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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-Q 
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2021
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                         
Commission file number: 001-36710
Shell Midstream Partners, L.P.
(Exact name of registrant as specified in its charter)
Delaware46-5223743
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
150 N. Dairy Ashford, Houston, Texas 77079
(Address of principal executive offices) (Zip Code)
(832) 337-2034
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Units, Representing Limited Partner InterestsSHLXNew York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ý    No   ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ý    No  ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ý
Accelerated filer ¨
Non-accelerated filer ¨
Smaller reporting company

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. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ☐    No  ý
The registrant had 393,289,537 common units outstanding as of October 29, 2021.





SHELL MIDSTREAM PARTNERS, L.P.
TABLE OF CONTENTS
 
Page
                   Unaudited Consolidated Statements of Income
* SHELL and the SHELL Pecten are registered trademarks of Shell Trademark Management, B.V. used under license.



PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
SHELL MIDSTREAM PARTNERS, L.P.
UNAUDITED CONSOLIDATED BALANCE SHEETS
September 30, 2021December 31, 2020
(in millions of dollars)
ASSETS
Current assets 
Cash and cash equivalents$365 $320 
Accounts receivable – third parties, net7 20 
Accounts receivable – related parties30 21 
Allowance oil18 9 
Prepaid expenses10 24 
Total current assets430 394 
Equity method investments1,008 1,013 
Property, plant and equipment, net662 699 
Operating lease right-of-use assets 3 4 
Other investments2 2 
Contract assets – related parties222 233 
Other assets – related parties2 2 
Total assets$2,329 $2,347 
LIABILITIES
Current liabilities
Accounts payable – third parties$4 $5 
Accounts payable – related parties13 16 
Deferred revenue – third parties 4 
Deferred revenue – related parties26 19 
Accrued liabilities – third parties16 10 
Accrued liabilities – related parties19 28 
Total current liabilities78 82 
Noncurrent liabilities
Debt payable – related party2,691 2,692 
Operating lease liabilities3 4 
Finance lease liabilities23 24 
Deferred revenue and other unearned income3 3 
Total noncurrent liabilities2,720 2,723 
Total liabilities2,798 2,805 
Commitments and Contingencies (Note 12)
(DEFICIT) EQUITY
Preferred unitholders (50,782,904 units issued and outstanding as of both September 30, 2021 and December 31, 2020)
(1,059)(1,059)
Common unitholders – public (123,832,233 units issued and outstanding as of both September 30, 2021 and December 31, 2020)
3,362 3,382 
Common unitholder – SPLC (269,457,304 units issued and outstanding as of both September 30, 2021 and December 31, 2020)
(2,470)(2,497)
Financing receivables – related parties(294)(298)
Accumulated other comprehensive loss(9)(9)
Total partners’ deficit(470)(481)
Noncontrolling interests1 23 
Total deficit(469)(458)
Total liabilities and deficit$2,329 $2,347 
The accompanying notes are an integral part of the consolidated financial statements.
3


SHELL MIDSTREAM PARTNERS, L.P.
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended
September 30,
Nine Months Ended
September 30,
2021202020212020
Revenue
Transportation, terminaling and storage services – third parties$33 $26 $113 $84 
Transportation, terminaling and storage services – related parties70 64 234 210 
Product revenue – related parties11 5 26 14 
Lease revenue – related parties14 15 42 43 
Total revenue128 110 415 351 
Costs and expenses
Operations and maintenance – third parties16 9 38 33 
Operations and maintenance – related parties26 30 87 76 
Cost of product sold9 3 20 20 
Impairment of fixed assets  3  
General and administrative – third parties1 3 4 7 
General and administrative – related parties12 11 34 40 
Depreciation, amortization and accretion12 13 37 39 
Property and other taxes3 6 14 15 
Total costs and expenses79 75 237 230 
Operating income49 35 178 121 
Income from equity method investments86 109 293 330 
Other income8 7 32 27 
Investment and other income94 116 325 357 
Interest income8 8 23 16 
Interest expense22 22 64 71 
Income before income taxes129 137 462 423 
Income tax expense    
Net income129 137 462 423 
Less: Net income attributable to noncontrolling interests2 2 10 9 
Net income attributable to the Partnership$127 $135 $452 $414 
Preferred unitholder’s interest in net income attributable to the Partnership12 12 36 24 
General partner’s interest in net income attributable to the Partnership   55 
Limited Partners’ interest in net income attributable to the Partnership’s common unitholders$115 $123 $416 $335 
Net income per Limited Partner Unit - Basic and Diluted:
Common - basic$0.29 $0.31 $1.06 $0.98 
Common - diluted$0.29 $0.30 $1.02 $0.96 
Distributions per Limited Partner Unit$0.3000 $0.4600 $1.0600 $1.3800 
Weighted average Limited Partner Units outstanding - Basic and Diluted:
Common units - public - basic123.8 123.8 123.8 123.8 
Common units - SPLC - basic269.5 269.5 269.5 216.3 
Common units - public - diluted123.8 123.8 123.8 123.8 
Common units - SPLC - diluted320.3 320.3 320.3 250.2 
The accompanying notes are an integral part of the consolidated financial statements.
4


SHELL MIDSTREAM PARTNERS, L.P.
UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Three Months Ended September 30,Nine Months Ended September 30,
2021202020212020
Net income$129 $137 $462 $423 
Other comprehensive income (loss), net of tax:
Remeasurements of pension and other postretirement benefits related to equity method investments, net of tax 2  2 
Comprehensive income$129 $139 $462 $425 
Less comprehensive income attributable to:
Noncontrolling interests2 2 10 9 
Comprehensive income attributable to the Partnership$127 $137 $452 $416 

The accompanying notes are an integral part of the consolidated financial statements.
5


SHELL MIDSTREAM PARTNERS, L.P.
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS 
Nine Months Ended September 30,
20212020
(in millions of dollars)
Cash flows from operating activities
Net income$462 $423 
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation, amortization and accretion37 39 
Amortization of contract assets - related parties11 8 
Impairment of fixed assets3  
Non-cash interest expense1  
Allowance oil reduction to net realizable value 8 
Undistributed equity earnings(30)(6)
Changes in operating assets and liabilities
Accounts receivable4 (10)
Allowance oil(9)(3)
Prepaid expenses and other assets14 6 
Accounts payable(3)11 
Deferred revenue and other unearned income2 20 
Accrued liabilities(3)7 
Net cash provided by operating activities489 503 
Cash flows from investing activities
Capital expenditures(7)(17)
May 2021 Transaction10  
Contributions to investment(3) 
Return of investment38 62 
Auger Divestiture2  
Net cash provided by investing activities40 45 
Cash flows from financing activities
Payment of equity issuance costs (2)
Distributions to noncontrolling interests(10)(12)
Distributions to unitholders and general partner(476)(497)
Other contributions from Parent 1 
Prepayment fee on credit facility(2) 
Receipt of principal payments on financing receivables4 2 
Repayment of principal on finance leases (1)
Net cash used in financing activities(484)(509)
Net increase in cash and cash equivalents45 39 
Cash and cash equivalents at beginning of the period320 290 
Cash and cash equivalents at end of the period$365 $329 
Supplemental cash flow information
Non-cash investing and financing transactions:
Change in accrued capital expenditures$ $3 
The accompanying notes are an integral part of the consolidated financial statements.
6


SHELL MIDSTREAM PARTNERS, L.P.
UNAUDITED CONSOLIDATED STATEMENT OF CHANGES IN (DEFICIT) EQUITY
Partnership
(in millions of dollars)Preferred Unitholder SPLCCommon Unitholders PublicCommon Unitholder SPLCFinancing ReceivablesAccumulated Other Comprehensive LossNoncontrolling InterestsTotal
Balance as of December 31, 2020$(1,059)$3,382 $(2,497)$(298)$(9)$23 $(458)
Net income12 48 103 — — 4 167 
Distributions to unitholders(12)(57)(104)— — — (173)
Distributions to noncontrolling interests— — — — — (4)(4)
Principal repayments on financing receivables— — — 1 — — 1 
Balance as of March 31, 2021$(1,059)$3,373 $(2,498)$(297)$(9)$23 $(467)
Net income12 47 103 — — 4 166 
Distributions to unitholders(12)(57)(104)— — — (173)
Distributions to noncontrolling interests— — — — — (3)(3)
May 2021 Transaction— — 31 — — (22)9 
Principal repayments on financing receivables— — — 1 — — 1 
Balance as of June 30, 2021$(1,059)$3,363 $(2,468)$(296)$(9)$2 $(467)
Net income12 36 79 — — 2 129 
Distributions to unitholders(12)(37)(81)— — — (130)
Distributions to noncontrolling interests— — — — — (3)(3)
Principal repayments on financing receivables— — — 2 — — 2 
Balance as of September 30, 2021$(1,059)$3,362 $(2,470)$(294)$(9)$1 $(469)

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Partnership
(in millions of dollars)Preferred Unitholder SPLCCommon Unitholders PublicCommon Unitholder SPLCGeneral Partner SPLCFinancing ReceivablesAccumulated Other Comprehensive LossNoncontrolling InterestsTotal
Balance as of December 31, 2019$ $3,450 $(203)$(4,014)$ $(8)$26 $(749)
Net income— 44 39 55 — — 4 142 
Distributions to unitholders and general partner— (57)(50)(55)— — — (162)
Distributions to noncontrolling interests— — — — — — (5)(5)
Balance as of March 31, 2020$ $3,437 $(214)$(4,014)$ $(8)$25 $(774)
Net income12 41 88 — — — 3 144 
Other contributions from Parent— — 1 — — — — 1 
Distributions to unitholders and general partner— (57)(51)(55)— — — (163)
Distributions to noncontrolling interests— — — — — — (4)(4)
Principal repayments on financing receivables— — — — 1 — — 1 
April 2020 Transaction(1,071)— (2,280)4,069 (302)— — 416 
Balance as of June 30, 2020$(1,059)$3,421 $(2,456)$ $(301)$(8)$24 $(379)
Net income12 38 85 — — — 2 137 
Other comprehensive income— — — — — 2 — 2 
Distributions to unitholders and general partner(12)(57)(103)— — — — (172)
Distributions to noncontrolling interests— — — — — — (3)(3)
Principal repayments on financing receivables— — — — 1 — — 1 
Balance as of September 30, 2020$(1,059)$3,402 $(2,474)$ $(300)$(6)$23 $(414)

The accompanying notes are an integral part of the consolidated financial statements.

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SHELL MIDSTREAM PARTNERS, L.P.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 
Except as noted within the context of each note disclosure, the dollar amounts presented in the tabular data within these note disclosures are stated in millions of dollars.

1. Description of the Business and Basis of Presentation
Shell Midstream Partners, L.P. (“we,” “us,” “our,” “SHLX” or “the Partnership”) is a Delaware limited partnership formed by Royal Dutch Shell plc on March 19, 2014 to own and operate pipeline and other midstream assets, including certain assets purchased from Shell Pipeline Company LP (“SPLC”) and its affiliates. We conduct our operations either through our wholly-owned subsidiary, Shell Midstream Operating LLC (“Operating Company”), or through direct ownership. Our general partner is Shell Midstream Partners GP LLC (“general partner”). References to “RDS,” “Shell” or “Parent” refer collectively to Royal Dutch Shell plc and its controlled affiliates, other than us, our subsidiaries and our general partner.

Until April 1, 2020, our general partner owned an approximate 2% general partner economic interest in the Partnership, including the incentive distribution rights (“IDRs”). On April 1, 2020, we closed the transactions contemplated by the Partnership Interests Restructuring Agreement with our general partner dated February 27, 2020 (the “Partnership Interests Restructuring Agreement”), pursuant to which the IDRs were eliminated and the 2% general partner economic interest was converted into a non-economic general partner interest in the Partnership. As of September 30, 2021, our general partner holds a non-economic general partner interest in the Partnership, and affiliates of SPLC own a 68.5% limited partner interest (269,457,304 common units), and 50,782,904 Series A perpetual convertible preferred units (the “Series A Preferred Units”) in the Partnership. These common units and preferred units, on an as-converted basis, represent a 72% interest in the Partnership. See Note 2 Acquisitions and Other Transactions and Note 8 (Deficit) Equity for additional details.

Description of the Business
We own, operate, develop and acquire pipelines and other midstream and logistics assets. As of September 30, 2021, our assets include interests in entities that own (a) crude oil and refined products pipelines and terminals that serve as key infrastructure to transport onshore and offshore crude oil production to Gulf Coast and Midwest refining markets and deliver refined products from those markets to major demand centers and (b) storage tanks and financing receivables that are secured by pipelines, storage tanks, docks, truck and rail racks and other infrastructure used to stage and transport intermediate and finished products. The Partnership’s assets also include interests in entities that own natural gas and refinery gas pipelines that transport offshore natural gas to market hubs and deliver refinery gas from refineries and plants to chemical sites along the Gulf Coast.

We generate revenue from the transportation, terminaling and storage of crude oil, refined products, and intermediate and finished products through our pipelines, storage tanks, docks, truck and rail racks, generate income from our equity and other investments, and generate interest income from financing receivables on certain logistic assets. Our operations consist of one reportable segment. 




















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The following table reflects our ownership interests as of September 30, 2021:
SHLX Ownership
Pecten Midstream LLC (“Pecten”)100.0 %
Sand Dollar Pipeline LLC (“Sand Dollar”)100.0 %
Triton West LLC (“Triton”)100.0 %
Zydeco Pipeline Company LLC (“Zydeco”) (1)
100.0 %
Mattox Pipeline Company LLC (“Mattox”)79.0 %
Amberjack Pipeline Company LLC (“Amberjack”) – Series A/Series B
75.0% / 50.0%
Mars Oil Pipeline Company LLC (“Mars”)71.5 %
Odyssey Pipeline L.L.C. (“Odyssey”)71.0 %
Bengal Pipeline Company LLC (“Bengal”)50.0 %
Crestwood Permian Basin LLC (“Permian Basin”)50.0 %
LOCAP LLC (“LOCAP”)41.48 %
Explorer Pipeline Company (“Explorer”)38.59 %
Poseidon Oil Pipeline Company, L.L.C. (“Poseidon”)36.0 %
Colonial Enterprises, Inc. (“Colonial”)16.125 %
Proteus Oil Pipeline Company, LLC (“Proteus”)10.0 %
Endymion Oil Pipeline Company, LLC (“Endymion”)10.0 %
Cleopatra Gas Gathering Company, LLC (“Cleopatra”)1.0 %
(1) Prior to May 1, 2021, we owned a 92.5% ownership interest in Zydeco and SPLC owned the remaining 7.5% ownership interest. Effective May 1, 2021, SPLC transferred its 7.5% ownership interest to us as part of the May 2021 Transaction. Refer to Note 2 —Acquisitions and Other Transactions for additional information.

Basis of Presentation
Our unaudited consolidated financial statements include all subsidiaries required to be consolidated under generally accepted accounting principles in the United States (“GAAP”). Our reporting currency is U.S. dollars, and all references to dollars are U.S. dollars. The accompanying unaudited consolidated financial statements and related notes have been prepared in accordance with GAAP for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by GAAP for complete annual financial statements. The year-end consolidated balance sheet data was derived from audited financial statements. During interim periods, we follow the accounting policies disclosed in our Annual Report on Form 10-K for the year ended December 31, 2020 (our “2020 Annual Report”), filed with the United States Securities and Exchange Commission (“SEC”) unless otherwise described herein. The unaudited consolidated financial statements for the three and nine months ended September 30, 2021 and September 30, 2020 include all adjustments we believe are necessary for a fair statement of the results of operations for the interim periods presented. These adjustments are of a normal recurring nature unless otherwise disclosed. Operating results for the interim periods are not necessarily indicative of the results that may be expected for the full year. These unaudited consolidated financial statements and other information included in this Quarterly Report on Form 10-Q should be read in conjunction with our audited consolidated financial statements and notes thereto included in our 2020 Annual Report.

Our consolidated subsidiaries include Pecten, Sand Dollar, Triton, Zydeco, Odyssey and the Operating Company. Asset acquisitions of additional interests in previously consolidated subsidiaries and interests in equity method and other investments are included in the financial statements prospectively from the effective date of each acquisition. In cases where these types of acquisitions are considered acquisitions of businesses under common control, the financial statements are retrospectively adjusted.

Summary of Significant Accounting Policies
The accounting policies are set forth in Note 2 – Summary of Significant Accounting Policies in the Notes to Consolidated Financial Statements of our 2020 Annual Report. There have been no significant changes to these policies during the nine months ended September 30, 2021, other than those noted below.



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Recent Accounting Pronouncements

Standards Adopted as of January 1, 2021
In August 2020, the FASB issued Accounting Standards Update (“ASU”) 2020-06, Debt — Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging — Contracts in Entity’s Own Equity. The update will simplify the accounting for convertible instruments by reducing the number of accounting models for convertible debt instruments and convertible preferred stock. Limiting the accounting models may result in fewer embedded conversion features being separately recognized from the host contract as compared with current GAAP. This update also amends the guidance for the derivatives scope exception for contracts in an entity’s own equity to reduce form-over-substance-based accounting conclusions. The update is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2021 for SEC filers, excluding smaller reporting companies. We elected to early adopt effective January 1, 2021. The adoption of ASU 2020-06 did not have a material impact on our unaudited consolidated financial statements.
2. Acquisitions and Other Transactions

May 2021 Transaction
Effective May 1, 2021, Triton sold to Equilon Enterprises LLC d/b/a Shell Oil Products US (“SOPUS”), as designee of SPLC, substantially all of the assets associated with its clean products truck rack terminal and facility in Anacortes, Washington (the “Anacortes Assets”). In exchange for the Anacortes Assets, SPLC paid Triton $10 million in cash and transferred to the Operating Company, as designee of Triton, SPLC’s 7.5% interest in Zydeco (the “May 2021 Transaction”). Effective May 1, 2021, the Partnership owns a 100.0% ownership interest in Zydeco.
The May 2021 Transaction closed pursuant to a Sale and Purchase Agreement dated April 28, 2021 between Triton and SPLC, effective May 1, 2021 (the “May 2021 Sale and Purchase Agreement”). The May 2021 Sale and Purchase Agreement contains customary representations, warranties and covenants of Triton and SPLC. SPLC, on the one hand, and Triton, on the other hand, have agreed to indemnify each other and their respective affiliates, officers, directors and other representatives against certain losses resulting from any breach of their representations, warranties or covenants contained in the May 2021 Sale and Purchase Agreement, subject to certain limitations and survival periods.

In connection with the May 2021 Transaction, the Partnership and SPLC entered into a Termination of Voting Agreement dated April 28, 2021 and effective May 1, 2021, under which they agreed to terminate the Voting Agreement dated November 3, 2014 between the Partnership and SPLC, relating to certain governance matters for their respective direct and indirect ownership interests in Zydeco.

Auger Divestiture
On January 25, 2021, we executed an agreement to divest the 12” segment of the Auger pipeline; however, this agreement was subsequently terminated. As a result of the intended divestment, we recorded an impairment charge of approximately $3 million during the first quarter of 2021. On April 29, 2021, we executed a new agreement to divest this segment of pipeline, effective June 1, 2021. We received approximately $2 million in cash consideration for this sale. The remainder of the Auger pipeline continues to operate under the ownership of Pecten.

April 2020 Transaction
On April 1, 2020, we closed the following transactions (together referred to as the “April 2020 Transaction”):

Pursuant to a Purchase and Sale Agreement dated as of February 27, 2020 (the “Purchase and Sale Agreement”) between the Partnership and Triton, SPLC, Shell GOM Pipeline Company LLC (“SGOM”), Shell Chemical LP (“Shell Chemical”) and SOPUS, we acquired 79% of the issued and outstanding membership interests in Mattox from SGOM (the “Mattox Transaction”), and SOPUS and Shell Chemical transferred to Triton, as a designee of the Partnership, certain logistics assets at the Shell Norco Manufacturing Complex located in Norco, Louisiana (such assets, the “Norco Assets,” and such transaction, the “Norco Transaction”).
Simultaneously with the closing of the transactions contemplated by the Purchase and Sale Agreement, we also closed the transactions contemplated by the Partnership Interests Restructuring Agreement, pursuant to which we eliminated all of the IDRs and converted the 2% economic general partner interest in the Partnership into a non-economic general partner interest (the “GP/IDR Restructuring”). Our general partner or its assignee also agreed to waive a portion of the distributions that would otherwise have been payable on the common units issued to SPLC as part of the April 2020 Transaction, in an
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amount of $20 million per quarter for each of four consecutive fiscal quarters, beginning with the distribution made with respect to the second quarter of 2020 and ending with the distribution made with respect to the first quarter of 2021.

As consideration for the April 2020 Transaction, the Partnership issued 50,782,904 Series A Preferred Units to SPLC at a price of $23.63 per unit, plus 160,000,000 newly-issued common units. Certain third-party fair value appraisals were performed to determine the fair value of the total consideration, as well as the fair values of each of the Mattox Transaction, the Norco Transaction and the GP/IDR Restructuring, as of April 1, 2020. Because the components of the April 2020 Transaction were entered in contemplation of each other and were transactions among entities under common control, the fair values of the April 2020 Transaction were used solely for the purpose of allocating a portion of the consideration on a relative fair value basis to the Norco Transaction.

In connection with the April 2020 Transaction, the Partnership recorded the following balances as of April 1, 2020:

Equity method investment (1)
$174 
Financing receivables – related parties (2)
302 
Contract assets - related parties (3)
244 
April 2020 Transaction$720 
(1) Equity method investment was recorded at SGOM’s historical carrying value of the 79% interest in Mattox. See more discussion in the section entitled “Mattox Transaction” below.
(2) Financing receivables under the failed sale leaseback were recorded at the fair value of the property, plant and equipment of the Norco Assets transferred by SOPUS and Shell Chemical and recognized as a component of the Partners’ deficit. See more discussion in the section entitled “Norco Transaction” below.
(3) Contract assets were recorded based on the difference between the consideration allocated to the Norco Transaction and the financing receivables. See more discussion in the section entitled “Norco Transaction” below.

Mattox Transaction
We acquired 79% of the issued and outstanding membership interests in Mattox from SGOM. The acquisition was accounted for as a transaction among entities under common control on a prospective basis as an asset acquisition. As a result of the Mattox Transaction, we have significant influence, but not control, over Mattox and account for this investment as an equity method investment. As such, we recorded the acquired equity interests in Mattox at SGOM’s historical carrying value of $174 million, which is included in Equity method investments in our consolidated balance sheet as of September 30, 2021. See Note 4 – Equity Method Investments for additional details.

Norco Transaction
SOPUS and Shell Chemical transferred certain logistics assets at the Shell Norco Manufacturing Complex located in Norco, Louisiana, which are comprised of crude, chemicals, intermediate and finished product pipelines, storage tanks, docks, truck and rail racks and supporting infrastructure, to Triton, as a designee of the Partnership. The Partnership is treated for accounting purposes as simultaneously leasing the Norco Assets back to SOPUS and Shell Chemical pursuant to the terminaling services agreements entered into among Triton, SOPUS and Shell Chemical related to the Norco Assets. The Partnership receives an annual net payment of $140 million, which is the total annual payment pursuant to the terminaling services agreements of $151 million, less $11 million, which primarily represents the allocated utility costs from SOPUS related to the Norco Assets. Both payments are subject to annual Consumer Price Index adjustments.

The transfer of the Norco Assets combined with the terminaling services agreements were accounted for as a failed sale leaseback under ASC Topic 842, Leases (“the lease standard”), as control of the assets did not transfer to the Partnership. As a result, the transaction was treated as a financing arrangement. As the Norco Transaction was entered into simultaneously and in contemplation of the Mattox Transaction and the GP/IDR Restructuring, we allocated $546 million of the fair value of the consideration of the April 2020 Transaction to the Norco Transaction based on its relative stand-alone fair value to the other components of the April 2020 Transaction. From this amount, we recorded financing receivables of $302 million, based on the fair value of the Norco Assets’ property, plant and equipment transferred from SOPUS and Shell Chemical, using a combination of market and cost valuation approaches. The financing receivables were recorded as the fair value of property, plant and equipment because the annual payments received by the Partnership are directly related to the lease of the property, plant and equipment of the Norco Assets. Since the financing receivables from SOPUS and Shell Chemical arose from transactions involving the issuance of the Partnership’s common and preferred units, the financing receivables are presented as a component of (deficit) equity and not as assets on the balance sheet.

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As of April 1, 2020, we also recorded contract assets in the amount of $244 million, which represent the difference between the allocated fair value of the Norco Transaction of $546 million and the recognized financing receivables of $302 million. The contract assets represent the excess of the fair value embedded within the terminaling services agreements transferred by the Partnership to SOPUS and Shell Chemical as part of entering into the terminaling services agreements. See Note 9 – Revenue Recognition for additional details.

The amount of contract assets recognized was dependent on the allocated fair value of the consideration to the Norco Transaction, which was determined using the fair values of the consideration transferred and the fair values of each of the three components of the April 2020 Transaction. The newly-issued common units were valued using a market approach based on the market opening price of the Partnership’s common units as of April 1, 2020, less a discount for the waiver described above and a marketability discount. The Series A Preferred Units were valued using an income approach based on a trinomial lattice model. Further, the fair values of the three components of the April 2020 Transaction were determined using an income approach of discounted cash flows at an average discount rate for each of the Mattox Transaction, the Norco Transaction and the GP/IDR Restructuring of 14%, 11% and 20%, respectively.

GP/IDR Restructuring
On April 1, 2020, we also closed the transactions contemplated by the Partnership Interests Restructuring Agreement, which included the elimination of all the IDRs and the cancellation of all of the general partner units, both of which were held by our general partner, and amended and restated our partnership agreement to reflect these and other changes (as so amended, the “Second Amended and Restated Partnership Agreement”). The 2% general partner economic interest was converted into a non-economic general partner interest. Because the components of the April 2020 Transaction were among entities under common control, our general partner’s negative equity balance of $4 billion at April 1, 2020 was transferred to SPLC’s equity accounts, allocated between its holdings of common units and preferred units, based on the relative fair value of the consideration related to the issuance of common units and preferred units in the April 2020 Transaction.

Upon the closing of the April 2020 Transaction, the Partnership had 393,289,537 common units outstanding, of which SPLC’s wholly-owned subsidiary, Shell Midstream LP Holdings LLC (“LP Holdings”), owned 269,457,304 common units in the Partnership, representing an aggregate 68.5% limited partner interest. The Partnership also had 50,782,904 of Series A Preferred Units outstanding, which are entitled to receive a quarterly distribution of $0.2363 per unit and all of which are owned by LP Holdings. See Note 8 – (Deficit) Equity for additional details.

3. Related Party Transactions
Related party transactions include transactions with SPLC and Shell, including those entities in which Shell has an ownership interest but does not have control.

Partnership Interests Restructuring Agreement
On February 27, 2020, we and our general partner entered into the Partnership Interests Restructuring Agreement, effective April 1, 2020, pursuant to which the IDRs were eliminated and the 2% general partner economic interest was converted into a non-economic general partner interest in the Partnership. Refer to Note 2 – Acquisitions and Other Transactions for additional information.

May 2021 Sale and Purchase Agreement
On April 28, 2021, we entered into the May 2021 Sale and Purchase Agreement between Triton and SPLC, effective May 1, 2021, pursuant to which we sold the Anacortes Assets in exchange for $10 million in cash and the remaining 7.5% interest in Zydeco.

Purchase and Sale Agreement
On February 27, 2020, we entered into the Purchase and Sale Agreement by and among Triton, SPLC, SGOM, Shell Chemical and SOPUS, effective April 1, 2020, pursuant to which we acquired 79% of the issued and outstanding membership interests in Mattox from SGOM, and SOPUS and Shell Chemical transferred to Triton, as a designee of the Partnership, the Norco Assets.

Omnibus Agreement
We, our general partner, SPLC and the Operating Company entered into an Omnibus Agreement effective February 1, 2019 (the “2019 Omnibus Agreement”). On February 16, 2021, pursuant to the 2019 Omnibus Agreement, the Board of Directors of
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our general partner (the “Board”) approved a decrease in the annual general and administrative fee to $10 million for 2021, based on a change in the cost of the services provided.

The 2019 Omnibus Agreement addresses, among other things, the following matters:

our payment of an annual general and administrative fee of approximately $10 million for the provision of certain services by SPLC;
our obligation to reimburse SPLC for certain direct or allocated costs and expenses incurred by SPLC on our behalf; and
our obligation to reimburse SPLC for all expenses incurred by SPLC as a result of us becoming and continuing as a publicly-traded entity; we will reimburse our general partner for these expenses to the extent the fees relating to such services are not included in the general and administrative fee.

Trade Marks License Agreement
We, our general partner and SPLC entered into a Trade Marks License Agreement with Shell Trademark Management