Lived Assets

Long lived assets of identifiable business activities are evaluated for impairment when events or changes in circumstances indicate, in the Company management’s judgment, that the carrying value of such assets may not be recoverable. These events include market declines that are believed to be other than temporary, changes in the manner in which the Company intends to use a long-lived asset, decisions to sell an asset and adverse changes in the legal or business environment such as adverse actions by regulators. If an event occurs, which is a determination that involves judgment, the Company evaluates the recoverability of our carrying values based on the long-lived asset’s ability to generate future cash flows on an undiscounted basis. When an indicator of impairment has occurred, the Company compares the Company management’s estimate of forecasted discounted future cash flows attributable to the assets to the carrying value of the assets to determine whether the assets are recoverable (i.e., the discounted future cash flows exceed the net carrying value of the assets). If the assets are not recoverable, the Company determines the amount of the impairment recognized in the financial statements (unaudited) by estimating the fair value of the assets and recording a loss for the amount that the carrying value exceeds the estimated fair value. The Company determined that there were no asset impairments in the three months ended March 31, 2018 and March 31, 2017.

Fair Value of Financial Instruments

Assets and liabilities requiring fair value presentation or disclosure are measured using an exit price (i.e., the price that would be received to sell an asset or paid to transfer a liability) and disclose such amounts according to the quality of valuation inputs under the following hierarchy:

Level 1    Quoted prices in an active market for identical assets or liabilities.

Level 2    Inputs other than quoted prices that are directly or indirectly observable.

Level 3    Unobservable inputs that are significant to the fair value of assets or liabilities.

The fair value of an asset or liability is classified based on the lowest level of input significant to its measurement. A fair value initially reported as Level 3 will be subsequently reported as Level 2 if the unobservable inputs become inconsequential to its measurement, or corroborating market data becomes available. Asset and liability fair values initially reported as Level 2 will be subsequently reported as Level 3 if corroborating market data becomes unavailable.

The carrying amounts of the Company’s accounts receivable, other current assets, prepaids and other deferred charges or deposit, accounts payable and accrued liabilities, and payables to related parties approximate their carrying values due to their short-term nature.

Nonrecurring fair value measurements are applied with respect to the Company’s nonfinancial assets and liabilities measured on a nonrecurring basis, which includes the determination of the fair value for impairment of the Company’s long-lived assets.

Other Current Assets

The Company has entered into several lease agreements (LOPS agreements) to lease usage of offshore platform spaces located at Green Canyon Block 19 (GC 19) and Ship Shoal Block 332 (SS 332). The prepaid rent on the platform lease is included in “Other current assets” within the accompanying Balance Sheets (unaudited). Also, the “Other current assets” includes prepaid insurance and current prepaid common facilities expense.

Concentration of Credit and Other Risks

A significant portion of the Company’s receivables are from a related party, and other oil and gas companies. Although collection of these receivables could be influenced by economic factors affecting the oil and gas industry, management believes the risk of significant loss to be remote.

Development and production of crude oil in the service area of the pipeline are subject to, among other factors, prices of crude oil, as well as federal and state energy policy, none of which are within the Company’s control.

The Company has concentrated credit risk for cash by maintaining deposits in a major bank, which may at times exceed amounts covered by insurance provided by the United States Federal Deposit Insurance Corporation (FDIC). The Company monitors the financial health of the bank and have not experienced any losses in such accounts and believe that the Company is

8

not exposed to any significant credit risk. As of March 31, 2018 and December 31, 2017, the Company had approximately $7,561,818 and $27,495,601, respectively, in cash in excess of FDIC limits.

Transportation Revenue

In general, the Company recognizes revenue from customers when all of the following criteria are met: 1) persuasive evidence of an exchange arrangement exists; 2) delivery has occurred or services have been rendered; 3) the price is fixed or determinable; and 4) collectability is reasonably assured. The Company records revenue for crude oil transportation services over the period in which they are earned (i.e., either physical delivery of product has taken place or the services designated in the contract have been performed). Revenues for transportation services are recognized upon delivery of crude oil from the pipeline system.

Income Taxes

The Company has not historically incurred income tax expense, as limited liability companies, in accordance with the provisions of the Internal Revenue Code, are not subject to U.S. federal income taxes. Rather, each Member includes its allocated share of the Company’s income or loss in its own federal and state income tax returns. The Company is responsible for various state property and ad valorem taxes, which are recorded in the accompanying Statements of Income (unaudited) as "Property taxes".

On December 22, 2017, the Tax Cuts and Jobs Act bill was enacted, which includes a broad range of tax reform legislation affecting businesses, including reducing the corporate tax rate, changes to business deductions and sweeping changes to international tax provisions.  The Company analyzed these impacts and believes that the impacts would be on the members of the entity and not the entity itself.  As such, no adjustment was made to the financial statements (unaudited) in relation to tax reform.

Comprehensive Income (Loss)

The Company has not reported comprehensive income (loss) due to the absence of items of other comprehensive income (loss) in the periods presented.

Recent Accounting Pronouncements

Standards Not Adopted as of March 31, 2018

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers, which superseded nearly all existing revenue recognition guidance under GAAP. The ASU's core principle is that a company will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. ASU 2014-09 will require additional disclosure in the notes to the financial statements and was initially effective for fiscal years and interim periods within those fiscal years beginning after December 15, 2018, and interim periods within fiscal periods beginning after December 15, 2019. The update allows for either “full retrospective” adoption, meaning the standard is applied to all of the periods presented, or “modified retrospective” adoption, meaning the standard is applied only to the most current period presented in the financial statements. We will adopt the requirements of the new standard in the first quarter of 2019 under the modified retrospective transition method.

We expect the adoption of the new standard will change the timing of revenue recognized under throughput and deficiency agreements as well as dedication and transportation agreements that contain tiered pricing terms and/or tariff surcharges that are in effect for a portion of the contract. Upon transition, a cumulative effect adjustment will be recognized (a contract asset or liability) related to the change in timing of revenue recognition. The calculation of the transition adjustment is still under review.

We have also identified potential contracts or elements of contracts that will require a change in presentation on our income statement, specifically related to the accumulation and sale of product loss allowance.

In February 2016, the FASB issued ASU 2016-02 to Topic 842, Leases, which requires lessees to recognize assets and liabilities for leases with lease terms greater than twelve months in the statement of financial position. The Company has formed a project team to evaluate and implement the new standard, including cataloging its existing lease contracts. The Company plans to adopt this new standard on January 1, 2020 and is currently evaluating its impact to the financial statements and related disclosures.

3. Property, Plant and Equipment

Property, plant, and equipment consisted of the following as of March 31, 2018 and December 31, 2017:

9

	March 31, 2018			December 31, 2017
Buildings	$	26,253,142		$	26,253,142
Line pipe, equipment and other pipeline assets	1,037,439,636			1,037,439,636
Rights-of-way	826,662			826,662
Office, communication and data handling equipment	19,628,338			19,628,338
Construction work-in progress	1,926,883			1,856,460
	1,086,074,661			1,086,004,238
Accumulated depreciation	(213,296,564		)	(202,641,216		)
Total property, plant and equipment, net	$	872,778,097		$	883,363,022

Depreciation expense on property, plant and equipment is included in "Depreciation and amortization" in the accompanying Statements of Income (unaudited) for each of the three months ended March 31, 2018 and 2017 was $10,728,869 and $9,036,988, respectively.

4. Related Party Transactions

The Company derives a significant portion of its transportation and allowance oil revenues from related parties, which are based on published tariffs and contractual agreements. This activity amounted to $34,480,157 and $28,981,816 for the three months ended March 31, 2018 and 2017, respectively. All such transactions are within the ordinary course of business. At March 31, 2018 and December 31, 2017, the Company had affiliate receivables of $9,797,235 and $7,565,841, respectively, relating to transportation services. Non-transportation affiliate receivables at March 31, 2018 and December 31, 2017 were $3,058,694 and $2,108,832, respectively.

The Company has no employees and relies on its operators, Shell Pipeline and Chevron Pipeline, to provide personnel to perform daily operating and administrative duties on behalf of the Company. In accordance with terms of the operating agreement, Shell Pipeline has charged the Company for expenses incurred on behalf of the Company in the amount of $5,522,683 and $4,486,924 for the three months ended March 31, 2018 and 2017, respectively. Chevron Pipeline has charged the Company for expenses incurred on behalf of the Company in the amount of $1,037,683 and $585,713 for the three months ended March 31, 2018 and 2017, respectively.  

Substantially all expenses incurred by the Company are paid by Shell Pipeline on the Company’s behalf. At March 31, 2018 and December 31, 2017, the Company owed $4,509,778 and $3,846,297, respectively, to reimburse Shell Pipeline for these expenses. The Company also owed Chevron $379,685 and $0 as of March 31, 2018 and December 31, 2017, respectively, for various projects led by Chevron. At March 31, 2018 and December 31, 2017, the Company had a receivable balance of $300,000 from Shell Pipeline which is comprised of advance payments made by the Members to Shell Pipeline to fund operating expenses. This balance is included in “Advance for operations due from related party” which is included in the accompanying Balance Sheets (unaudited).

Employees who directly or indirectly support the Company’s operations participate in the pension, postretirement health and life insurance, and defined contribution benefit plans sponsored by Shell Oil, which includes other Shell Oil subsidiaries. The Company’s share of pension and postretirement health and life insurance costs for the three months ended March 31, 2018 and 2017 was $292,963 and $256,363, respectively. The Company’s share of defined contribution plan costs for the same periods was $116,285 and $101,758, respectively. Pension and defined contribution benefit plan expenses are included in “General and administrative” expense in the Statements of Income (unaudited).

Cost Sharing Agreement

In July 2014, the lease on platform ST 301, which was previously utilized by Series A’s pipeline, was terminated. To continue operations, Amberjack A built a subsea access route around the platform. Amberjack A is the sole owner of the new infrastructure, however two affiliate owned pipelines are connected to Series A’s pipeline. These two affiliates have a cost sharing agreement with Series A to share common costs including the main bypass piping, engineering, design, and permitting. The contributed cash is accounted for as deferred income and is included in Other Current Liabilities and Other Long-Term Liabilities on the accompanying Balance Sheets (unaudited). At March 31, 2018 and December 31, 2017, Series A had a $4,417,681 and $4,459,620 deferred income balance, respectively. The balance is for prepaid construction costs with the

10

Brutus Pipeline as a result of the cost sharing agreement for the ST 301 re-route project. The amount is amortized over the 30-year useful life of the asset and credited to “Other income” in the Statements of Income (unaudited). Income recorded by the Company related to this amounted to $41,939 in the three months ended March 31, 2018 and 2017.

5. Supplemental Information

Equity interest in the Company is separated into two series; Series A and Series B, as defined in Note 1. Series A of the Members’ capital represents the assets and liabilities in the pipeline system from the Green Canyon, Ewing Bank and Grand Isle areas in the Gulf of Mexico to the intersection with Mars Oil Pipeline Company’s pipeline at Fourchon, Louisiana. Series A assets, liabilities, income and losses are shared between Shell Pipeline and Chevron in the ratio of 75:25. Series B of the Members’ capital represents the assets and liabilities in the pipeline system extension connecting the offshore production area called Tahiti and Jack St Malo in the Gulf of Mexico to the existing Amberjack pipeline in the Gulf of Mexico at GC19. Series B assets, liabilities, income and losses are shared between Shell Pipeline and Chevron in the ratio of 50:50. Supplemental information of Series A units and Series B units are presented below:

	Income Statement
	Three Months Ended
	March 31, 2018
	Series A		Series B		Total
Revenues	$	8,046,989	$	54,054,407	$	62,101,396
Costs and Expenses	4,491,711		14,218,289		18,710,000
Operating income	3,555,278		39,836,118		43,391,396
Other income and expense	41,939		—		41,939
Interest income	844		2,430		3,274
Net income	$	3,598,061	$	39,838,548	$	43,436,609

	Three Months Ended
	March 31, 2017
	Series A		Series B		Total
Revenues	$	6,431,805	$	48,140,596	$	54,572,401
Costs and Expenses	6,114,512		10,489,902		16,604,414
Operating income	317,293		37,650,694		37,967,987
Other income and expense	42,957		—		42,957
Interest income	1,152		1,980		3,132
Net income	$	361,402	$	37,652,674	$	38,014,076

	Balance Sheet
	March 31, 2018
	Series A		Series B		Total
Total assets	$	104,790,214	$	811,604,101	$	916,394,315
Members' capital	59,957,199		846,814,876		906,772,075

	December 31, 2017
	Series A		Series B		Total
Total assets	$	107,263,467	$	835,294,558	$	942,558,025
Members' capital	62,559,138		870,176,328		932,735,466

11

6. Environmental Remediation Costs

The Company is subject to federal, state, and local environmental laws and regulations. The Company routinely conducts reviews of potential environmental issues and claims that could impact our assets or operations. These reviews assist the Company in identifying environmental issues and estimating the costs and timing of remediation efforts. In making environmental liability estimations, we consider the material effect of environmental compliance, pending legal actions against us and potential third-party liability claims. Often, as the remediation evaluation and effort progresses, additional information is obtained, requiring revisions to estimated costs. These revisions are reflected in the Company’s income in the period in which they are probable and reasonably estimable. Total expenses for the three months ended March 31, 2018 and 2017 were $0 for environmental remediation costs.

7. Commitments and Contingencies

In the ordinary course of business, the Company is subject to various laws and regulations. In the opinion of management, the Company is in compliance with existing laws and regulations and is not aware of any violations that will materially affect the financial position, results of operations, or cash flows of the Company.

8. Subsequent Events

In preparing the accompanying financial statements (unaudited), the Company has reviewed events that have occurred after March 31, 2018 until November 2, 2018, which is the date of the issuance of the unaudited financial statements. Any material subsequent events that occurred during this time have been properly disclosed in the financial statements (unaudited).

On May 11, 2018, ownership in Amberjack changed as a result of a sale of ownership interests to Shell Midstream Partners, L.P. (SHLX) from Shell Pipeline; a fully owned subsidiary of Royal Dutch Shell plc and an affiliate of SHLX. The sale of Amberjack membership interests consisted of 75% of issued and outstanding Series A and 50% of the respective Series B. The sale was closed for $1.22 billion.

12

EX-99.2

Exhibit 99.2

UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME

Background

The unaudited pro forma consolidated statement of income of Shell Midstream Partners, L.P. (“we,” “us,” “our” or “the Partnership”) for the nine months ended September 30, 2018 is based upon our historical unaudited financial statements.

On May 11, 2018, we acquired from Shell Pipeline Company LP (“SPLC”), a wholly owned subsidiary of Royal Dutch Shell plc, its ownership interest in Amberjack Pipeline Company LLC, a Delaware limited liability company, (“Amberjack”), which is comprised of 75% of the issued and outstanding Series A membership interest of Amberjack (“Amberjack Series A”) and 50% of the issued and outstanding Series B membership interest of Amberjack (“Amberjack Series B”) for total cash consideration of $1,220.0 million (collectively, the “May 2018 Acquisition”). The May 2018 Acquisition closed pursuant to the terms of a Purchase and Sale Agreement (“Purchase Agreement”) entered into between us and SPLC on May 9, 2018.

We funded the May 2018 Acquisition with $494.0 million in borrowings under our five year revolver due October 2019 with Shell Treasury Center (West) Inc (“STCW”), an affiliate of Shell, and $726.0 million in borrowings under our five year revolver due December 2022 with STCW.

In February 2018, we completed equity offerings, consisting of (i) the sale of common units in a registered public offering for $680.0 million gross proceeds, (ii) the sale of common units in a private placement with Shell Midstream LP Holdings LLC, an indirect subsidiary of Shell, for an aggregate purchase price of $300.0 million and (iii) the issuance of general partner units to our general partner in order to maintain its 2% general partner interest in us for $20.0 million. The proceeds of the equity offerings were used to repay borrowings under certain of our existing credit facilities and for general partnership purposes.

Basis of Presentation

Unaudited Pro Forma Consolidated Statement of Income

The unaudited pro forma consolidated statement of income for the nine months ended September 30, 2018 has been prepared as though the May 2018 Acquisition and associated financing occurred on January 1, 2017. Borrowings under our existing five year revolving credit facilities include (i) $494.0 million under our five year revolver due October 2019 and (ii) $726.0 million under our five year revolver due December 2022 and the $1,000.0 million gross proceeds from the equity offerings used to pay down debt under our revolving credit facilities which created availability under our existing facilities to fund the May 2018 Acquisition.

No adjustments have been made to our historical audited financial statements to reflect other events subsequent to the period shown by such financial statements.    

The unaudited pro forma consolidated statement of income should be read in conjunction with our unaudited financial statements as well as the related notes in our other filings with the Securities and Exchange Commission.

The adjustments to the historical unaudited consolidated statement of income are based upon currently available information and certain estimates and assumptions. Actual effects of these transactions will differ from the pro forma adjustments. The unaudited pro forma consolidated statement of income is not necessarily indicative of the results that would have occurred if the transaction had been completed on the dates indicated or what could be achieved in the future. However, we believe the assumptions provide a reasonable basis for presenting the significant effects of the transactions as contemplated and the pro forma adjustments are factually supportable, give appropriate effect to the expected impact of events directly attributable to the conveyance, and reflect those items expected to have a continuing impact on the Partnership for purposes of the unaudited pro forma consolidated statement of income.

1

Financial Statements of the Partnership

Shell Midstream Partners, L.P. Unaudited Pro Forma Consolidated Statement of Income Nine Months Ended September 30, 2018
	Shell Midstream Partners, L.P.		May 2018 Acquisition			Pro Forma Adjustments				Shell Midstream Partners, L.P. Pro Forma
	(in millions of dollars, except per unit data)
Revenue
Transportation, terminaling and storage services – third parties	$	150.2	$	—		$	—			$	150.2
Transportation, terminaling and storage services – related parties	163.9		—			—				163.9
Product revenue - third parties	2.2		—			—				2.2
Product revenue - related parties	24.2		—			—				24.2
Lease revenue - related parties	41.9		—			—				41.9
Total revenue	382.4		—			—				382.4
Costs and expenses
Operations and maintenance – third parties	88.9		—			—				88.9
Operations and maintenance – related parties	39.8		—			0.4			(b)	40.2
Cost of goods sold - third parties	1.9		—			—				1.9
Cost of goods sold - related parties	20.8		—			—				20.8
General and administrative – third parties	5.3		—			—				5.3
General and administrative – related parties	39.3		—			—				39.3
Depreciation, amortization and accretion	34.4		—			—				34.4
Property and other taxes	12.5		—			—				12.5
Total costs and expenses	242.9		—			0.4				243.3
Operating income	139.5		—			(0.4		)		139.1
Income from equity method investments	161.3		33.2		(a)	—				194.5
Dividend income from cost investments	52.6		—			—				52.6
Other income	24.1		—			—				24.1
Investment, dividend and other income	238.0		33.2			—				271.2
Interest expense, net	42.9		—			15.2			(c)	55.4
						(2.7		)	(d)
Income before income taxes	334.6		33.2			(12.9		)		354.9
Income tax expense	0.2		—			—				0.2
Net income	334.4		33.2			(12.9		)		354.7
Less: Net income attributable to Parent	—									—
Less: Net income attributable to noncontrolling interests	11.4		—			—				11.4
Net income attributable to the Partnership	$	323.0	$	33.2		$	(12.9	)		$	343.3
General partner's interest in net income attributable to the Partnership	$	94.6								$	95.0
Limited partner's interest in net income attributable to the Partnership	$	228.4								$	248.3
Net income per Limited Partner Unit – Basic and Diluted:
Common	$	1.04								$	1.11
Weighted average Limited Partner Units outstanding – Basic and Diluted:
Common units – public	120.6									123.8
Common units – SPLC	98.5									100.0

2

Shell Midstream Partners, L.P.

Notes to Unaudited Pro Forma Consolidated Statement of Income

Pro Forma Adjustments

The following items are reflected in the unaudited pro forma consolidated statement of income:

(a) Reflects the Partnership's income from equity investment of Amberjack, consisting of 75% ownership interest of Amberjack Series A and 50% ownership interest of Amberjack Series B for the period January 1, 2018 to May 10, 2018.

(b) Reflects additional property damage and business interruption insurance related to the May 2018 Acquisition for the period January 1, 2018 to May 10, 2018.

(c) Reflects additional interest expense on borrowings totaling $1,220.0 million from existing five year revolving credit facilities to fund the May 2018 Acquisition for the period January 1, 2018 to May 10, 2018. The weighted average interest rate used in this pro forma financial information is 3.5%, comprised of the three-month LIBOR rate as of May 11, 2018 plus a margin. A 1/8 percentage point increase in the interest rate on the total of $1,220.0 million variable rate borrowings would increase our consolidated annual interest expense by approximately $1.5 million.

(d) Reflects reversal of interest expense on borrowings that were repaid in connection with the equity offerings discussed above totaling $972.9 million from existing five year revolving credit facilities for the period January 1, 2018 to February 5, 2018. The weighted average interest rate used in this pro forma financial information is 2.9% comprised of the three-month LIBOR rate as of February 6, 2018 plus a margin.

Pro Forma Net Income Per Unit

Net income per unit applicable to common limited partner units is computed by dividing the common limited partner’s interest in net income attributable to the Partnership for the period by the weighted average number of common units outstanding for the period. Any excess of distributions declared over net income shall be allocated to the partners based on their respective sharing of income specified in our partnership agreement. Pro forma basic net income per unit is determined by dividing the pro forma net income available to common unitholders of the Partnership by the number of common units assumed to be outstanding as a result of the offering and sale of common units, the net proceeds of which were used to repay borrowings under certain of our existing credit facilities and for general partnership purposes. For the purposes of this calculation, we have assumed common units and general partner units issued as a result of this offering to be outstanding since January 1, 2017.

3