SHELL MIDSTREAM PARTNERS, LP Management’s Report on Financial Condition and Results of Operations (Form 10-Q)

Shell Midstream Partners, L.P. ("we," "us," "our" or "the Partnership") is a
Delaware limited partnership formed by 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 or through direct ownership. Our general partner is Shell Midstream Partners
GP LLC (the "general partner"). References to "Shell" or "Parent" refer
collectively to Shell plc and its controlled affiliates, other than us, our
subsidiaries and our general partner.

The following discussion and analysis should be read in conjunction with the
unaudited consolidated financial statements and related notes in this quarterly
report and Management's Discussion and Analysis of Financial Condition and
Results of Operations in Part II, Item 7 of our Annual Report on Form 10-K for
the year ended December 31, 2021 (our "2021 Annual Report") and the consolidated
financial statements and related notes therein. Our 2021 Annual Report contains
a discussion of other matters not included herein, such as disclosures regarding
critical accounting policies and estimates and contractual obligations. You
should also read the following discussion and analysis together with Risk
Factors set forth in our 2021 Annual Report.

Presentation of the partnership

We own, operate, develop and acquire pipelines and other midstream assets and
logistics assets. As of June 30, 2022, 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. Our 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.

For a description of our assets, please see Part I, Items 1 and 2. – Businesses and Properties of our 2021 Annual Report.

Developments for 2022 include:

•Take Private Proposal. On February 11, 2022, the Board of Directors of our
general partner (the "Board") received a non-binding, preliminary proposal
letter from SPLC to acquire all of the Partnership's issued and outstanding
common units not already owned by SPLC or its affiliates at a value of $12.89
per each issued and outstanding publicly-held common unit (the "Proposal"). The
Board appointed the conflicts committee to review, evaluate and negotiate the
Proposal. Refer to Note 13 - Subsequent Events - Merger Agreement in the Notes
to the Unaudited Consolidated Financial Statements in this report for additional
information.

•Credit facilities. On February 16, 2022we used excess cash to repay $150 million loans under the Five Year Revolver due December 2022.

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 logistics assets at the Shell Norco Manufacturing Complex
(the "Norco Assets"). Our revenue is generated from customers in the same
industry, our Parent's affiliates, integrated oil companies, marketers and
independent exploration, production and refining companies primarily within the
Gulf Coast region of the United States. We generally do not own any of the crude
oil, refinery gas or refined petroleum products we handle, nor do we engage in
the trading of these commodities. We therefore have limited direct exposure to
risks associated with fluctuating commodity prices, although these risks
indirectly influence our activities and results of operations over the
long-term.

Notable and certain expected 2022 impacts on net income and cash available for distribution (“CAFD”) include:

•Planned Turnarounds. Certain offshore connected producers will have planned
turnarounds during 2022. We anticipate an impact of approximately $15 million to
net income and CAFD from planned turnaround activity in 2022, of which
approximately $14 million has been incurred in the six months ended June 30,
2022.

•Colonial Rate Case. Colonial is currently involved in a rate case with the
Federal Energy Regulatory Commission ("FERC"). On April 27, 2022, the
Administrative Law Judge issued a second partial initial decision addressing the
issues not covered in the first partial initial decision. Colonial is reviewing
the potential financial impacts that could
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result if the decision is adopted by the FERC in its forthcoming ruling.
Depending upon the final outcome of the case, the potential adoption of such
decision in whole or in part by the FERC could adversely affect our equity
method investment in Colonial, net income and CAFD. Due in part to the
anticipated impacts of the rate case on Colonial's business, the board of
directors of Colonial elected not to declare a dividend for the three months
ended June 30, 2022.

Throughout the first half of 2022, we have seen a significant increase in oil
prices, most notably due to the ongoing Russian invasion of Ukraine and the
associated impacts on the global markets. The responses of oil and gas producers
to this situation, including as a result of government sanctions, is evolving
and remains uncertain. As we navigate the current turbulent global environment,
we anticipate continuing to moderate inorganic growth in our asset base and
focusing on the sustainable operation of our core assets, cash preservation and
the organic growth of our business throughout the remainder of 2022.

Executive Overview

Net income was $311 million and net income attributable to the Partnership
was $306 million during the six months ended June 30, 2022. We generated cash
from operations of $341 million. As of June 30, 2022, we had cash and cash
equivalents of $325 million, total debt of $2,542 million and unused capacity
under our credit facilities of $1,016 million.

Our operations and strategic initiatives for 2022 demonstrate our continued focus on our business strategies:

•Maintain operational excellence through prioritization of safety, reliability
and efficiency;
•Enhanced focus on cash optimization and reduced discretionary project spend;
•Focus on advantageous commercial agreements with creditworthy counterparties to
enhance financial results over the long-term; and
•Optimize existing assets and pursue organic growth opportunities.

Over the past two years, our business, as well as the market and economy as a
whole, have dealt with unprecedented volatility and uncertainty. Even with these
challenges, our assets have largely continued to deliver solid results that have
allowed us to execute our business strategies. However, we continue to
anticipate certain headwinds that may jeopardize our ability to generate
sufficient cash to meet our quarterly obligations, including the pending FERC
rate case at Colonial and ongoing uncertainty in the macro-environment. Further,
the transactions contemplated by the Proposal, if consummated, will alter our
capital structure. Refer to Note 13 - Subsequent Events - Merger Agreement in
the Notes to the Unaudited Consolidated Financial Statements in this report for
additional information.

To the extent the transactions contemplated by the Proposal are not consummated,
identifying and executing acquisitions, whether from Shell or from third
parties, will remain a key part of our strategy. However, if we do not make
acquisitions on economically acceptable terms or if we incur a substantial
amount of debt in connection with the acquisitions, our future growth will be
limited, and the acquisitions we do make may reduce, rather than increase, our
available cash. Our ability to obtain financing or access capital markets may
also directly impact our ability to continue to pursue strategic acquisitions.
Market demand for equity issued by master limited partnerships ("MLPs") may make
it more challenging for us to fund our acquisitions with the issuance of equity
in the capital markets.

However, we believe our balance sheet offers us flexibility, providing us other
financing options such as hybrid securities, purchases of common units by Shell
and debt. While we expect to retain this flexibility, we anticipate continuing
to moderate inorganic growth in our asset base and focusing on the sustainable
operation of our core assets, cash preservation and organic growth of our
business.

How we evaluate our operations

Our management uses a variety of financial and operating metrics to analyze our
performance. These metrics are significant factors in assessing our operating
results and profitability and include: (i) revenue (including pipeline loss
allowance ("PLA") from contracted capacity and throughput); (ii) operations and
maintenance expenses (including capital expenses); (iii) net income attributable
to the Partnership; (iv) Adjusted EBITDA (defined below); and (v) CAFD.

Capacity and throughput under contract

The amount of revenue generated by our assets is primarily dependent on our transportation and storage service agreements with shippers and the volumes of crude oil, refinery gas and refined products that we process through our pipelines, terminals and reservoirs. of storage.

The commitments made under our transportation, terminal and storage service agreements with shippers and the volumes we process in our pipelines and storage tanks are primarily affected by crude oil supply and demand, refinery gas, natural gas

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gas and refined products in the markets served directly or indirectly by our
assets. This supply and demand is impacted by the market prices for these
products in the markets we serve. The ongoing Russian invasion of Ukraine and
the associated impacts on the global markets have caused, and may continue to
cause, disruptions in the U.S. economy and financial and energy markets.
Responses of oil and gas producers to the changes in demand for, and price of,
oil and natural gas are constantly evolving and unpredictable.

We use trade agreements that we believe are the most prudent under market conditions to implement our business strategy. The results of our operations will be impacted by our ability to:

•maintain utilization of and rates charged for our pipelines and storage
facilities;
•utilize the remaining uncommitted capacity on, or add additional capacity to,
our pipeline systems;
•increase throughput volumes on our 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 and refined products; and
•identify and execute organic expansion projects.

Operating and maintenance expenses

Our operating and maintenance expenses mainly consist of:

•labor expenses (including contractor services);
•insurance costs (including coverage for our consolidated assets and operated
joint ventures);
•utility costs (including electricity and fuel);
•repairs and maintenance expenses; and
•major maintenance costs (related to the terminaling service agreements of the
Norco Assets, which are expensed as incurred because the Partnership does not
own the related assets).

Certain costs naturally fluctuate based on throughput volumes and the grades of
crude oil and types of refined products we handle, whereas other costs generally
remain stable across broad ranges of throughput and storage volumes, but can
vary depending upon the level of both planned and unplanned maintenance activity
in the particular period. Our maintenance activity can be impacted by events
such as turnarounds, asset integrity work and storms.

Our management seeks to maximize our profitability by effectively managing
operations and maintenance expenses. While cost effectiveness has always been a
focus of the business, it is of increased importance given the current operating
environment.

Adjusted EBITDA and cash available for distribution

Adjusted EBITDA and CAFD 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
CAFD in isolation or as a substitute for analysis of our results as reported
under generally accepted accounting principles in the United States ("GAAP").
Additionally, because Adjusted EBITDA and CAFD may be defined differently by
other companies in our industry, our definition of Adjusted EBITDA and CAFD may
not be comparable to similarly-titled measures of other companies, thereby
diminishing their utility.

The GAAP measures most directly comparable to Adjusted EBITDA and CAFD are net
income and net cash provided by operating activities. Adjusted EBITDA and CAFD
should not be considered as an alternative to GAAP net income or net cash
provided by operating activities. Please refer to "Results of Operations -
Reconciliation of Non-GAAP Measures" for the reconciliation of GAAP measures net
income and cash provided by operating activities to non-GAAP measures, Adjusted
EBITDA and CAFD.

We define Adjusted EBITDA as net income before income taxes, interest expense,
interest income, gain or loss from dispositions of fixed assets, allowance oil
reduction to net realizable value, loss from revision of asset retirement
obligation, and depreciation, amortization and accretion, plus cash distributed
to us from equity method investments for the applicable period, less equity
method distributions included in other income and income from equity method
investments. We define Adjusted EBITDA attributable to the Partnership as
Adjusted EBITDA less Adjusted EBITDA attributable to noncontrolling interests
and Adjusted EBITDA attributable to Parent.

We define CAFD as Adjusted EBITDA attributable to the Partnership less
maintenance capital expenditures attributable to the Partnership, net interest
paid by the Partnership, cash reserves, income taxes paid and distributions on
our Series A perpetual convertible preferred units (the "Series A Preferred
Units"), plus net adjustments from volume deficiency payments attributable to
the Partnership, reimbursements from Parent included in partners' capital,
principal and interest payments received on financing receivables and certain
one-time payments received. CAFD will not reflect changes in working capital
balances.
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We believe that the presentation of these supplemental non-GAAP financial measures provides useful information to management and investors in evaluating our financial condition and results of operations.

Adjusted EBITDA and CAFD are supplemental non-GAAP financial measures that management and external users of our consolidated financial statements, such as industry analysts, investors, lenders and rating agencies, may use to assess :

•our operating performance as compared to other publicly-traded partnerships in
the midstream energy industry, without regard to historical cost basis or, in
the case of Adjusted EBITDA, financing methods;
•the ability of our business to generate sufficient cash to support our decision
to make distributions to our unitholders;
•our ability to incur and service debt and fund capital expenditures; and
•the viability of acquisitions and other capital expenditure projects and the
returns on investment of various investment opportunities.

Factors Affecting Our Business and Prospects

We believe key factors that impact our business are the supply of, and demand
for, crude oil, natural gas, refinery gas and refined products in the markets in
which our business operates. We also believe that our customers' requirements,
competition and government regulation of crude oil, refined products, natural
gas and refinery gas play an important role in how we manage our operations and
implement our long-term strategies. In addition, acquisition opportunities,
whether from Shell or third parties, and financing options, will also impact our
business. These factors are discussed in more detail below.

Changes in Crude Oil Supply and Refined Products Demand Dynamics

To effectively manage our business, we monitor our market areas for both
short-term and long-term shifts in crude oil and refined products supply and
demand. Changes in crude oil supply such as new discoveries of reserves,
declining production in older fields, operational impacts at producer fields and
the introduction of new sources of crude oil supply affect the demand for our
services from both producers and consumers. In addition, general economic,
regulatory, broad market and worldwide health considerations can also affect
sourcing and demand dynamics for our services. This includes, but is not limited
to, the impacts resulting from the ongoing Russian invasion of Ukraine, as well
as the lingering effects of the COVID-19 pandemic.

One of the strategic advantages of our crude oil pipeline systems is their
ability to transport attractively priced crude oil from multiple supply markets
to key refining centers along the Gulf Coast. Our crude oil shippers
periodically change the relative mix of crude oil grades delivered to the
refineries and markets served by our pipelines. They also occasionally choose to
store crude longer term when the forward price is higher than the current price
(a "contango market"). While these changes in the sourcing patterns of crude oil
transported or stored are reflected in changes in the relative volumes of crude
oil by type handled by our pipelines, our total crude oil transportation revenue
is primarily affected by changes in overall crude oil supply and demand
dynamics, such as the impacts resulting from the ongoing Russian invasion of
Ukraine, as well as U.S. exports.

Similarly, our refined products pipelines have the ability to serve multiple
major demand centers. Our refined products shippers periodically change the
relative mix of refined products shipped on our refined products pipelines, as
well as the destination points, based on changes in pricing and demand dynamics.
While these changes in shipping patterns are reflected in relative types of
refined products handled by our various pipelines, our total product
transportation revenue is primarily affected by changes in overall refined
products supply and demand dynamics, including the impacts resulting from the
ongoing Russian invasion of Ukraine. Demand can also be greatly affected by
refinery performance in the end market, as refined products pipeline demand will
increase to fill the supply gap created by refinery issues.

We can also be constrained by asset integrity considerations in the volumes we
ship. We may elect to reduce cycling on our systems to reduce asset integrity
risk, which in turn would likely result in lower revenues.

As these supply and demand dynamics shift, we anticipate that we will continue
to actively pursue projects that link new sources of supply to producers and
consumers and to create new services or capacity arrangements that meet customer
requirements. We expect to continue extending our corridor pipelines to provide
developing growth regions in the Gulf of Mexico with access via our existing
corridors to onshore refining centers and market hubs. For example, the Mars
system is expanding to address growing production volumes in the Gulf of Mexico
regions served by Mars. It is expected that the project will be fully
operational in 2022. Incremental growth volumes began arriving into the Mars
system in the first quarter of 2022, and we expect additional growth volumes to
arrive into the system in the latter part of 2022, and continuing into 2023. We
believe this strategy will allow our offshore business to grow profitably
throughout demand cycles.

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Changes in Customer contracting

We generate a portion of our revenue under long-term transportation service
agreements with shippers, including ship-or-pay agreements and life-of-lease
transportation agreements, some of which provide a guaranteed return, and
storage service agreements with marketers, pipelines and refiners. Historically,
the commercial terms of these long-term transportation and storage service
agreements have mitigated volatility in our financial results by limiting our
direct exposure to reductions in volumes due to supply or demand variability.
Our business could be negatively affected if we are unable to renew or replace
our contract portfolio on comparable terms, by sustained downturns or
sluggishness in commodity prices, or the economy in general. Our business is
also impacted by shifts in supply and demand dynamics, the mix of services
requested by our pipeline customers, competition and changes in regulatory
requirements affecting our operations. Other factors that can have an effect on
our performance include asset integrity or customer interruptions, natural
disasters or other events that could lead customers or connecting carriers to
invoke force majeure or other defenses to avoid contractual performance.

As contracts expire, there are several ways in which the associated revenue
could be replaced in the future, such as through re-contracting or spot
shipments, the outcome of which will be dependent on market and customer
dynamics. The market environment at any given time will dictate the rates, terms
and duration of agreements that shippers are willing to enter into, as well as
the contracts that best satisfy the needs of our business and that will maximize
earnings. As we have grown and broadened our business over the past several
years, we have benefited from shifting our reliance away from the results of any
one asset. For example, while Zydeco continues to serve an important market, and
we strive to maximize the long-term value of the system to both shippers and the
pipeline, we have diversified, and will continue to diversify, our risk across
products, customers and geographies.

Changes in commodity prices and customer volumes

Crude oil prices have fluctuated significantly over the past few years, often
with drastic moves in relatively short periods of time. While we saw an increase
in both the demand for and price of crude oil throughout 2021, and a significant
increase in price in the first half of 2022, it is not without continued
uncertainty. Current global geopolitical and economic instability, particularly
as it relates to the ongoing Russian invasion of Ukraine, continues to
contribute to future uncertainty, and potential volatility, in financial and
commodity markets. One example of such global economic forces impacting crude
oil prices was the stalemate among Organization of Petroleum Exporting Countries
("OPEC") members and co-operating non-OPEC resource holders (the "OPEC+
alliance"), which ultimately ended in mid-2021 and was resolved when the OPEC+
alliance agreed to phase out the COVID-19 production cuts from August 2021 to
December 2022. We expect that the OPEC+ alliance decision will cause the crude
oil market to remain relatively tight in the near and medium-term, as this
increased production will likely align with the higher global demand. The
ongoing Russian invasion of Ukraine and resulting sanctions imposed on Russia by
the European Union, the United States and other countries have further tightened
the crude oil market and elevated commodity prices. Although such sanctions do
not directly impact our business or our customers, the effects of these measures
may indirectly affect our business by affecting the price of crude oil, natural
gas, refinery gas and refined products. Additionally, in order to address high
oil prices, in March 2022 President Biden announced a plan to release 1 million
barrels of oil a day for a period of 6 months from the U.S. Strategic Petroleum
Reserve. The release from the U.S. Strategic Petroleum Reserve was available in
the market beginning in May 2022. While the scope of impact on commodity prices
is somewhat unclear, the continued release could have a downward effect.

Our direct exposure to commodity price fluctuations is limited to the PLA
provisions in our tariffs. Indirectly, global demand for refined products and
chemicals could impact our terminal operations and refined products and refinery
gas pipelines, as well as our crude pipelines that feed U.S. manufacturing
demand. Likewise, changes in the global market for crude oil could affect our
crude oil pipelines and terminals and require expansion capital expenditures to
reach growing export hubs. Demand for crude oil, refined products and refinery
gas may decline in the areas we serve as a result of decreased production by our
customers, depressed commodity prices, decreased third-party investment in the
industry, increased competition and other adverse economic factors. Other global
events, such as the ongoing Russian invasion of Ukraine and its associated
impacts on the global markets, as well as the lingering impacts of the COVID-19
pandemic, could affect the exploration, production and refining industries
generally, which, indirectly, may affect our business. However, fixed contracts
with volume minimums and demand for tanks for storage are expected to moderate
any impact on our terminaling and storage service revenue.

Certain of our assets benefit from long-term fee-based arrangements and are
strategically positioned to connect crude oil volumes originating from key
onshore and offshore production basins to the Texas and Louisiana refining
markets, where demand for throughput has remained strong. Historically, with the
exception of the impacts of the COVID-19 pandemic, we have not experienced a
material decline in throughput volumes on our crude oil pipeline systems as a
result of lower crude oil prices. If crude oil prices drop to lower levels, as
they did during the height of the COVID-19 pandemic, we will see a reduction in
our transportation volumes if production coming into our systems is deferred and
our associated allowance oil sales decrease. Our customers may also experience
liquidity and credit problems or other unexpected events, which could cause them
to defer development or repair projects, avoid our contracts in bankruptcy,
invoke force majeure clauses or other defenses to avoid
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contractual performance, renegotiate our contracts on terms less attractive to us, or impair their ability to perform under our contracts.

Our throughput volumes on our refined products pipeline systems depend primarily
on the volume of refined products produced at connected refineries and the
desirability of our end markets. These factors in turn are driven by refining
margins, maintenance schedules and market differentials. Refining margins depend
on the cost of crude oil or other feedstocks and the price of refined products.
These margins are affected by numerous factors beyond our control, including the
domestic and global supply of and demand for crude oil and refined products.

Other changes in customer volumes

Onshore crude transportation volumes were lower in the three months ended
June 30, 2022 (the "Current Quarter") and the six months ended June 30, 2022
(the "Current Period") versus the three months ended June 30, 2021 (the
"Comparable Quarter") and the six months ended June 30, 2021 (the "Comparable
Period") primarily due to the expiration of a shipper contract in the Current
Quarter. The decrease was partially offset by increased shipper activity on the
remaining contracts and an increase in deliveries into Houma from certain
offshore systems.

Offshore crude transportation volumes were lower in the Current Quarter and
Current Period versus the Comparable Quarter and Comparable Period primarily due
to planned turnaround activities on various systems in the central and eastern
corridors of the Gulf Coast, and lower deliveries from certain connected
producers.

Onshore terminaling and storage volumes decreased in the Current Quarter and
Current Period versus the Comparable Quarter and Comparable Period due to
scheduled maintenance at the Lockport facility, as well as connecting carrier
availability.

Major Maintenance Projects

A project is being completed on the Odyssey system to re-route two pipelines
around the MP289C platform. We expect that the re-route work will be complete by
mid-2023. The project is being funded by cash calls to the owners of Odyssey for
their proportionate share. As such, we will fund 71% of the project.

For planned capital expenditures in 2022, see Capital Resources and Liquidity – Capital Expenditures and Investments.

Major expansion projects

The Mars system is expanding to address growing production volumes in the Gulf
of Mexico regions served by Mars. SPLC has elected to fund the installation of
the equipment necessary to enable greater throughput volumes on the system, but
the revenue associated with increased throughput volumes will benefit Mars. Two
major milestones were reached in 2021 with the placement of the pump module on
the platform and the execution of definitive agreements with producers. It is
expected that the project will be fully operational in 2022. Incremental growth
volumes began arriving into the Mars system in the first quarter of 2022 with
the startup of PowerNap, a tie-back to the Shell-operated Olympus production
hub. We expect additional growth volumes to arrive into the system in the latter
part of 2022, and continuing into 2023.

Over the course of the next few years, we are considering expanding the Auger
corridor in order to position the system to capture potential growth volumes in
that region of the Gulf of Mexico.

We also intend to expand our Lock facility to accommodate the expected additional volumes entering the Midwest region. This expansion is pending the conclusion of certain trade agreements.

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Clients

We transport and store crude oil, refined products, natural gas and refinery gas
for a broad mix of customers, including producers, refiners, marketers and
traders, and are connected to other crude oil and refined products pipelines. In
addition to serving directly-connected U.S. Gulf Coast markets, our crude oil
and refined products pipelines have access to customers in various regions of
the United States through interconnections with other major pipelines. Our
customers use our transportation and storage services for a variety of reasons.
Refiners typically require a secure and reliable supply of crude oil over a
prolonged period of time to meet the needs of their specified refining diet and
frequently enter into long-term firm transportation agreements to ensure a ready
supply of a specific mix of crude oil grades, rate surety and sometimes
sufficient transportation capacity over the life of the contract. Similarly,
chemical sites require a secure and reliable supply of refinery gas to crackers
and enter into long-term firm transportation agreements to ensure steady supply.
Producers of crude oil and natural gas 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 greater market liquidity. Marketers and traders
generate income from buying and selling crude oil and refined products to
capitalize on price differentials over time or between markets. Our customer mix
can vary over time and largely depends on the crude oil and refined products
supply and demand dynamics in our markets.

Competition

Our pipeline systems compete primarily with other interstate and intrastate
pipelines and with marine and rail transportation. Some of our competitors may
expand or construct transportation systems that would create additional
competition for the services we provide to our customers. For example,
newly-constructed transportation systems in the onshore Gulf of Mexico region
may increase competition in the markets where our pipelines operate. In
addition, future pipeline transportation capacity could be constructed in excess
of actual demand in the market areas we serve, which could reduce the demand for
our services, and could lead to the reduction of the rates that we receive for
our services. While we do see some variation from quarter-to-quarter resulting
from changes in our customers' demand for transportation, we have historically
been able to partially mitigate this risk with the longer-term, fixed-rate
nature of several of our contracts.

Our storage terminal competes with surrounding providers of storage tank
services. Some of our competitors have expanded terminals and built new pipeline
connections, and third parties may construct pipelines that bypass our location.
These, or similar events, could have a material adverse impact on our
operations.

Our refined products terminals generally compete with other terminals that serve
the same markets. These terminals may be owned by major integrated oil and gas
companies or by independent terminaling companies. While fees for terminal
storage and throughput services are not regulated, they are subject to
competition from other terminals serving the same markets. However, our
contracts provide for stable, long-term revenue, which is not impacted by market
competitive forces.

Regulation

Our assets are subject to regulation by various federal, state and local agencies; for example, our interstate common carrier pipeline systems are subject to economic regulation by the FERC. Intrastate pipeline systems are regulated by the appropriate state agency.

On April 8, 2022, the Pipeline and Hazardous Materials Safety Administration
("PHMSA") published a new final rule titled "Required valve installation and
minimum rupture detection standards." This rule has amendments to both the
liquid and gas pipeline safety regulations around valve placement and
rupture/leak detection. The majority of the requirements regarding valve
placement and rupture detection in this new rule apply to new construction or
pipeline replacements. There are some provisions around emergency response and
emergency notifications that apply to all regulated lines. The rule is being
reviewed to determine the impact to our operations, and an action plan will be
created to adjust processes and procedures as needed for compliance with the
rule.

We are also subject to various cybersecurity requirements, including recent
changes as a result of the May 2021 cyberattack impacting Colonial. We have a
16.125% ownership interest in Colonial, which owns and operates a pipeline that
runs throughout the southern and eastern United States (the "Colonial
pipeline"). On May 7, 2021, the computerized equipment managing the Colonial
pipeline was the target of a cyberattack, and while Colonial proactively took
certain systems offline to contain the threat, it paid a ransom in the form of
cryptocurrency to regain control of the equipment. For additional information
about cybersecurity risks and the cybersecurity programs and protocols we have
in place to protect against those risks, see Part I, Items 1 and 2. Business and
Properties - Information Technology and Cyber-security and Item 1A. Risk Factors
- IT/Cyber-security/Data Privacy/Terrorism Risks in our 2021 Annual Report.

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In May 2021, the Transportation Security Administration ("TSA") issued a
security directive, which was its initial regulatory response to the Colonial
pipeline ransomware attack. The first security directive requires pipeline
owners and operators to report confirmed and potential cybersecurity incidents
to the Cybersecurity and Infrastructure Security Agency ("CISA") within 12 hours
of discovery, designate a cybersecurity coordinator to be available 24 hours a
day, seven days a week, review current practices and identify any gaps and
related remediation measures to address cyber-related risks and report the
results to the TSA and CISA within 30 days.

In July 2021, the TSA issued a second security directive imposing additional
obligations on owners and operators of TSA-designated critical pipelines. In
addition to the requirements under the first directive, the second directive
requires pipeline owners and operators to develop and implement specific
mitigation measures to protect against ransomware attacks and other known
threats to information technology and operational technology systems, develop
and implement a cybersecurity contingency and recovery plan, as well as to
conduct cybersecurity assessments.

On May 29, 2022, having received feedback from us and other industry
participants, the TSA issued a revised version of the first security directive,
revising the reporting period for cybersecurity incidents to CISA within 24
hours of discovery. On July 21, 2022, the TSA updated its second directive to
focus less on prescriptive security measures and other technical requirements,
and instead focusing on a performance-based model to provide more flexibility as
technology advances. The revised security directive retains the requirements
that pipeline owners and operators take various mitigation measures to protect
against cybersecurity attacks and other known threats, develop the plans and
conduct the assessments described above; however, companies are permitted more
flexibility in achieving the cybersecurity goals as set forth by the TSA
directives.

The Cyber Incident Reporting for Critical Infrastructure Act ("CIRCIA") was
signed into law on March 15, 2022. CIRCIA will require all owners and operators
of critical infrastructure to report cyber incidents to CISA within 72 hours and
ransomware payments within 24 hours. These new requirements will become
effective once CISA promulgates rules pursuant to the Act. CISA is required to
issue a notice of proposed rulemaking by March 2024 and issue a final rule
within 18 months of issuing the proposed rule.

On June 14, 2021, as part of the self-executing provisions of the Protecting our
Infrastructure of Pipelines and Enhancing Safety Act of 2020, PHMSA published an
advisory bulletin requiring operators to update inspection and maintenance plans
to address eliminating hazardous leaks and minimizing releases of natural gas by
December 27, 2021. This advisory bulletin is expected to have minimal impact on
our operations but will require minor updates to our inspection and maintenance
manuals.

In early 2021, PHMSA issued a revised map of the ecological High Consequence
Areas ("HCAs") in the Gulf of Mexico. This revised map expanded the ecological
HCA of the Gulf of Mexico to include previously excluded dolphin and whale
habitats. The HCA now encompasses most of the Gulf of Mexico. This places most
liquid pipelines in the Gulf of Mexico in an HCA and subject to the assessment
requirements of 49 CFR 195.452. This may impact certain operational activity
such as the frequency at which certain inspections need to be performed and the
types of inspections required at those intervals. The holistic impact to our
business is uncertain at this time, but we expect that all companies with
comparable Gulf of Mexico operations will be similarly impacted.

In May 2021, Zydeco, Mars and LOCAP filed with the FERC to decrease rates
subject to the FERC's indexing adjustment methodology that were previously at
their ceiling levels by 0.5812% starting on July 1, 2021. On January 20, 2022,
the FERC filed an order requiring carriers to recalculate their ceiling levels
and file any necessary rate reductions to be effective March 1, 2022 using a
revised formula. All the FERC ceiling levels were recalculated as directed and
necessary rate reductions filed before the March 1 deadline.

Rate complaints are currently pending at the FERC in Docket Nos. OR18-7-002, et
al. challenging Colonial's tariff rates, its market power and its practices and
charges related to transmix and product volume loss. A partial initial decision
from the Administrative Law Judge was issued on December 1, 2021 finding that
Colonial lacks the ability to exercise market power in the 90-county Gulf Coast
geographic origin market, but no longer lacks the ability to exercise market
power in the 16-county Tuscaloosa-Moundville geographic origin market. The
partial initial decision also found that Colonial's method of net recoveries of
product loss is unjust and unreasonable and that Colonial should adopt a fixed
allowance oil deduction for shortages in deliveries and determine the amount of
reparations, if any, owed to shippers. This document is a recommendation to the
FERC based on the facts surrounding the case, the law and FERC precedent. The
FERC may decide to adopt the recommendations made or make different
determinations. If the FERC adopts the partial initial decision in whole, in
addition to the changes in product loss charges described above, which may
adversely affect Colonial, Colonial's rates in respect of the 16-county
Tuscaloosa-Moundville geographic origin market will no longer be market-based
and could be reduced. Subsequently, on April 27, 2022, the Administrative Law
Judge issued a second partial initial decision addressing the issues not covered
in the first partial initial decision. The parties to the case filed briefs on
the recommendations in June 2022 and will be filing reply briefs in August 2022.
Colonial continues to review the decision in preparation for filing reply briefs
and to evaluate the
                                       33
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the potential financial impacts that could result if the decision is adopted by the
FERC in his next decision. The timing of this decision is unknown.

In 2020, the FERC commenced the five-year review of the oil pipeline rate index
formula in Docket No. RM20-14-000. The FERC issued an initial order on December
17, 2020 adopting a new formula of PPI-FG plus 0.78% for the next five-year
period commencing on July 1, 2021. On January 20, 2022, the FERC issued an order
on rehearing revising the formula set in the December 17, 2020 order to PPI-FG
minus 0.21%. The lower indexing adjustment resulted from the FERC adjusting the
data set used to assess pipeline cost changes; taking into account the
elimination of the income tax allowance and previously accrued accumulated
deferred income tax balances for MLP-owned pipelines; and using updated cost
data for 2014. The rehearing order required pipelines to recalculate their rate
ceiling levels using the PPI-FG minus 0.21% formula for the period July 1, 2021
to June 30, 2022. For any rate that exceeded the recalculated ceiling level, the
pipeline was required to file a rate reduction with the FERC to be effective
March 1, 2022. Judicial appeals of the FERC's order on rehearing have been filed
with the U.S. Court of Appeals for the Fifth Circuit and in the U.S. Court of
Appeals for the District of Columbia Circuit. The Fifth Circuit issued an order
on May 11, 2022 that approved the transfer of this petition to the D.C. Circuit
Court, although certain parties have sought review of that order by the Fifth
Circuit en banc. Once the matters regarding venue are resolved, the case is
expected to proceed. We do not expect these rate recalculations to have a
material effect on our financial position, operating results or cash flows.

For more information about federal, state and local regulations affecting our business, please read Part I, Articles 1 and 2. Businesses and Properties of our 2021 Annual Report.






































                                       34
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Operating results

The following tables and discussion are a summary of our results of operations,
including a reconciliation of Adjusted EBITDA and CAFD to net income and net
cash provided by operating activities, the most directly comparable GAAP
financial measures, for each of the periods indicated.
                                                         Three Months Ended June 30,               Six Months Ended June 30,
                                                           2022                 2021                 2022                2021
Revenue                                              $          149          $    148          $         284          $   287
Costs and expenses
Operations and maintenance                                       44                45                     85               83
Cost of product sold                                             14                 7                     23               11
Impairment of fixed assets                                        -                 -                      -                3
General and administrative                                       14                13                     27               25
Depreciation, amortization and accretion                         13                12                     25               25
Property and other taxes                                          5                 6                     10               11
Total costs and expenses                                         90                83                    170              158
Operating income                                                 59                65                    114              129
Income from equity method investments                            97               105                    205              207

Other income                                                      9                10                     19               24
Investment and other income                                     106               115                    224              231
Interest income                                                   8                 7                     16               15
Interest expense                                                 22                21                     43               42
Income before income taxes                                      151               166                    311              333
Income tax expense                                                -                 -                      -                -
Net income                                                      151               166                    311              333
Less: Net income attributable to
noncontrolling interests                                          3                 4                      5                8
Net income attributable to the Partnership                      148               162                    306              325
Preferred unitholder's interest in net income
attributable to the Partnership                                  12                12                     24               24
Limited Partners' interest in net income
attributable to the Partnership's common
unitholders                                          $          136          $    150          $         282          $   301
Adjusted EBITDA attributable to the
Partnership (1)                                      $          191          $    207          $         373          $   408
Cash available for distribution attributable
to the Partnership's common unitholders (1)          $          164         

$186 $321 $359

(1) For a reconciliation of Adjusted EBITDA and CAFD attributable to the Partnership to their most comparable GAAP measures, please read “-Reconciliation of Non-GAAP Measures”.




                                       35
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                                                     Three Months Ended June 30,                  Six Months Ended June 30,
Pipeline throughput (thousands of barrels
per day) (1)                                           2022                  2021                 2022                  2021
Zydeco - Mainlines                                          622                673                     579                 657
Zydeco - Other segments                                      66                 42                      54                  30
Zydeco total system                                         688                715                     633                 687
Amberjack total system                                      317                335                     328                 333
Mars total system                                           432                484                     460                 491
Bengal total system                                         315                341                     310                 346
Poseidon total system                                       262                263                     251                 300
Auger total system                                           41                 55                      40                  75
Delta total system                                          206                234                     215                 238
Na Kika total system                                         48                 60                      60                  55
Odyssey total system                                         99                125                      98                 132
Colonial total system                                     2,411              2,205                   2,416               2,101
Explorer total system                                       618                727                     541                 586
Mattox total system (2)                                     114                103                     117                 104
LOCAP total system                                          881                801                     804                 811
Other systems                                               447                440                     450                 479

Terminals (3) (4)
Lockport terminaling throughput and
storage volumes                                             205                253                     217                 252

Revenue per barrel ($ per barrel)
Zydeco total system (5)                         $          0.59          $  

$0.59 0.64 $0.54
Amberjack total system (5)

                                 2.19               2.30                    2.28                2.37
Mars total system (5)                                      1.57               1.29                    1.41                1.31
Bengal total system (5)                                    0.34               0.40                    0.35                0.41
Auger total system (5)                                     1.80               1.77                    1.81                1.72
Delta total system (5)                                     0.80               0.64                    0.73                0.65
Na Kika total system (5)                                   1.10               0.93                    0.90                0.99
Odyssey total system (5)                                   1.06               1.03                    1.02                1.00
Lockport total system (6)                                  0.25               0.20                    0.23                0.21
Mattox total system (7)                                    1.52               1.52                    1.52                1.52


(1) Pipeline throughput is defined as the volume of delivered barrels. For
additional information regarding our pipeline and terminal systems, refer to
Part I, Items 1 and 2. - Business and Properties - Our Assets and Operations in
our 2021 Annual Report.
(2) The actual delivered barrels for Mattox are disclosed in the above table for
the comparative periods. However, Mattox is billed by monthly minimum quantity
per dedication and transportation agreements. Based on the contracted volume
determined in the agreements, the thousands of barrels per day (for revenue
calculation purposes) for Mattox are 170 barrels per day for both the three and
six months ended June 30, 2022, and 154 barrels per day for both the three and
six months ended June 30, 2021.
(3) Terminaling throughput is defined as the volume of delivered barrels and
storage is defined as the volume of stored barrels.
(4) Refinery Gas Pipeline and our refined products terminals are not included
above as they generate revenue under transportation and terminaling service
agreements, respectively, that provide for guaranteed minimum revenue and/or
throughput.
(5) Based on reported revenues from transportation and allowance oil divided by
delivered barrels over the same time period. Actual tariffs charged are based on
shipping points along the pipeline system, volume and length of contract.
(6) Based on reported revenues from transportation and storage divided by
delivered and stored barrels over the same time period. Actual rates are based
on contract volume and length.
(7) Mattox is billed at a fixed rate of $1.52 per barrel for the monthly minimum
quantity in accordance with the terms of dedication and transportation
agreements.





                                       36
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Reconciliation of Non-GAAP Measures

The following tables provide a reconciliation of adjusted EBITDA and CAFD to net income and net cash provided by operating activities, the most directly comparable GAAP financial measures, for each of the periods indicated.

Please read "-Adjusted EBITDA and Cash Available for Distribution" for more
information.
                                                        Three Months Ended June 30,               Six Months Ended June 30,
                                                          2022                 2021                 2022                2021
Reconciliation of Adjusted EBITDA and Cash
Available for Distribution to Net Income
Net income                                          $          151          $    166          $         311          $    333
Add:
Impairment of fixed assets                                       -                 -                      -                 3

Depreciation, amortization and accretion                        16                17                     32                33
Interest income                                                 (8)               (7)                   (16)              (15)
Interest expense                                                22                21                     43                42
Cash distributions received from equity
method investments                                             119               128                    230               251

Less:

Equity method distributions included in other
income                                                           9                10                     17                24
Income from equity method investments                           97               105                    205               207
Adjusted EBITDA (1)                                            194               210                    378               416

Less:

  Adjusted EBITDA attributable to
noncontrolling interests                                         3                 3                      5                 8
Adjusted EBITDA attributable to the
Partnership                                                    191               207                    373               408

Less:

Series A Preferred Units distribution                           12                12                     24                24
Net interest paid by the Partnership (2)                        22                21                     43                42
Maintenance capex attributable to the
Partnership                                                      5                 3                      7                 5

To add:

Principal and interest payments received on
financing receivables                                           11                 8                     18                17
Net adjustments from volume deficiency
payments attributable to the Partnership                         -                (5)                     3                (7)
2021 Transactions (3)                                            -                12                      -                12
Reimbursement from Parent included in
partner's capital (4)                                            1                 -                      1                 -
Cash available for distribution attributable
to the Partnership's common unitholders             $          164          

$186 $321 $359


(1) Excludes principal and interest payments received on financing receivables.
(2) Amount represents both paid and accrued interest attributable to the period.
(3) Amount in 2021 includes the one-time $10 million payment received as part of
the May 2021 Transaction, as well as the cash received as part of the Auger
Divestiture. Refer to Note 2 - Acquisitions and Other Transactions in the Notes
to the Unaudited Consolidated Financial Statements for additional information.
(4) Amount in 2022 relates to reimbursement for final close out activities
associated with the directional drill project on Zydeco that was finalized and
operational in 2019.
                                       37
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                                                                       Six 

Months ended June 30th,

                                                                        2022                 2021

Reconciliation of Adjusted EBITDA and cash available for distribution to net cash provided by operating activities Net cash provided by operating activities

                         $         341          $      351
Add:
Interest income                                                             (16)                (15)
Interest expense                                                             43                  42
Return of investment                                                         41                  30
Less:
Change in deferred revenue and other unearned income                          8                  (5)

Change in other assets and liabilities                                       23                  (3)
Adjusted EBITDA (1)                                                         378                 416

Less:

 Adjusted EBITDA attributable to noncontrolling interests                     5                   8
Adjusted EBITDA attributable to the Partnership                             373                 408

Less:

Series A Preferred Units distribution                                        24                  24
Net interest paid by the Partnership (2)                                     43                  42
Maintenance capex attributable to the Partnership                             7                   5

To add:

Principal and interest payments received on financing receivables

  18                  17

Net Shortfall Payment Adjustments attributable to the Partnership

                                                               3                  (7)
2021 Transactions (3)                                                         -                  12
Reimbursement from Parent included in partner's capital (4)                   1                   -

Cash Available for Distribution Attributable to Ordinary Unitholders of the Partnership

                                                $         

321 $359


(1) Excludes principal and interest payments received on financing receivables.
(2) Amount represents both paid and accrued interest attributable to the period.
(3) Amount in 2021 includes the one-time $10 million payment received as part of
the May 2021 Transaction, as well as the cash received as part of the Auger
Divestiture. Refer to Note 2 - Acquisitions and Other Transactions in the Notes
to the Unaudited Consolidated Financial Statements for additional information.
(4) Amount in 2022 relates to reimbursement for final close out activities
associated with the directional drill project on Zydeco that was finalized and
operational in 2019.




                                       38
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Current term compared to Comparable quarter

Revenue

Total revenue increased by $1 million in the Current term compared to the
Comparable quarter consisting of an increase of $9 million attributable to product revenues, partially offset by lower transportation service revenues $8 million. Revenues from terminal services and rental revenues are consistent in Current term against the Comparable quarter.

Product revenue increased by $9 million related to higher sales of allowance oil
for certain of our onshore and offshore crude pipelines in the Current Quarter
as compared to the Comparable Quarter.

Transportation services revenue decreased primarily due to the expiration of a
shipper contract on the Zydeco system in the Current Quarter, coupled with lower
average tariff rates for the mix of barrels shipped in the Current Quarter
versus the Comparable Quarter. Additionally, there was lower throughput on
Odyssey in the Current Quarter, primarily as a result of lower deliveries from
producers. Lastly, there was lower transportation services revenue on Pecten
primarily as a result of lower throughput largely due to planned maintenance
activities from producers in the Current Quarter. These decreases were partially
offset by an increase in deliveries into Houma from certain offshore systems, as
well as an overall increase in allowance oil prices in the Current Quarter.

Terminaling services revenue increased as a result of a contractual inflation
adjustment in the latter part of 2021 related to the service components of the
terminaling services agreements for the Norco Assets. However, this increase was
offset by lower revenue related to the major maintenance service component on
the Norco Assets due to lower capital expenditure in the Current Quarter.

Costs and expenses

Total costs and expenses increased $7 million in the Current Quarter as compared
to the Comparable Quarter primarily due to an increase of $7 million of cost of
product sold, $1 million of general and administrative expenses and $1 million
of depreciation expense. These increases were partially offset by decreases of
$1 million of operations and maintenance expenses and $1 million of property and
other taxes.

Cost of goods sold increased primarily due to higher quota oil sales in Current term compared to the Comparable quarter.

General and administrative expenses increased in the Current Quarter versus the
Comparable Quarter primarily due to an increase in professional services and
associated fees.

Operations and maintenance expenses decreased in the Current Quarter versus the
Comparable Quarter primarily due to larger physical gains on allowance oil in
the Current Quarter, as well as lower non-routine maintenance expenses on the
Norco Assets. This decrease was almost entirely offset by higher project spend
across various assets.

Property tax expense decreased due to changes in property tax assessment estimates.

Investment and Other Income

Investment and other income decreased $9 million in the Current term compared to the Comparable quarter. Income from equity accounted investments decreased $8 million in the Current term primarily due to lower earnings on equity at Explorer, partially offset by higher earnings on equity at Colonial. Other income decreased by $1 million mainly related to the drop in Poseidon distributions in the Current term.

Interest income and expenses

Interest income and interest expense both increased $1 million in the Current term compared to the Comparable quarter mainly due to rising interest rates Current term against the Comparable quarter.







                                       39
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Current period versus comparable period

Revenue

Total revenue decreased by $3 million in the Current Period as compared to the
Comparable Period comprised of decreases of $17 million attributable to
transportation services revenue and $1 million attributable to lease revenue.
These decreases were partially offset by increases of $14 million in product
revenue and $1 million in terminaling services revenue in the Current Period
versus the Comparable Period.

Transportation services revenue decreased for Pecten primarily due to planned
maintenance activities on certain systems in the Current Period. Transportation
services revenue also decreased as a result of the expiration of a shipper
contract on the Zydeco system in the Current Period, coupled with lower average
tariff rates for the mix of barrels shipped in the Current Period versus the
Comparable Period, as well as lower overall spot shipments in the Current
Period. These decreases were partially offset by an overall increase in
allowance oil prices in the Current Period.

Rental income decreased due to the sale of Anacortes assets during the comparable period.

Product sales increased by $14 million related to higher oil quota sales for certain of our onshore and offshore crude pipelines in the current period compared to the comparable period.

Terminaling services revenue increased as a result of a contractual inflation
adjustment in the latter part of 2021 related to the service components of the
terminaling services agreements for the Norco Assets.

Costs and expenses

Total costs and expenses increased $12 million in the Current Period as compared
to the Comparable Period primarily due to an increase of $12 million of cost of
product sold, $2 million of operations and maintenance expenses and $2 million
of general and administrative expenses. These increases were partially offset by
decreases of $3 million as a result of no impairment of fixed assets in Current
Period and a decrease of $1 million of property and other taxes.

Cost of goods sold increased due to higher quota oil sales in the current period compared to the comparable period.

Operations and maintenance expenses increased in the Current Period as compared
to the Comparable Period mainly as a result of higher project spend and
maintenance activities in the Current Period. This increase was partially offset
by larger physical gains on allowance oil in the Current Period.

General and administrative expenses increased primarily due to an increase in professional services and related fees.

Property tax expense decreased due to changes in property tax assessment estimates.

Investment and Other Income

Investment and other income decreased $7 million in the Current Period as
compared to the Comparable Period. Other income decreased by $5 million related
to $7 million of lower distributions from Poseidon in the Current Period,
partially offset by the receipt of $2 million of insurance proceeds in the
Current Period related to hurricane impacts in the third quarter of 2021. Income
from equity method investments decreased by $2 million primarily as a result of
lower equity earnings from Explorer, partially offset by higher equity earnings
from Colonial.

Interest Income and Expense

Interest income and interest expense both increased $1 million in the Current
Period as compared to the Comparable Period mainly due to higher interest rates
in the Current Period versus the Comparable Period.
                                       40
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Capital resources and liquidity

We expect our ongoing sources of liquidity to include cash generated from
operations, borrowings under our credit facilities and our ability to access the
capital markets. We believe this access to credit along with cash generated from
operations will be sufficient to meet our short-term working capital
requirements and long-term capital expenditure requirements and to make
quarterly cash distributions. Our liquidity as of June 30, 2022 was $1,341
million, consisting of $325 million cash and cash equivalents and $1,016 million
of available capacity under our credit facilities.

Credit Facility Agreements

From June 30, 2022we have entered into the following credit facilities:

                                         Total Capacity          Current Interest Rate                Maturity Date
2021 Ten Year Fixed Facility           $           600                           2.96  %                    March 16, 2031
Ten Year Fixed Facility                            600                           4.18  %                      June 4, 2029
Seven Year Fixed Facility                          600                           4.06  %                     July 31, 2025
Five Year Revolver due July 2023
(1)                                                760                           2.17  %                     July 31, 2023
Five Year Revolver due December
2022 (1)                                         1,000                           2.18  %                  December 1, 2022


(1) These revolving credit facilities will expire in 2022 and 2023, respectively, and as such, we are currently evaluating our renewal options.

On June 30, 2021, Zydeco entered into a termination of revolving loan facility
agreement with Shell Treasury Center (West) Inc. ("STCW") to terminate the 2019
Zydeco Revolver. Zydeco had not borrowed any funds under this facility, and
therefore, no further obligations existed at the time of termination.

On March 16, 2021, we entered into a ten-year fixed rate credit facility with
STCW with a borrowing capacity of $600 million (the "2021 Ten Year Fixed
Facility"). The 2021 Ten Year Fixed Facility bears an interest rate of 2.96% per
annum and matures on March 16, 2031. The 2021 Ten Year Fixed Facility was fully
drawn on March 23, 2021, and the borrowings were used to repay the borrowings
under, and replace, the Five Year Fixed Facility. Refer to Note 6 - Related
Party Debt in the Notes to the Unaudited Consolidated Financial Statements in
this report for additional information.

Borrowings under the Five Year Revolver due July 2023 and the Five Year Revolver
due December 2022 bear interest at the three-month London Interbank Offered Rate
("LIBOR") rate plus a margin or, in certain instances (including if LIBOR is
discontinued), at an alternate interest rate as described in each respective
revolver. LIBOR is being discontinued globally, and as such, a new benchmark
will take its place. We are in discussion with our Parent to further clarify the
reference rate(s) applicable to our revolving credit facilities once LIBOR is
discontinued, and once determined, will assess the financial impact, if any.

Our weighted average interest rate for the six months ended June 30, 2022 and
June 30, 2021 was 3.2% and 3.0%, respectively. The weighted average interest
rate includes drawn and undrawn interest fees, but does not consider the
amortization of debt issuance costs or capitalized interest. A 1/8 percentage
point (12.5 basis points) increase in the interest rate on the total variable
rate debt of $744 million as of June 30, 2022 would increase our consolidated
annual interest expense by approximately $1 million.

We will need to rely on the willingness and ability of our related party lender
to secure additional debt, our ability to use cash from operations and/or obtain
new debt from other sources to repay/refinance such loans when they come due
and/or to secure additional debt as needed.

Like two June 30, 2022 and December 31, 2021we complied with the covenants contained in our credit facilities.

For definitions and additional information on our credit facilities, refer to
Note 6 - Related Party Debt in the Notes to the Unaudited Consolidated Financial
Statements in this report and Note 8 - Related Party Debt in the Notes to the
Consolidated Financial Statements included in Part II, Item 8 in our 2021 Annual
Report.

Cash flow from our operations

Operating Activities. We generated $341 million in cash flow from operating
activities in the Current Period compared to $351 million in the Comparable
Period. The decrease in cash flows was primarily driven by lower undistributed
equity earnings from our equity method investments in the Current Period. This
decrease was partially offset by the timing of receipt of receivables and
deferred revenue, and payment of accruals.
                                       41
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Investing Activities. Our cash flow provided by investing activities was $34
million in the Current Period compared to $35 million in the Comparable Period.
The decrease in cash flow provided by investing activities was primarily due to
higher capital expenditures in the Current Period compared to Comparable Period,
and no cash received from any transactions in the Current Period compared to
proceeds received from the May 2021 Transaction and the Auger Divestiture in the
Comparable Period. This is offset by a higher return of investment and lower
contribution to investment in the Current Period compared to the Comparable
Period.

Financing Activities. Our cash flow used in financing activities was
$411 million in the Current Period compared to $353 million in the Comparable
Period. The increase in cash flow used in financing activities was primarily due
to partial repayment of outstanding debt in the Current Period. This increase
was partially offset by lower distributions to unitholders and non-controlling
interests in the Current Period, as well as the receipt of other contributions
from both our Parent and a noncontrolling interest in the Current Period and a
prepayment fee paid in the Comparable Period.

Capital expenditure and investments

Our operations can be capital intensive, requiring investments to maintain,
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. Examples of maintenance capital
expenditures are those made to replace partially or fully depreciated assets, to
maintain the existing operating capacity of our assets and to extend their
useful lives, or other capital expenditures that are incurred in maintaining
existing system volumes and related cash flows. In contrast, expansion capital
expenditures are those made to acquire additional assets to grow our business,
to expand and upgrade our systems and facilities and to construct or acquire new
systems or facilities. We regularly explore opportunities to improve service to
our customers and maintain or increase our assets' capacity and revenue. We may
incur substantial amounts of capital expenditures in certain periods in
connection with large maintenance projects that are intended to only maintain
our assets' capacity or revenue.

We have made capital expenditures and investments of $8 million for the current period and the comparable period.

A summary of our capital expenditures and investments is shown in the table
below:
                                                     Three Months Ended June 30,                  Six Months Ended June 30,
                                                      2022                  2021                  2022                  2021
Expansion capital expenditures                  $            -          $        -          $            -          $        -
Maintenance capital expenditures                             5                   3                       7                   4
Total capital expenditures paid                              5                   3                       7                   4
(Decrease) increase in accrued capital
expenditures                                                 1                   -                       1                   1
Total capital expenditures incurred                          6                   3                       8                   5
Contributions to investment                                  -                   1                       -                   3
Total capital expenditures and
investments                                     $            6          $        4          $            8          $        8



                                       42
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We expect total capital expenditures and investments to be approximately $43 million for 2022, the summary of which appears in the table below:

                                                       Actual                                Expected
                                                                                                      Total Expected
                                                  Six Months Ended          Six Months Ending          2022 Capital
                                                    June 30, 2022           December 31, 2022          Expenditures
Expansion capital expenditures
 Pecten                                         $                -          $            2          $             2
Total expansion capital expenditures
incurred                                                         -                       2                        2

Maintenance capital expenditure

  Zydeco                                        $                1          $            2          $             3
  Pecten                                                         -                       2                        2
Triton                                                           1                       3                        4
  Odyssey                                                        6                      23                       29
Total maintenance capital expenditures
incurred                                                         8                      30                       38
Contributions to investment                                      -                       3                        3
Total capital expenditures and
investments                                     $                8          $           35          $            43


Expansion and maintenance expenses

Pecten had no expansion capital expenditures for both the three and six months
ended June 30, 2022, and we expect Pecten's expansion capital expenditures to be
approximately $2 million for the remainder of 2022. These expected expenditures
relate to the potential expansion of the Auger corridor.

Zydeco's maintenance capital expenditures for the three and six months ended
June 30, 2022 were less than $1 million and $1 million, respectively, primarily
for the Houma motor control center upgrade. We expect Zydeco's maintenance
capital expenditures to be approximately $2 million for the remainder of 2022,
of which approximately $1 million is related to the Houma tank maintenance
projects and $1 million is related to various other maintenance projects.

Pecten’s maintenance capital expenditures for the three and six months ended June 30, 2022 were less than $1 millionand we expect Pecten’s maintenance capital expenditure to be approximately $2 million for the remainder of 2022. These planned expenditures relate to maintenance of the
Lock terminal and the Auger and Delta systems.

Triton's maintenance capital expenditures for both the three and six months
ended June 30, 2022 was $1 million. We expect Triton's maintenance capital
expenditures to be approximately $3 million for the remainder of 2022, of which
approximately $1 million is related to the Des Plaines truck, tank and control
center upgrades. The remaining maintenance capital expenditure is related to
various other routine maintenance projects.

Odyssey's maintenance capital expenditures for the three and six months ended
June 30, 2022 were $5 million and $6 million, respectively, related to a project
to re-route two pipelines around the MP289C platform. We expect Odyssey's
maintenance capital expenditures to be approximately $23 million for the
remainder of 2022 related to this pipeline re-route project.

We do not expect any maintenance capital expenditure for Sand Dollar in 2022.

We expect capital expenditures for the remainder of the year to be funded primarily by cash flow from operations.

Capital contributions

In accordance with the Member Interest Purchase Agreement dated October 16,
2017, pursuant to which we acquired a 50% interest in Permian Basin, we will
make capital contributions for our pro rata interest in Permian Basin to fund
capital and other expenditures, as approved by a supermajority (75%) vote of the
members. We did not make any capital contribution in the three and six months
ended June 30, 2022, and expect to make approximately $3 million in capital
contributions during the remainder of 2022.

Off-balance sheet arrangements

We have not entered into any transaction, agreement or other contractual arrangement that would result in off-balance sheet liabilities.

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Environmental issues and compliance costs

Our operations are subject to extensive and frequently changing federal, state
and local laws, regulations and ordinances relating to the protection of the
environment. Among other things, these laws and regulations govern the emission
or discharge of pollutants into or onto the land, air and water, the handling
and disposal of solid and hazardous wastes and the remediation of contamination.
As with the industry in general, compliance with existing and anticipated
environmental laws and regulations increases our overall cost of business,
including our capital costs to construct, maintain, operate and upgrade
equipment and facilities. While these laws and regulations affect our
maintenance capital expenditures and net income, we believe they do not affect
our competitive position, as the operations of our competitors are similarly
affected. We believe our facilities are in substantial compliance with
applicable environmental laws and regulations. However, these laws and
regulations are subject to changes, or to changes in the interpretation of such
laws and regulations, by regulatory authorities, and continued and future
compliance with such laws and regulations may require us to incur significant
expenditures. Additionally, violation of environmental laws, regulations and
permits can result in the imposition of significant administrative, civil and
criminal penalties, injunctions limiting our operations, investigatory or
remedial liabilities or construction bans or delays in the construction of
additional facilities or equipment. Additionally, a release of hydrocarbons or
hazardous substances into the environment could, to the extent the event is not
insured, subject us to substantial expenses, including costs to comply with
applicable laws and regulations and to resolve claims by third parties for
personal injury or property damage or claims by the U.S. federal government or
state governments for natural resources damages. These impacts could directly
and indirectly affect our business and have an adverse impact on our financial
position, results of operations and liquidity if we do not recover these
expenditures through the rates and fees we receive for our services. We believe
our competitors must comply with similar environmental laws and regulations.
However, the specific impact on each competitor may vary depending on a number
of factors, including, but not limited to, the type of competitor and location
of its operating facilities. For additional information, refer to Environmental
Matters, Items 1 and 2. Business and Properties in our 2021 Annual Report.

We accrue for environmental remediation activities when the responsibility to
remediate is probable and the amount of associated costs can be reasonably
estimated. As environmental remediation matters proceed toward ultimate
resolution or as additional remediation obligations arise, charges in excess of
those previously accrued may be required. New or expanded environmental
requirements, which could increase our environmental costs, may arise in the
future. We believe we substantially comply with all legal requirements regarding
the environment; however, as not all of the associated costs are fixed or
presently determinable (even under existing legislation) and may be affected by
future legislation or regulations, it is not possible to predict all of the
ultimate costs of compliance, including remediation costs that may be incurred
and penalties that may be imposed.

Significant Accounting Policies and Estimates

Our significant accounting policies and estimates are presented in Part II, point 7. Management report and analysis of the financial situation and results of operations – Significant accounting policies and estimates of our 2021 annual report. June 30, 2022no material changes have been made to our critical accounting policies and estimates since the filing of our 2021 annual report.

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           CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This report includes forward-looking statements. You can identify our
forward-looking statements by the words "anticipate," "estimate," "believe,"
"budget," "continue," "could," "intend," "may," "plan," "potential," "predict,"
"seek," "should," "would," "expect," "objective," "projection," "forecast,"
"goal," "guidance," "outlook," "effort," "target" and similar expressions.

We based the forward-looking statements on our current expectations, estimates
and projections about us and the industries in which we operate in general. We
caution you these statements are not guarantees of future performance as they
involve assumptions that, while made in good faith, may prove to be incorrect,
and involve risks and uncertainties we cannot predict. In addition, we based
many of these forward-looking statements on assumptions about future events that
may prove to be inaccurate. Accordingly, our actual outcomes and results may
differ materially from what we have expressed in the forward-looking statements.
Any differences could result from a variety of factors, including the following:

•Whether the proposed Transaction to acquire all of our issued and outstanding
common units not already owned by SPLC or its affiliates will be consummated in
2022 or at all.
•The proposed Transaction includes risks that it may not be consummated or the
benefits contemplated therefrom may not be realized, including the ability to
obtain the requisite regulatory approval and the satisfaction of the other
conditions to the consummation of the proposed Transaction, and the potential
impact of the announcement or consummation of the proposed Transaction on
relationships, including with employees, suppliers, customers, competitors and
credit rating agencies.
•The continued ability of Shell and our non-affiliate customers to satisfy their
obligations under our commercial and other agreements.
•The volume of crude oil, refined petroleum products and refinery gas we
transport or store and the prices that we can charge our customers.
•The tariff rates with respect to volumes that we transport through our
regulated assets, which rates are subject to review and possible adjustment
imposed by federal and state regulators.
•Changes in revenue we realize under the loss allowance provisions of our fees
and tariffs resulting from changes in underlying commodity prices.
•Our ability to renew or replace our third-party contract portfolio on
comparable terms.
•Fluctuations in the prices for crude oil, refined petroleum products and
refinery gas, including fluctuations due to political or economic measures taken
by various countries.
•The level of production of refinery gas by refineries and demand by chemical
sites.
•The level of onshore and offshore (including deepwater) production and demand
for crude oil by U.S. refiners.
•Changes in global economic conditions and the effects of a global economic
downturn on the business of Shell and the business of its suppliers, customers,
business partners and credit lenders.
•The ongoing COVID-19 pandemic and related governmental regulations and travel
restrictions (including our vaccine mandate for offshore employees), and any
resulting reduction in the global demand for oil and natural gas.
•Availability of acquisitions and financing for acquisitions on our expected
timing and acceptable terms.
•Changes in, and availability to us, of the equity and debt capital markets.
•Liabilities associated with the risks and operational hazards inherent in
transporting and/or storing crude oil, refined petroleum products and refinery
gas.
•Curtailment of operations or expansion projects due to unexpected leaks, spills
or severe weather disruption, including disruptions caused by hurricanes; riots,
strikes, lockouts or other industrial disturbances; or failure of information
technology systems due to various causes, including unauthorized access or
attack.
•Costs or liabilities associated with federal, state and local laws and
regulations, including those that may be implemented by the current U.S.
presidential administration, relating to environmental protection and safety,
including spills, releases and pipeline integrity.
•Costs associated with compliance with evolving environmental laws and
regulations on climate change.
•Costs associated with compliance with safety regulations and system maintenance
programs, including pipeline integrity management program testing and related
repairs.
•Changes in tax status or applicable tax laws.
•Changes in the cost or availability of third-party vessels, pipelines, rail
cars and other means of delivering and transporting crude oil, refined petroleum
products and refinery gas.
•Direct or indirect effects on our business resulting from actual or threatened
terrorist incidents or acts of war, including the ongoing Russian invasion of
Ukraine, its associated impacts on global commodity markets and the resulting
political and economic sanctions on Russia.
•The effect of releases from the U.S. Strategic Petroleum Reserve.
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•The factors generally described in Part I, point 1A. Risk factors in our 2021 annual report.


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