Annual Reports

 
Quarterly Reports

  • 10-Q (Nov 3, 2017)
  • 10-Q (Aug 4, 2017)
  • 10-Q (May 5, 2017)
  • 10-Q (Nov 3, 2016)
  • 10-Q (Aug 5, 2016)
  • 10-Q (May 6, 2016)

 
8-K

 
Other

Buckeye Partners 10-Q 2017

Documents found in this filing:

  1. 10-Q
  2. Ex-31.1
  3. Ex-31.2
  4. Ex-32.1
  5. Ex-32.2
  6. Ex-32.2
Document
 
 
 
 
 
 
 
 
 
 

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-Q
 
 
(Mark One)
ý    Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the quarterly period ended June 30, 2017
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 1-9356 
 
Buckeye Partners, L.P.
(Exact name of registrant as specified in its charter)
 
Delaware
 
23-2432497
(State or other jurisdiction of incorporation or organization)
 
(IRS Employer Identification number)
 
 
 
One Greenway Plaza
 
 
Suite 600
 
 
Houston, TX
 
77046
(Address of principal executive offices)
 
(Zip Code)
 Registrant’s telephone number, including area code: (832) 615-8600
 
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 and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post 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. (Check one):
Large accelerated filer
ý
 
Accelerated filer ¨ 
Non-accelerated filer
¨ 
 
Smaller reporting company ¨ 
(Do not check if a 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. ¨ 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ¨ No ý 
As of July 28, 2017, there were 141,224,005 limited partner units outstanding.
 
 
 
 
 



TABLE OF CONTENTS
 
 
 
 
Page
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1.
 
 
 
2.
 
 
 
3.
 
 
 
4.
 
 
 
5.
 
 
 
6.

 
 
7.
 
 
 
8.
 
 
 
9.
 
 
 
10.
 
 
 
11.
 
 
 
12.
 
 
 
13.
 
 
 
14.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 




PART I.  FINANCIAL INFORMATION 
Item 1.  Financial Statements 
BUCKEYE PARTNERS, L.P.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per unit amounts)
(Unaudited) 
 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
 
2017
 
2016
 
2017
 
2016
Revenue:
 

 
 

 
 

 
 

Product sales
$
399,805

 
$
364,326

 
$
965,225

 
$
749,088

Transportation, storage and other services
410,396

 
412,796

 
814,249

 
808,628

Total revenue
810,201

 
777,122

 
1,779,474

 
1,557,716

 
 
 
 
 
 
 
 
Costs and expenses:
 

 
 

 
 

 
 

Cost of product sales
392,578

 
353,953

 
940,628

 
722,597

Operating expenses
162,220

 
147,718

 
324,188

 
296,804

Depreciation and amortization
64,838

 
63,322

 
130,326

 
124,748

General and administrative
24,346

 
22,185

 
46,083

 
43,416

Other, net
(4,422
)
 

 
(4,422
)
 

Total costs and expenses
639,560

 
587,178

 
1,436,803

 
1,187,565

Operating income
170,641

 
189,944

 
342,671

 
370,151

 
 
 
 
 
 
 
 
Other income (expense):
 

 
 

 
 

 
 

Earnings from equity investments
3,120

 
2,470

 
13,478

 
5,558

Interest and debt expense
(56,424
)
 
(47,834
)
 
(112,309
)
 
(95,617
)
Other income (expense)
81

 
(108
)
 
109

 
(28
)
Total other expense, net
(53,223
)
 
(45,472
)
 
(98,722
)
 
(90,087
)
 
 
 
 
 
 
 
 
Income before taxes
117,418

 
144,472

 
243,949

 
280,064

Income tax (expense) benefit
(1,039
)
 
27

 
(1,261
)
 
(588
)
Net income
116,379

 
144,499

 
242,688

 
279,476

Less: Net income attributable to noncontrolling interests
(3,657
)
 
(4,043
)
 
(6,390
)
 
(7,907
)
Net income attributable to Buckeye Partners, L.P.
$
112,722

 
$
140,456

 
$
236,298

 
$
271,569

 
 
 
 
 
 
 
 
Earnings per unit attributable to Buckeye Partners, L.P.:
 
 

 
 

 
 

Basic
$
0.80

 
$
1.08

 
$
1.68

 
$
2.09

Diluted
$
0.80

 
$
1.07

 
$
1.67

 
$
2.08

 
 
 
 
 
 
 
 
Weighted average units outstanding:
 

 
 

 
 

 
 

Basic
140,826

 
130,494

 
140,603

 
130,099

Diluted
141,505

 
131,153

 
141,253

 
130,641

 
See Notes to Unaudited Condensed Consolidated Financial Statements.

1


BUCKEYE PARTNERS, L.P.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands)
(Unaudited)
 
 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
 
2017
 
2016
 
2017
 
2016
Net income
$
116,379

 
$
144,499

 
$
242,688

 
$
279,476

Other comprehensive income:
 
 
 
 
 

 
 

Unrealized losses on derivative instruments
(9,216
)
 

 
(6,231
)
 

Reclassification of derivative losses to net income
3,037

 
3,037

 
6,075

 
4,809

Recognition of costs related to benefit plans to net income
(161
)
 
309

 
16

 
504

Other comprehensive income from equity method investments
24,855

 

 
27,746

 

Total other comprehensive income
18,515

 
3,346

 
27,606

 
5,313

Comprehensive income
134,894

 
147,845

 
270,294

 
284,789

Less: Comprehensive income attributable to noncontrolling interests
(3,657
)
 
(4,043
)
 
(6,390
)
 
(7,907
)
Comprehensive income attributable to Buckeye Partners, L.P.
$
131,237

 
$
143,802

 
$
263,904

 
$
276,882

 
See Notes to Unaudited Condensed Consolidated Financial Statements.

2


BUCKEYE PARTNERS, L.P.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except unit amounts)
(Unaudited)
 
June 30,
2017
 
December 31,
2016
Assets:
 

 
 

Current assets:
 

 
 

Cash and cash equivalents
$
2,375

 
$
640,340

Accounts receivable, net
197,612

 
236,416

Construction and pipeline relocation receivables
20,038

 
17,276

Inventories
286,474

 
356,803

Derivative assets
26,047

 
1,526

Prepaid and other current assets
42,952

 
66,536

Total current assets
575,498

 
1,318,897

 
 
 
 
Property, plant and equipment
7,703,506

 
7,523,774

Less: Accumulated depreciation
(1,124,402
)
 
(1,040,492
)
Property, plant and equipment, net
6,579,104

 
6,483,282

 
 
 
 
Equity investments
1,254,768

 
89,564

Goodwill
1,004,545

 
1,004,545

 
 
 
 
Intangible assets
616,286

 
616,286

Less: Accumulated amortization
(225,931
)
 
(192,983
)
Intangible assets, net
390,355

 
423,303

 
 
 
 
Other non-current assets
76,433

 
101,512

Total assets
$
9,880,703

 
$
9,421,103

 
 
 
 
Liabilities and partners’ capital:
 

 
 

Current liabilities:
 

 
 

Line of credit
$
227,260

 
$

Accounts payable
64,932

 
107,383

Derivative liabilities
118

 
26,272

Accrued and other current liabilities
246,112

 
265,893

Total current liabilities
538,422

 
399,548

 
 
 
 
Long-term debt
4,579,943

 
4,217,695

Other non-current liabilities
98,864

 
105,437

Total liabilities
5,217,229

 
4,722,680

 
 
 
 
Commitments and contingent liabilities (Note 3)

 

 
 
 
 
Partners’ capital:
 

 
 

Buckeye Partners, L.P. capital:
 

 
 

Limited Partners (141,221,279 and 140,263,787 units outstanding as of June 30, 2017 and December 31, 2016, respectively)
4,378,168

 
4,437,316

Accumulated other comprehensive income (loss)
2,013

 
(25,593
)
Total Buckeye Partners, L.P. capital
4,380,181

 
4,411,723

Noncontrolling interests
283,293

 
286,700

Total partners’ capital
4,663,474

 
4,698,423

Total liabilities and partners’ capital
$
9,880,703

 
$
9,421,103

 
See Notes to Unaudited Condensed Consolidated Financial Statements.

3


BUCKEYE PARTNERS, L.P.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited) 
 
Six Months Ended
June 30,
 
2017
 
2016
Cash flows from operating activities:
 

 
 

Net income
$
242,688

 
$
279,476

Adjustments to reconcile net income to net cash provided by (used in) operating activities:
 

 
 

Depreciation and amortization
130,326

 
124,748

Amortization of debt issuance costs and discount
2,647

 
2,346

Amortization of losses on terminated interest rate swaps
6,075

 
6,075

Non-cash unit-based compensation expense
17,665

 
14,090

Gains on property damage recoveries
(4,621
)
 

Net changes in fair value of derivatives
(29,484
)
 
92,242

Amortization of unfavorable storage contracts

 
(5,536
)
Earnings from equity investments
(13,478
)
 
(5,558
)
Distributions of earnings from equity investments
17,700

 
1,594

Other non-cash items
1,105

 
2,987

Change in assets and liabilities, net of amounts related to acquisitions:
 

 
 

Accounts receivable
38,281

 
(8,895
)
Construction and pipeline relocation receivables
(2,762
)
 
1,115

Inventories
70,329

 
(54,302
)
Prepaid and other current assets
16,557

 
(50,694
)
Accounts payable
(45,361
)
 
(10,031
)
Accrued and other current liabilities
(8,164
)
 
(12,021
)
Other non-current assets
(923
)
 
(477
)
Other non-current liabilities
(2,359
)
 
(5,559
)
Net cash provided by operating activities
436,221

 
371,600

Cash flows from investing activities:
 

 
 

Capital expenditures
(202,961
)
 
(224,117
)
Equity investment acquisition
(1,150,000
)
 

Proceeds from asset disposals
428

 
1,775

Escrow deposits

 
19,850

Recoveries on property damages
4,621

 

Distributions in excess of earnings from equity investments
7,402

 

Net cash used in investing activities
(1,340,510
)
 
(202,492
)
Cash flows from financing activities:
 

 
 

Net proceeds from issuance of LP Units
48,440

 
90,182

Net proceeds from exercise of Unit options
481

 
300

Payment of tax withholding on issuance of LTIP awards
(8,305
)
 
(5,082
)
Borrowings under BPL Credit Facility
865,890

 
691,500

Repayments under BPL Credit Facility
(505,890
)
 
(687,500
)
Net borrowings under BMSC Credit Facility
227,260

 
66,001

Contributions from noncontrolling interests
5,600

 
2,200

Distributions to noncontrolling interests
(16,892
)
 
(6,194
)
Distributions to unitholders
(350,260
)
 
(310,634
)
Net cash provided by (used in) financing activities
266,324

 
(159,227
)
Net (decrease) increase in cash and cash equivalents
(637,965
)
 
9,881

Cash and cash equivalents — Beginning of period
640,340

 
4,881

Cash and cash equivalents — End of period
$
2,375

 
$
14,762

 
See Notes to Unaudited Condensed Consolidated Financial Statements.

4


BUCKEYE PARTNERS, L.P.
CONDENSED CONSOLIDATED STATEMENTS OF PARTNERS’ CAPITAL
(In thousands)
(Unaudited)
 
 
 
 
Accumulated
 
 
 
 
 
 
 
Other
 
 
 
 
 
Limited
 
Comprehensive
 
Noncontrolling
 
 
 
Partners
 
Income (Loss)
 
Interests
 
Total
Partners’ capital - January 1, 2017
$
4,437,316

 
$
(25,593
)
 
$
286,700

 
$
4,698,423

Net income
236,298

 

 
6,390

 
242,688

Distributions paid to unitholders
(351,718
)
 

 
1,458

 
(350,260
)
Net proceeds from issuance of LP Units
48,440

 

 

 
48,440

Amortization of unit-based compensation awards
17,665

 

 

 
17,665

Net proceeds from exercise of Unit options
481

 

 

 
481

Payment of tax withholding on issuance of LTIP awards
(8,305
)
 

 

 
(8,305
)
Distributions paid to noncontrolling interests

 

 
(16,892
)
 
(16,892
)
Contributions from noncontrolling interests

 

 
5,600

 
5,600

Other comprehensive income

 
27,606

 

 
27,606

Accrual of distribution equivalent rights
(1,972
)
 

 

 
(1,972
)
Other
(37
)
 

 
37

 

Partners’ capital - June 30, 2017
$
4,378,168

 
$
2,013

 
$
283,293

 
$
4,663,474

 
 
 
 
 
 
 
 
Partners’ capital - January 1, 2016
$
3,833,230

 
$
(97,841
)
 
$
281,352

 
$
4,016,741

Net income
271,569

 

 
7,907

 
279,476

Distributions paid to unitholders
(312,175
)
 

 
1,541

 
(310,634
)
Net proceeds from issuance of LP Units
90,182

 

 

 
90,182

Amortization of unit-based compensation awards
14,090

 

 

 
14,090

Net proceeds from exercise of Unit options
300

 

 

 
300

Payment of tax withholding on issuance of LTIP awards
(5,082
)
 

 

 
(5,082
)
Distributions paid to noncontrolling interests

 

 
(6,194
)
 
(6,194
)
Contributions from noncontrolling interests

 

 
2,200

 
2,200

Other comprehensive income

 
5,313

 

 
5,313

Accrual of distribution equivalent rights
(1,468
)
 

 

 
(1,468
)
Other
(48
)
 

 
48

 

Partners’ capital - June 30, 2016
$
3,890,598

 
$
(92,528
)
 
$
286,854

 
$
4,084,924

 
See Notes to Unaudited Condensed Consolidated Financial Statements.


5


BUCKEYE PARTNERS, L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 
1. ORGANIZATION AND BASIS OF PRESENTATION
 
Organization
 
Buckeye Partners, L.P. is a publicly traded Delaware master limited partnership (“MLP”), and its limited partnership units representing limited partner interests (“LP Units”) are listed on the New York Stock Exchange (“NYSE”) under the ticker symbol “BPL.”  Buckeye GP LLC (“Buckeye GP”) is our general partner.  As used in these Notes to Unaudited Condensed Consolidated Financial Statements, “we,” “us,” “our” and “Buckeye” mean Buckeye Partners, L.P. and, where the context requires, includes our subsidiaries.
 
We own and operate a diversified network of integrated assets providing midstream logistic solutions, primarily consisting of the transportation, storage, processing and marketing of liquid petroleum products.  We are one of the largest independent liquid petroleum products pipeline operators in the United States in terms of volumes delivered and miles of pipeline. We also use our service expertise to operate and/or maintain third-party pipelines and perform certain engineering and construction services for our customers. Additionally, we are one of the largest independent terminalling and storage operators in the United States in terms of capacity available for service. We own and operate one of the largest networks of active products terminals across our portfolio of pipelines, inland terminals and marine terminals located primarily in the East Coast, Midwest and Gulf Coast regions of the United States and in the Caribbean.  Our network of marine terminals enables us to facilitate global flows of crude oil and refined petroleum products, offering our customers connectivity between supply areas and market centers through some of the world’s most important bulk liquid storage and blending hubs.  Our flagship marine terminal in The Bahamas, Buckeye Bahamas Hub Limited (“BBH”), is one of the largest marine crude oil and refined petroleum products storage facilities in the world and provides an array of logistics and blending services for the global flow of petroleum products. Our Gulf Coast regional hub, Buckeye Texas Partners LLC (“Buckeye Texas”), offers world-class marine terminalling, storage and processing capabilities. Our 50% equity interest in VTTI B.V. (“VTTI”) expands our international presence, with premier storage and marine terminalling services for petroleum products in key global energy hubs, primarily in Northwest Europe, the United Arab Emirates and Singapore. We are also a wholesale distributor of refined petroleum products in areas served by our pipelines and terminals.
 
Basis of Presentation and Principles of Consolidation
 
The unaudited condensed consolidated financial statements and the accompanying notes are prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and the rules of the U.S. Securities and Exchange Commission.  Accordingly, our financial statements reflect all normal and recurring adjustments that are, in the opinion of management, necessary for a fair presentation of our results of operations for the interim periods.  The unaudited condensed consolidated financial statements include the accounts of our subsidiaries controlled by us and variable interest entities of which we are the primary beneficiary. We have eliminated all intercompany transactions in consolidation.
 
We believe that the disclosures in these unaudited condensed consolidated financial statements are adequate to make the information presented not misleading.  These interim financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto contained in our Annual Report on Form 10-K for the year ended December 31, 2016.

Recent Accounting Developments

Modifications to Share-Based Payment Awards. In May 2017, the Financial Accounting Standards Board (“FASB”) issued guidance to clarify when changes in the terms or conditions of share-based payment awards must be accounted for as modifications under Topic 718. The guidance requires that entities apply modification accounting unless the award’s fair value, vesting conditions and classification as an equity or liability instrument are the same immediately before and after the change. The amendments are effective for interim and annual periods beginning after December 15, 2017, with early adoption permitted. The amendments should be applied prospectively to awards modified on or after the adoption date. We expect to adopt this guidance on January 1, 2018, and it will be applied to modifications of our unit-based awards prospectively, if any.

6


Retirement Benefits. In March 2017, the FASB issued guidance to amend the presentation of net periodic pension cost and net periodic postretirement benefit cost. The guidance requires that the service cost component of net periodic pension and postretirement benefit cost be presented in the same income statement line item as other employee compensation costs, while the other components are required to be presented separately within non-operating income. The guidance also allows only the service cost component to be eligible for capitalization when applicable. The amendments are effective for interim and annual periods beginning after December 15, 2017. The amendments should be applied retrospectively for the presentation of the service cost component and the other components of net periodic pension cost and net periodic postretirement benefit cost in the income statement and prospectively, on and after the effective date, for the capitalization of the service cost component of net periodic pension cost and net periodic postretirement benefit in assets. We are currently evaluating the impact the adoption of this guidance will have on our consolidated financial statements.

Revenue from Contracts with Customers. In May 2014, the FASB issued Accounting Standards Update No. 2014-09, “Revenue from Contracts with Customers (Topic 606)” (“ASU 2014-09”), which amended existing accounting standards for revenue recognition, including industry-specific requirements, and provides entities with a single revenue recognition model for recognizing revenue from contracts with customers.  The core principle of ASU 2014-09 is that an entity should recognize revenue from contracts with customers when it transfers promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.  Furthermore, additional disclosures will be required to describe the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts. The two permitted transition methods under ASU 2014-09 are the full retrospective method, which would be applied to each prior reporting period presented and the cumulative effect of applying the standard would be recognized at the earliest period shown, or the modified retrospective method, in which the cumulative effect of applying the standard would be recognized at the date of initial application.  In July 2015, the FASB deferred the effective date of ASU 2014-09 and is effective for annual and interim periods beginning after December 15, 2017, with early adoption permitted for annual and interim periods beginning after December 15, 2016.  In 2016, the FASB issued accounting standards updates that amended several aspects of ASU 2014-09.  We continue to evaluate the provisions of the standard through our implementation work team, consisting of representatives from all of our business segments, and to assess and implement changes to business processes, systems and controls. In addition, we have implemented training on the new standard’s revenue recognition model and are continuing our contract review and documentation. We expect to adopt this guidance on January 1, 2018, and we are currently evaluating the impact that it will have on our consolidated financial statements, including our disclosures, under the elected modified retrospective transition method.

Equity-Based Compensation. In March 2016, the FASB issued guidance to simplify several aspects of the accounting for employee equity-based payment transactions, including the accounting for income taxes, forfeitures and statutory tax withholding requirements, as well as classification in the statement of cash flows and classification of awards as liabilities or equity. The guidance was effective for annual reporting periods beginning after December 15, 2016 and interim periods within those annual periods, with early adoption permitted. Amendments related to the timing of when excess tax benefits are recognized, statutory withholding requirements and forfeitures were to be applied using a modified retrospective transition method by means of a cumulative-effect adjustment to equity as of the beginning of the period in which the guidance is adopted. Amendments related to the presentation of employee taxes paid on the statement of cash flows were to be applied retrospectively. Amendments requiring recognition of excess tax benefits and tax deficiencies in the income statement were to be applied prospectively. Amendments related to the presentation of excess tax benefits on the statement of cash flows were to be applied using either a prospective transition method or a retrospective transition method. We adopted this guidance as of January 1, 2017 and did not recognize a retrospective transition adjustment. In addition, the adoption of this guidance did not have a material impact on our consolidated financial statements or on our disclosures.
 

7


2. ACQUISITIONS
 
Business Combination

Indianola terminalling facility acquisition
 
In August 2016, we acquired a liquid petroleum products terminalling facility in Indianola, Pennsylvania from Kinder Morgan Transmix Company, LLC for $26.0 million. The operations of these assets are reported in our Domestic Pipelines & Terminals segment. The acquisition cost has been allocated on a preliminary basis to assets acquired based on estimated fair values at the acquisition date, with amounts exceeding the fair value recorded as goodwill, which represent expected synergies from combining the acquired assets with our existing operations. Fair values have been developed using recognized business valuation techniques.  The estimates of fair value reflected as of June 30, 2017 are subject to change pending final valuation analysis.  The purchase price has been allocated to tangible and intangible assets acquired as follows (in thousands):
Inventories
$
1,554

Property, plant and equipment
16,713

Goodwill
7,758

Allocated purchase price
$
26,025


Unaudited Pro forma Financial Results for the Indianola terminalling facility acquisition

Our consolidated statements of operations do not include earnings from the terminalling facility prior to August 4, 2016, the effective acquisition date of these assets. The preparation of unaudited pro forma financial information for the terminalling facility is impracticable due to the fact that meaningful historical revenue information is not available. The revenues and earnings impact of this acquisition was not significant to our financial results for the three and six months ended June 30, 2017.

Equity Investment Transaction

VTTI Acquisition

In January 2017, we acquired an indirect 50% equity interest in VTTI for cash consideration of $1.15 billion (the “VTTI Acquisition”). We own VTTI jointly with Vitol S.A. (“Vitol”). VTTI is one of the largest independent global marine terminal businesses which, through its subsidiaries and partnership interests, owns and operates approximately 57 million barrels of petroleum products storage across 14 terminals located on five continents. These marine terminals are predominately located in key global energy hubs, including Northwest Europe, the United Arab Emirates and Singapore, and offer world-class storage and marine terminalling services for refined petroleum products, liquid petroleum gas and crude oil. We and VIP Terminals Finance B.V., a subsidiary of Vitol, have equal board representation and voting rights in the VTTI joint venture. We account for this investment using the equity method of accounting. Under this method, an investment is recorded at acquisition cost plus our equity in undistributed earnings or losses since acquisition, reduced by distributions received and amortization of excess net investment. The earnings from our equity investment in VTTI are reported in our Global Marine Terminals segment. In addition, we include our proportionate share of our equity method investments’ unrealized gains and losses in other comprehensive income in our unaudited condensed consolidated financial statements.
  
The estimated fair values used to calculate the excess net investment in VTTI were primarily developed using an income approach, with inputs classified as Level 3 within the fair value hierarchy. The excess net investment was $580.8 million at the acquisition date and was comprised of the following components: (i) $233.0 million related to the excess of the fair values of identifiable property, plant and equipment and intangible assets over their carrying values, which is being amortized on a straight-line basis over the estimated useful lives of these underlying assets of approximately 28 years; and (ii) $347.8 million of implied goodwill, which is not subject to amortization.


8


3. COMMITMENTS AND CONTINGENCIES
 
Claims and Legal Proceedings
 
In the ordinary course of business, we are involved in various claims and legal proceedings, some of which are covered by insurance.  We are generally unable to predict the timing or outcome of these claims and proceedings.  Based upon our evaluation of existing claims and proceedings and the probability of losses relating to such contingencies, we have accrued certain amounts relating to such claims and proceedings, none of which are considered material.

Environmental Contingencies
 
At June 30, 2017 and December 31, 2016, we had $44.8 million and $44.3 million, respectively, of environmental remediation liabilities unrelated to claims and legal proceedings.  Costs ultimately incurred may be in excess of our estimates, which may have a material impact on our financial condition, results of operations or cash flows.  At June 30, 2017 and December 31, 2016, we had $5.9 million and $7.2 million, respectively, of receivables related to these environmental remediation liabilities covered by insurance or third-party claims.

4. INVENTORIES
 
Our inventory amounts were as follows at the dates indicated (in thousands):
 
June 30,
2017
 
December 31,
2016
Liquid petroleum products (1)
$
263,238

 
$
337,424

Materials and supplies
23,236

 
19,379

Total inventories
$
286,474

 
$
356,803

                                                      
(1)
Ending inventory was 181.1 million and 198.2 million gallons of liquid petroleum products as of June 30, 2017 and December 31, 2016, respectively.
 
At June 30, 2017 and December 31, 2016, approximately 92% and 88% of our liquid petroleum products inventory volumes were designated in a fair value hedge relationship, respectively.  Because we generally designate inventory as a hedged item upon purchase, hedged inventory is valued at current market prices with the change in value of the inventory reflected in our unaudited condensed consolidated statements of operations.  Our inventory volumes that are not designated as the hedged item in a fair value hedge relationship are economically hedged to reduce our commodity price exposure.  Inventory not accounted for as a fair value hedge is accounted for at the lower of weighted average cost method or net realizable value.

5. PREPAID AND OTHER CURRENT ASSETS
 
Prepaid and other current assets consist of the following at the dates indicated (in thousands):
 
June 30,
2017
 
December 31,
2016
Prepaid insurance
$
17,326

 
$
7,609

Margin deposits
6,127

 
43,912

Unbilled revenue
2,118

 
1,615

Prepaid taxes
4,630

 
7,357

Vendor prepayments
1,165

 
1,863

Other
11,586

 
4,180

Total prepaid and other current assets
$
42,952

 
$
66,536



9


6. EQUITY INVESTMENTS
 
The following table presents earnings from equity investments for the periods indicated (in thousands): 
 
 
 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
 
Segment
 
2017
 
2016
 
2017
 
2016
VTTI B.V. (1)
Global Marine Terminals
 
$
326

 
$

 
$
8,715

 
$

West Shore Pipe Line Company
Domestic Pipelines & Terminals
 
1,799

 
1,565

 
3,141

 
3,896

Muskegon Pipeline LLC
Domestic Pipelines & Terminals
 
468

 
419

 
802

 
796

Transport4, LLC
Domestic Pipelines & Terminals
 
271

 
226

 
444

 
373

South Portland Terminal LLC
Domestic Pipelines & Terminals
 
256

 
260

 
376

 
493

Total earnings from equity investments
 
 
$
3,120

 
$
2,470

 
$
13,478

 
$
5,558

                                                      
(1) We acquired an indirect 50% equity interest in VTTI in January 2017.  For additional information, see Note 2.

Summarized combined income statement data for our equity method investments are as follows for the periods indicated (amounts represent 100% of investee income statement data in thousands): 
 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
 
2017
 
2016
 
2017
 
2016
Revenue
$
133,355

 
$
20,835

 
$
260,039

 
$
43,046

Operating income
39,784

 
10,073

 
85,429

 
22,606

Net income
23,821

 
6,984

 
53,933

 
15,323

Net income attributable to investee
15,795

 
6,984

 
39,782

 
15,323


7. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

We are exposed to financial market risks, including changes in interest rates and commodity prices, in the course of our normal business operations.  We use derivative instruments to manage such risks.
 
Interest Rate Derivatives

From time to time, we utilize forward-starting interest rate swaps to hedge the variability of the forecasted interest payments on anticipated debt issuances that may result from changes in the benchmark interest rate until the expected debt is issued. When entering into interest rate swap transactions, we become exposed to both credit risk and market risk. We are subject to credit risk when the change in fair value of the swap instrument is positive and the counterparty may fail to perform under the terms of the contract. We are subject to market risk with respect to changes in the underlying benchmark interest rate that impacts the fair value of the swaps. We manage our credit risk by entering into swap transactions only with major financial institutions with investment-grade credit ratings. We manage our market risk by aligning the swap instrument with the existing underlying debt obligation or a specified expected debt issuance, generally associated with the maturity of an existing debt obligation. We designate the swap agreements as cash flow hedges at inception and expect the changes in values to be highly correlated with the changes in value of the underlying borrowings.

During 2016, we entered into seven forward-starting interest rate swaps with a total aggregate notional amount of $350.0 million, which we entered into in anticipation of the issuance of debt on or before January 15, 2018, and eleven forward-starting interest rate swaps with a total aggregate notional amount of $500.0 million, which we entered into in anticipation of the issuance of debt on or before November 15, 2018. We expect to issue new fixed-rate debt on or before January 15, 2018 to repay the $300.0 million of 6.050% notes that are due on January 15, 2018, and on or before November 15, 2018 to repay the $400.0 million of 2.650% notes that are due on November 15, 2018, as well as to fund capital expenditures and other general partnership purposes, although no assurances can be given that the issuance of fixed-rate debt will be possible on acceptable terms.

During the three and six months ended June 30, 2017, unrealized losses of $12.2 million and $10.5 million, respectively, were recorded in accumulated other comprehensive income (“AOCI”) to reflect the change in the fair values of the forward-starting interest rate swaps.

10


Commodity Derivatives

Our Merchant Services segment primarily uses exchange-traded refined petroleum product futures contracts to manage the risk of market price volatility on its refined petroleum product inventories and its physical derivative contracts, which we designated as fair value hedges, with changes in fair value of both the futures contracts and physical inventory reflected in earnings. Our Merchant Services segment also uses exchange-traded refined petroleum contracts to hedge expected future transactions related to certain gasoline inventory that we manage on behalf of a third party, which are designated as cash flow hedges, with the effective portion of the hedge reported in other comprehensive income (“OCI”) and reclassified into earnings when the expected future transaction affects earnings. Any gains or losses incurred on the derivative instruments that are not effective in offsetting changes in fair value or cash flows of the hedged item are recognized immediately in earnings.
Additionally, our Merchant Services segment enters into exchange-traded refined petroleum product futures contracts on behalf of our Domestic Pipelines & Terminals segment to manage the risk of market price volatility on the gasoline-to-butane pricing spreads associated with our butane blending activities managed by a third party. These futures contracts are not designated in a hedge relationship for accounting purposes. Physical forward contracts and futures contracts that have not been designated in a hedge relationship are marked-to-market.
The following table summarizes our commodity derivative instruments outstanding at June 30, 2017 (amounts in thousands of gallons):
 
 
Volume (1)
 
 
Derivative Purpose 
 
Current
 
Long-Term
 
 
Derivatives NOT designated as hedging instruments:
 
 

 
 

 
 
Physical fixed price derivative contracts
 
14,166

 
1,903

 
 
Physical index derivative contracts
 
34,959

 

 
 
Futures contracts for refined petroleum products
 
6,675

 
13,566

 
 
 
 
 
 
 
 
Hedge Type
Derivatives designated as hedging instruments:
 
 

 
 

 
 
Cash flow hedge contracts
 
9,198

 

 
Cash Flow Hedge
Futures contracts for refined petroleum products
 
156,072

 
11,004

 
Fair Value Hedge
                                                     
(1)
Volume represents absolute value of net notional volume position.

Our futures contracts designated as fair value hedges related to our inventory portfolio and our futures contracts designated as cash flow hedges related to refined petroleum products extend to the fourth quarter of 2018.

Effective January 2017, the Chicago Mercantile Exchange (“CME”) amended its rulebook, resulting in the characterization of variation margin transfers as settlement payments, as opposed to adjustments to collateral.  These amendments impacted the accounting treatment of our exchange-traded derivatives contracts, primarily comprised of our futures contracts, for which the CME serves as the central clearing party, and exchange-settled derivatives traded on the over-the-counter (“OTC”) market. As a result, commencing with the first quarter of 2017, we began reducing the corresponding derivative asset and liability balances for our exchange-settled derivative contracts to reflect the settlement of those positions via the variation margin. The variation margin is now considered partial settlement of the derivative contract and will result in realized gains or losses which, prior to January 1, 2017, were classified as unrealized gains or losses on derivatives. In addition, we maintain an initial margin deposit with the broker in an amount sufficient to cover the fair value of our open futures positions. This margin deposit is considered collateral and is included within prepaid and other current assets in our condensed consolidated balance sheets and is not offset against the fair values of our derivative instruments.


11


The following table sets forth the fair value of each classification of derivative instruments and the locations of the derivative instruments on our unaudited condensed consolidated balance sheets at the dates indicated (in thousands):
 
June 30, 2017
 
Derivatives NOT Designated as Hedging Instruments
 
Derivatives Designated as Hedging Instruments
 
Derivative Carrying Value
 
Netting Balance Sheet Adjustment (1)
 
Net Total
Physical fixed price derivative contracts
$
4,518

 
$

 
$
4,518

 
$
(53
)
 
$
4,465

Physical index derivative contracts
331

 

 
331

 
(1
)
 
330

Interest rates derivatives

 
21,252

 
21,252

 

 
21,252

Total current derivative assets
4,849

 
21,252

 
26,101

 
(54
)
 
26,047

Physical fixed price derivative contracts
238

 

 
238

 

 
238

Interest rates derivatives

 
30,894

 
30,894

 

 
30,894

Total non-current derivative assets
238

 
30,894

 
31,132

 

 
31,132

Physical fixed price derivative contracts
(170
)
 

 
(170
)
 
53

 
(117
)
Physical index derivative contracts
(2
)
 

 
(2
)
 
1

 
(1
)
Total current derivative liabilities
(172
)
 

 
(172
)
 
54

 
(118
)
Net derivative assets
$
4,915

 
$
52,146

 
$
57,061

 
$

 
$
57,061

 

 
December 31, 2016
 
Derivatives NOT Designated as Hedging Instruments
 
Derivatives Designated as Hedging Instruments
 
Derivative Carrying Value
 
Netting Balance Sheet Adjustment (1)
 
Net Total
Physical fixed price derivative contracts
$
1,499

 
$

 
$
1,499

 
$
(306
)
 
$
1,193

Physical index derivative contracts
334

 

 
334

 
(1
)
 
333

Futures contracts for refined products
51,431

 
21

 
51,452

 
(51,452
)
 

Total current derivative assets
53,264

 
21

 
53,285

 
(51,759
)
 
1,526

Physical fixed price derivative contracts
164

 

 
164

 
(5
)
 
159

Futures contracts for refined products
226

 

 
226

 
(226
)
 

Interest rates derivatives

 
62,609

 
62,609

 

 
62,609

Total non-current derivative assets
390

 
62,609

 
62,999

 
(231
)
 
62,768

Physical fixed price derivative contracts
(4,517
)
 

 
(4,517
)
 
306

 
(4,211
)
Physical index derivative contracts
(1
)
 

 
(1
)
 
1

 

Futures contracts for refined products
(57,828
)
 
(15,685
)
 
(73,513
)
 
51,452

 
(22,061
)
Total current derivative liabilities
(62,346
)
 
(15,685
)
 
(78,031
)
 
51,759

 
(26,272
)
Physical fixed price derivative contracts
(61
)
 

 
(61
)
 
5

 
(56
)
Futures contracts for refined products
(4,384
)
 

 
(4,384
)
 
226

 
(4,158
)
Total non-current derivative liabilities
(4,445
)
 

 
(4,445
)
 
231

 
(4,214
)
Net derivative (liabilities) assets
$
(13,137
)
 
$
46,945

 
$
33,808

 
$

 
$
33,808

                                                      
(1)
Amounts represent the netting of physical fixed and index contracts’ assets and liabilities when a legal right of offset exists.  Futures contracts are subject to settlement through margin requirements and are additionally presented on a net basis.
 
At June 30, 2017, open refined petroleum product derivative contracts (represented by the physical fixed-price contracts, physical index contracts, and futures contracts for refined products contracts noted above) varied in duration in the overall portfolio, but did not extend beyond December 2018.  In addition, at June 30, 2017, we had refined petroleum product inventories that we intend to use to satisfy a portion of the physical derivative contracts.
 

12


The gains and losses on our derivative instruments recognized in income were as follows for the periods indicated (in thousands):
 
 
 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
 
Location
 
2017
 
2016
 
2017
 
2016
Derivatives NOT designated as hedging instruments:
 
 
 

 
 

 
 

 
 

Physical fixed price derivative contracts
Product sales
 
$
4,465

 
$
(5,309
)
 
$
6,952

 
$
(7,564
)
Physical index derivative contracts
Product sales
 
17

 
15

 
1

 
(12
)
Physical fixed price derivative contracts
Cost of product sales
 
(549
)
 
2,371

 
(82
)
 
7,486

Physical index derivative contracts
Cost of product sales
 
175

 
(51
)
 
338

 
163

Futures contracts for refined products
Cost of product sales
 
(710
)
 
6,115

 
(800
)
 
4,633

 
 
 
 
 
 
 
 
 
 
Derivatives designated as fair value hedging instruments:
 
 
 
 
 

 
 

 
 

Futures contracts for refined products
Cost of product sales
 
$
19,274

 
$
(28,568
)
 
$
52,851

 
$
(26,955
)
Physical inventory - hedged items
Cost of product sales
 
(20,349
)
 
31,681

 
(40,700
)
 
40,007

 
 
 
 
 
 
 
 
 
 
Ineffectiveness excluding the time value component on fair value hedging instruments:
 
 
 
 
 

 
 

 
 

Fair value hedge ineffectiveness (excluding time value)
Cost of product sales
 
$
(1,671
)
 
$
(660
)
 
$
(2,630
)
 
$
(13
)
Time value excluded from hedge assessment
Cost of product sales
 
596

 
3,773

 
14,781

 
13,065

Net (loss) gain in income
 
 
$
(1,075
)
 
$
3,113

 
$
12,151

 
$
13,052


The change in value recognized in OCI and the gains and losses reclassified from AOCI to income attributable to our derivative instruments designated as cash flow hedges were as follows for the periods indicated (in thousands):
 
(Loss) Gain Recognized in OCI on Derivatives for the
 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
 
2017
 
2016
 
2017
 
2016
Derivatives designated as cash flow hedging instruments:
 

 
 

 
 

 
 

Interest rate contracts
$
(12,173
)
 
$

 
$
(10,463
)
 
$

Commodity derivatives
2,957

 

 
4,232

 

Total
$
(9,216
)
 
$

 
$
(6,231
)
 
$


 
 
 
(Loss) Gain Reclassified from AOCI to Income (Effective Portion) for the
 
 
 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
 
Location
 
2017
 
2016
 
2017
 
2016
Derivatives designated as cash flow hedging instruments:
 
 
 

 
 

 
 

 
 

Interest rate contracts
Interest and debt expense
 
$
(3,037
)
 
$
(3,037
)
 
$
(6,075
)
 
$
(6,075
)
Commodity derivatives
Product Sales
 

 

 

 
1,266

Total
 
 
$
(3,037
)
 
$
(3,037
)
 
$
(6,075
)
 
$
(4,809
)

Over the next twelve months, we expect to reclassify $10.5 million of net losses attributable to interest rate derivatives from AOCI to earnings as an increase to interest and debt expense. These net losses consist of $11.7 million of amortization of hedge losses on our settled forward-starting interest rate swaps, partially offset by $1.2 million of amortization of forecasted hedge gains on our forward-starting interest swaps that we expect to settle in late 2017. Additionally, $4.2 million of unrealized gains for refined petroleum products derivatives designated as cash flow hedges at June 30, 2017 is estimated to be realized and reclassified from AOCI to product sales over the next twelve months. The ineffective portion of the change in fair value of cash flow hedges was not material for the three and six months ended June 30, 2017.


13


8. FAIR VALUE MEASUREMENTS
 
We categorize our financial assets and liabilities using the three-tier fair value hierarchy as follows:
 
Recurring
 
The following table sets forth financial assets and liabilities measured at fair value on a recurring basis, as of the measurement dates indicated, and the basis for that measurement, by level within the fair value hierarchy (in thousands):
 
June 30, 2017
 
December 31, 2016
 
Level 1
 
Level 2
 
Level 1
 
Level 2
Financial assets:
 

 
 

 
 

 
 

Physical fixed price derivative contracts
$

 
$
4,756

 
$

 
$
1,352

Physical index derivative contracts

 
331

 

 
333

Interest rate derivatives

 
52,146

 

 
62,609

 
 
 
 
 
 
 
 
Financial liabilities:
 

 
 

 
 

 
 

Physical fixed price derivative contracts

 
(170
)
 

 
(4,267
)
Physical index derivative contracts

 
(2
)
 

 

Futures contracts for refined products

 

 
(26,219
)
 

Fair value
$

 
$
57,061

 
$
(26,219
)
 
$
60,027

 
The values of the Level 1 derivative assets and liabilities were based on quoted market prices obtained from the New York Mercantile Exchange.
 
The values of the Level 2 interest rate derivatives were determined using fair value estimates obtained from our counterparties, which are verified using other available market data, including cash flow models which incorporate market inputs, including the implied forward LIBOR yield curve for the same period as the future interest rate swap settlements. Credit value adjustments (“CVAs”), which are used to reflect the potential nonperformance risk of our counterparties, are considered in the fair value assessment of interest rate derivatives. We determined that the impact of CVAs is not significant to the overall valuation of interest rate derivatives.

The values of the Level 2 commodity derivative contracts were calculated using market approaches based on observable market data inputs, including published commodity pricing data, which is verified against other available market data, and market interest rate and volatility data.  Level 2 physical fixed price derivative assets are net of CVAs determined using an expected cash flow model, which incorporates assumptions about the credit risk of the derivative contracts based on the historical and expected payment history of each customer, the amount of product contracted for under the agreement and the customer’s historical and expected purchase performance under each contract.  The Merchant Services segment determined CVAs are appropriate because few of the Merchant Services segment’s customers entering into these derivative contracts are large organizations with nationally recognized credit ratings.  The CVAs were nominal as of June 30, 2017 and December 31, 2016. As of June 30, 2017 and December 31, 2016, the Merchant Services segment did not hold any net liability derivative position containing credit contingent features.
 
Financial instruments included in current assets and current liabilities are reported in the unaudited condensed consolidated balance sheets at amounts which approximate fair value due to the relatively short period to maturity of these financial instruments.  The fair values of our fixed-rate debt were estimated by observing market trading prices and by comparing the historic market prices of our publicly issued debt with the market prices of the publicly issued debt of other MLPs with similar credit ratings and terms.  The fair values of our variable-rate debt are their carrying amounts, as the carrying amount reasonably approximates fair value due to the variability of the interest rates.  The carrying value and fair value of our debt, using Level 2 input values, were as follows at the dates indicated (in thousands):
 
June 30, 2017
 
December 31, 2016
 
Carrying
Amount
 
Fair Value
 
Carrying
Amount
 
Fair Value
Fixed-rate debt
$
3,970,383

 
$
4,145,757

 
$
3,967,695

 
$
4,083,488

Variable-rate debt
836,820

 
837,260

 
250,000

 
250,000

Total debt
$
4,807,203

 
$
4,983,017

 
$
4,217,695

 
$
4,333,488


14


 
We recognize transfers between levels within the fair value hierarchy as of the beginning of the reporting period.  We did not have any transfers between Level 1 and Level 2 during the six months ended June 30, 2017 and 2016, respectively.
 
Non-Recurring
 
Certain nonfinancial assets and liabilities are measured at fair value on a nonrecurring basis and are subject to fair value adjustments in certain circumstances, such as when there is evidence of impairment.  For the three and six months ended June 30, 2017 and 2016, there were no fair value adjustments related to such assets or liabilities reflected in our unaudited condensed consolidated financial statements.

9. UNIT-BASED COMPENSATION PLANS
 
We award unit-based compensation to employees and directors primarily under the Buckeye Partners, L.P. 2013 Long-Term Incentive Plan (as amended and restated effective June 6, 2017, the “LTIP”).  We formerly awarded options to acquire LP Units to employees pursuant to the Buckeye Partners, L.P. Unit Option and Distribution Equivalent Plan (the “Option Plan”).  These compensation plans are further discussed below.
 
We recognized compensation expense related to the LTIP and the Option Plan, of $9.0 million and $7.7 million for the three months ended June 30, 2017 and 2016, respectively. For the six months ended June 30, 2017 and 2016, we recognized compensation expense of $17.7 million and $14.1 million, respectively.

LTIP
 
As of June 30, 2017, there were 2,645,369 LP Units available for issuance under the LTIP.
 
Deferral Plan under the LTIP
 
We also maintain the Buckeye Partners, L.P. Unit Deferral and Incentive Plan, as amended and restated effective February 4, 2015 (the “Deferral Plan”), pursuant to which we issue phantom and matching units under the LTIP to certain employees in lieu of a portion of the cash payments such employees would be entitled to receive under the Buckeye Partners, L.P. Annual Incentive Compensation Plan, as amended and restated, effective January 1, 2012.  At December 31, 2016 and 2015, actual compensation awards deferred under the Deferral Plan were $4.4 million and $3.1 million, for which 145,138 and 139,526 phantom units (including matching units) were granted during the six months ended June 30, 2017 and the year ended December 31, 2016, respectively.  These grants are included as granted in the LTIP activity table below.
 
Awards under the LTIP
 
During the six months ended June 30, 2017, the Compensation Committee of the Board granted 311,205 phantom units to employees (including the 145,138 phantom units granted pursuant to the Deferral Plan, as discussed above), 18,000 phantom units to independent directors of Buckeye GP and 211,144 performance units to employees.


15


The following table sets forth the LTIP activity for the periods indicated (in thousands, except per unit amounts):
 
Number of
LP Units
 
Weighted
Average
Grant Date
Fair Value
per LP Unit (1)
Unvested at January 1, 2017
1,296

 
$
63.54

Granted (2)
540

 
70.08

Performance adjustment (3)
32

 
71.50

Vested
(324
)
 
70.09

Forfeited
(28
)
 
64.45

Unvested at June 30, 2017
1,516

 
$
64.61

                                                      
(1)
Determined by dividing the aggregate grant date fair value of awards by the number of awards issued. The weighted-average grant date fair value per LP Unit for forfeited and vested awards is determined before an allowance for forfeitures.
(2)
Includes both phantom and performance awards. Performance awards are granted at a target amount but, depending on our performance during the vesting period with respect to certain pre-established goals, the number of LP Units issued upon vesting of such performance awards can be greater or less than the target amount.
(3)
Represents the LP Units issued in excess of target amounts for performance awards that vested during the six months ended June 30, 2017 as a result of our above target performance with respect to applicable performance goals.

At June 30, 2017, $48.3 million of compensation expense related to the LTIP is expected to be recognized over a weighted average period of 2.0 years for the above awards.
 
Unit Option Plan
 
The following is a summary of the changes in the options outstanding (all of which are vested) under the Option Plan for the periods indicated (in thousands, except per unit amounts): 
 
Number of
LP Units
 
Weighted
Average
Strike Price
per LP Unit
 
Weighted
Average
Remaining
Contractual
Term (in years)
 
Aggregate
Intrinsic
Value (1)
Outstanding at January 1, 2017
10

 
$
50.36

 
0.1

 
$
151

Exercised
(10
)
 

 
 

 
 

Outstanding at June 30, 2017

 

 

 
$

 
 
 
 
 
 
 
 
Exercisable at June 30, 2017

 
$

 

 
$

                                                      
(1)
Aggregate intrinsic value reflects fully vested LP Unit options at the date indicated. Intrinsic value is determined by calculating the difference between our closing LP Unit price on the last trading day in June 2017 and the exercise price, multiplied by the number of exercisable, in-the-money options.
 
The total intrinsic value of options exercised during each of the