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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549 
 
 
 
 
 
Form 10-Q 
 
 
 
 
 

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
Commission file number 1-12295
 
 
 
 
 
GENESIS ENERGY, L.P.
(Exact name of registrant as specified in its charter)
 
 
 
 
 

Delaware
76-0513049
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
 
 
919 Milam, Suite 2100,
Houston, TX
77002
(Address of principal executive offices)
(Zip code)
Registrant’s telephone number, including area code: (713) 860-2500
 
 
 
 
 
 
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 during the preceding 12 months (or 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, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer  x
 
Accelerated filer  ¨
Non-accelerated filer  ¨ (Do not check if a smaller reporting company)
 
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. ☐

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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2) of the Exchange Act).    Yes  ¨    No  ý
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. There were 122,539,221 Class A Common Units and 39,997 Class B Common Units outstanding as of August 2, 2017.


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GENESIS ENERGY, L.P.
TABLE OF CONTENTS
 

 
 
Page
 
 
Item 1.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Item 2.
Item 3.
Item 4.
 
 
Item 1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.

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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
GENESIS ENERGY, L.P.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except units)
 
 
June 30, 2017
 
December 31, 2016
ASSETS
 
 
 
CURRENT ASSETS:
 
 
 
Cash and cash equivalents
$
10,077

 
$
7,029

Accounts receivable - trade, net
217,834

 
224,682

Inventories
68,787

 
98,587

Other
31,012

 
29,271

Total current assets
327,710

 
359,569

FIXED ASSETS, at cost
4,843,007

 
4,763,396

Less: Accumulated depreciation
(629,193
)
 
(548,532
)
Net fixed assets
4,213,814

 
4,214,864

NET INVESTMENT IN DIRECT FINANCING LEASES, net of unearned income
129,164

 
132,859

EQUITY INVESTEES
390,326

 
408,756

INTANGIBLE ASSETS, net of amortization
193,389

 
204,887

GOODWILL
325,046

 
325,046

OTHER ASSETS, net of amortization
60,927

 
56,611

TOTAL ASSETS
$
5,640,376

 
$
5,702,592

LIABILITIES AND PARTNERS’ CAPITAL
 
 
 
CURRENT LIABILITIES:
 
 
 
Accounts payable - trade
$
117,100

 
$
119,841

Accrued liabilities
120,096

 
140,962

Total current liabilities
237,196

 
260,803

SENIOR SECURED CREDIT FACILITY
1,211,000

 
1,278,200

SENIOR UNSECURED NOTES, net of debt issuance costs
1,816,259

 
1,813,169

DEFERRED TAX LIABILITIES
26,249

 
25,889

OTHER LONG-TERM LIABILITIES
199,835

 
204,481

PARTNERS’ CAPITAL:
 
 
 
Common unitholders, 122,579,218 and 117,979,218 units issued and outstanding at June 30, 2017 and December 31, 2016, respectively
2,159,698

 
2,130,331

Noncontrolling interests
(9,861
)
 
(10,281
)
Total partners' capital
2,149,837

 
2,120,050

TOTAL LIABILITIES AND PARTNERS’ CAPITAL
$
5,640,376

 
$
5,702,592

The accompanying notes are an integral part of these Unaudited Condensed Consolidated Financial Statements.


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GENESIS ENERGY, L.P.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per unit amounts)
 
 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
 
2017
 
2016
 
2017
 
2016
REVENUES:
 
 
 
 
 
 
 
Offshore pipeline transportation services
77,638

 
78,994

 
162,766

 
155,120

Refinery services
43,068

 
41,324

 
88,114

 
83,860

Marine transportation
53,202

 
52,609

 
103,504

 
104,645

Onshore facilities and transportation
232,815

 
273,049

 
467,830

 
480,765

Total revenues
406,723

 
445,976

 
822,214

 
824,390

COSTS AND EXPENSES:
 
 
 
 
 
 
 
Onshore facilities and transportation product costs
188,395

 
227,998

 
380,488

 
390,391

Onshore facilities and transportation operating costs
33,939

 
24,122

 
56,178

 
49,498

Marine transportation operating costs
38,949

 
34,430

 
76,191

 
67,452

Refinery services operating costs
26,606

 
21,579

 
53,970

 
42,564

Offshore pipeline transportation operating costs
18,124

 
22,676

 
35,992

 
40,610

General and administrative
9,338

 
11,283

 
19,314

 
23,504

Depreciation and amortization
56,609

 
55,900

 
112,721

 
102,535

Gain on sale of assets
(26,684
)
 
—

 
(26,684
)
 
—

Total costs and expenses
345,276

 
397,988

 
708,170

 
716,554

OPERATING INCOME
61,447

 
47,988

 
114,044

 
107,836

Equity in earnings of equity investees
10,426

 
12,157

 
21,761

 
22,874

Interest expense
(37,990
)
 
(35,535
)
 
(74,729
)
 
(69,922
)
Income before income taxes
33,883

 
24,610

 
61,076

 
60,788

Income tax expense
(303
)
 
(1,009
)
 
(558
)
 
(2,010
)
NET INCOME
33,580

 
23,601

 
60,518

 
58,778

Net loss attributable to noncontrolling interests
153

 
126

 
305

 
252

NET INCOME ATTRIBUTABLE TO GENESIS ENERGY, L.P.
$
33,733

 
$
23,727

 
$
60,823

 
$
59,030

NET INCOME PER COMMON UNIT:
 
 
 
 
 
 
 
Basic and Diluted
$
0.28

 
$
0.22

 
$
0.50

 
$
0.54

WEIGHTED AVERAGE OUTSTANDING COMMON UNITS:
 
 
 
 
 
 
 
Basic and Diluted
122,579

 
109,979

 
120,495

 
109,979

The accompanying notes are an integral part of these Unaudited Condensed Consolidated Financial Statements.


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GENESIS ENERGY, L.P.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF PARTNERS’ CAPITAL
(In thousands)
 
 
Number of
Common Units
 
Partners’ Capital
 
Noncontrolling Interest
 
Total
Partners’ capital, January 1, 2017
117,979

 
$
2,130,331

 
$
(10,281
)
 
$
2,120,050

Net income (loss)
—

 
60,823

 
(305
)
 
60,518

Cash distributions to partners
—

 
(171,993
)
 
—

 
(171,993
)
Cash contributions from noncontrolling interests
—

 
—

 
725

 
725

Issuance of common units for cash, net
4,600

 
140,537

 
—

 
140,537

Partners' capital, June 30, 2017
122,579

 
$
2,159,698

 
$
(9,861
)
 
$
2,149,837

 
Number of
Common Units
 
Partners’ Capital
 
Noncontrolling Interest
 
Total
Partners’ capital, January 1, 2016
109,979

 
$
2,029,101

 
$
(8,350
)
 
$
2,020,751

Net income
—

 
59,030

 
(252
)
 
58,778

Cash distributions to partners
—

 
(146,048
)
 
—

 
(146,048
)
Partners' capital, June 30, 2016
109,979

 
$
1,942,083

 
$
(8,602
)
 
$
1,933,481

The accompanying notes are an integral part of these Unaudited Condensed Consolidated Financial Statements.


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GENESIS ENERGY, L.P.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
 
 
Six Months Ended
June 30,
 
2017
 
2016
CASH FLOWS FROM OPERATING ACTIVITIES:
 
 
 
Net income
$
60,518

 
$
58,778

Adjustments to reconcile net income to net cash provided by operating activities -
 
 
 
Depreciation and amortization
112,721

 
102,535

Provision for leased items no longer in use
12,589

 
—

Gain on sale of assets
(26,684
)
 
—

Amortization of debt issuance costs and discount
5,260

 
4,992

Amortization of unearned income and initial direct costs on direct financing leases
(6,958
)
 
(7,274
)
Payments received under direct financing leases
10,334

 
10,333

Equity in earnings of investments in equity investees
(21,761
)
 
(22,874
)
Cash distributions of earnings of equity investees
29,868

 
32,778

Non-cash effect of equity-based compensation plans
(1,457
)
 
4,255

Deferred and other tax liabilities
358

 
1,409

Unrealized loss on derivative transactions
561

 
1,313

Other, net
292

 
7,668

Net changes in components of operating assets and liabilities (Note 11)
8,313

 
(90,241
)
Net cash provided by operating activities
183,954

 
103,672

CASH FLOWS FROM INVESTING ACTIVITIES:
 
 
 
Payments to acquire fixed and intangible assets
(126,580
)
 
(247,416
)
Cash distributions received from equity investees - return of investment
10,323

 
11,851

Investments in equity investees
—

 
(1,135
)
Acquisitions
(759
)
 
(25,394
)
Contributions in aid of construction costs
124

 
8,940

Proceeds from asset sales
38,237

 
3,183

Other, net
—

 
107

Net cash used in investing activities
(78,655
)
 
(249,864
)
CASH FLOWS FROM FINANCING ACTIVITIES:
 
 
 
Borrowings on senior secured credit facility
410,700

 
631,900

Repayments on senior secured credit facility
(477,900
)
 
(341,100
)
Debt issuance costs
(7,536
)
 
(1,539
)
Issuance of common units for cash, net
140,537

 
—

Contributions from noncontrolling interests
725

 
—

Distributions to common unitholders
(171,993
)
 
(146,021
)
Other, net
3,216

 
607

Net cash provided by (used in) financing activities
(102,251
)
 
143,847

Net increase (decrease) in cash and cash equivalents
3,048

 
(2,345
)
Cash and cash equivalents at beginning of period
7,029

 
10,895

Cash and cash equivalents at end of period
$
10,077

 
$
8,550

The accompanying notes are an integral part of these Unaudited Condensed Consolidated Financial Statements.

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GENESIS ENERGY, L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS



1. Organization and Basis of Presentation and Consolidation
Organization
We are a growth-oriented master limited partnership formed in Delaware in 1996 and focused on the midstream segment of the crude oil and natural gas industry in the Gulf Coast region of the United States, Wyoming and the Gulf of Mexico. We have a diverse portfolio of assets, including pipelines, offshore hub and junction platforms, refinery-related plants, storage tanks and terminals, railcars, rail loading and unloading facilities, barges and other vessels, and trucks. We are owned 100% by our limited partners. Genesis Energy, LLC, our general partner, is a wholly-owned subsidiary. Our general partner has sole responsibility for conducting our business and managing our operations. We conduct our operations and own our operating assets through our subsidiaries and joint ventures.
In the fourth quarter of 2016, we reorganized our operating segments as a result of the way our Chief Executive Officer, who is our chief operating decision maker, evaluates the performance of operations, develops strategy and allocates resources. The results of our onshore pipeline transportation segment, formerly reported under its own segment, are now reported in our onshore facilities and transportation segment. The onshore facilities and transportation segment was formerly named as our supply and logistics segment. This segment has been renamed in the second quarter of 2017 to more accurately describe the nature of its operations. These changes are consistent with the increasingly integrated nature of our onshore operations.
As a result of the above changes, we currently manage our businesses through four divisions that constitute our reportable segments - offshore pipeline transportation, refinery services, marine transportation, and onshore facilities and transportation. Our disclosures related to prior periods have been recast to reflect our reorganized segments.
These four divisions that constitute our reportable segments consist of the following:
•
Offshore pipeline transportation and processing of crude oil and natural gas in the Gulf of Mexico;
•
Refinery services involving processing of high sulfur (or “sour”) gas streams for refineries to remove the sulfur, and selling the related by-product, sodium hydrosulfide (or “NaHS”, commonly pronounced "nash");
•
Marine transportation to provide waterborne transportation of petroleum products and crude oil throughout North America; and
•
Onshore facilities and transportation, which include terminaling, blending, storing, marketing, and transporting crude oil, petroleum products, and CO2.
Basis of Presentation and Consolidation
The accompanying Unaudited Condensed Consolidated Financial Statements include Genesis Energy, L.P. and its subsidiaries, including our general partner, Genesis Energy, LLC.
Our results of operations for the interim periods shown in this report are not necessarily indicative of results to be expected for the fiscal year. The Condensed Consolidated Financial Statements included herein have been prepared by us without audit pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, they reflect all adjustments (which consist solely of normal recurring adjustments) that are, in the opinion of management, necessary for a fair presentation of the financial results for interim periods. Certain information and notes normally included in annual financial statements prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) have been condensed or omitted pursuant to such rules and regulations. However, we believe that the disclosures are adequate to make the information presented not misleading when read in conjunction with the information contained in the periodic reports we file with the SEC pursuant to the Securities Exchange Act of 1934, including the Consolidated Financial Statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2016.
Except per unit amounts, or as noted within the context of each footnote disclosure, the dollar amounts presented in the tabular data within these footnote disclosures are stated in thousands of dollars.
2. Recent Accounting Developments
Recently Issued
In May 2014, the FASB issued revised guidance on revenue from contracts with customers that will supersede most current revenue recognition guidance, including industry-specific guidance. The core principle of the revenue model is that an entity will recognize revenue to depict the transfer of 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. The new standard provides a

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five-step analysis for transactions to determine when and how revenue is recognized. The guidance permits the use of either a full retrospective or a modified retrospective transition method. In July 2015, the FASB approved a one year deferral of the effective date of this standard to December 15, 2017 for annual reporting periods beginning after that date. The FASB also approved early adoption of the standard, but not before the original effective date of December 15, 2016. Our process of evaluating the impact of this guidance on each type of revenue contract entered into with customers is ongoing, but nearing completion. This process includes regular involvement from our implementation team in determining any significant impact on accounting treatment, processes, internal controls, and disclosures. While we do not believe there will be a material impact to our revenues upon adoption based on our preliminary assessment, we continue to evaluate the impacts of our pending adoption of this guidance until finalized conclusions are determined and we are still in the process of confirming which transition method to apply. We plan to confirm the transition method in the third quarter of 2017.
In July 2015, the FASB issued guidance modifying the accounting for inventory. Under this guidance, the measurement principle for inventory will change from lower of cost or market value to lower of cost or net realizable value. The guidance defines net realizable value as the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. The guidance is effective for reporting periods after December 15, 2016, with early adoption permitted. We have adopted this guidance as of January 1, 2017 with no material impact on our consolidated financial statements.
In February 2016, the FASB issued guidance to improve the transparency and comparability among companies by requiring lessees to recognize a lease liability and a corresponding lease asset for virtually all lease contracts. The guidance also requires additional disclosure about leasing arrangements. The guidance is effective for interim and annual periods beginning after December 15, 2018 and requires a modified retrospective approach to adoption. Early adoption is permitted. We are currently evaluating this guidance.
In August 2016, the FASB issued ASU 2016-15, Classification of Certain Cash Receipts and Cash Payments. ASU 2016-15 addresses how certain cash receipts and cash payments are presented and classified in the statement of cash flows under Topic 230, Statement of Cash flow, and other Topics. ASU 2016-15 is effective for annual reporting periods, and interim periods therein, beginning after December 15, 2017. We do not expect the adoption of this guidance to have a material impact on our consolidated financial statements.
3. Inventories
The major components of inventories were as follows:
 
June 30,
2017
 
December 31,
2016
Petroleum products
$
11,703

 
$
11,550

Crude oil
41,816

 
73,133

Caustic soda
5,723

 
4,593

NaHS
9,524

 
9,304

Other
21

 
7

Total
$
68,787

 
$
98,587

Inventories are valued at the lower of cost or net realizable value. The net realizable value of inventories were below recorded costs by approximately $0.1 million as of June 30, 2017 without similar adjustments required as of December 31, 2016; therefore we reduced the value of inventory in our Condensed Consolidated Financial Statements for this difference in 2017.

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GENESIS ENERGY, L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


4. Fixed Assets
Fixed Assets
Fixed assets consisted of the following:
 
 
June 30,
2017
 
December 31,
2016
Crude oil pipelines and natural gas pipelines and related assets
$
2,984,884

 
$
2,901,202

Onshore facilities, machinery, and equipment
762,610

 
427,658

Transportation equipment
17,857

 
17,543

Marine vessels
866,584

 
863,199

Land, buildings and improvements
102,841

 
55,712

Office equipment, furniture and fixtures
9,681

 
9,654

Construction in progress
42,882

 
440,225

Other
55,668

 
48,203

Fixed assets, at cost
4,843,007

 
4,763,396

Less: Accumulated depreciation
(629,193
)
 
(548,532
)
Net fixed assets
$
4,213,814

 
$
4,214,864

Our depreciation expense for the periods presented was as follows:
 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
 
2017
 
2016
 
2017
 
2016
Depreciation expense
$
50,397

 
$
48,807

 
$
100,321

 
$
88,519

During the period ending June 30, 2017, we sold certain non-core natural gas gathering and platform assets in the Gulf of Mexico that resulted in a gain of $26.7 million.


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GENESIS ENERGY, L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


Asset Retirement Obligations
We record AROs in connection with legal requirements to perform specified retirement activities under contractual arrangements and/or governmental regulations.
The following table presents information regarding our AROs since December 31, 2016:
ARO liability balance, December 31, 2016
$
213,726

Accretion expense
5,581

Change in estimate
729

Divestitures
(7,649
)
Settlements
(12,553
)
Other
240

ARO liability balance, June 30, 2017
$
200,074

Of the ARO balances disclosed above, $20.1 million and $22.4 million is included as current in "Accrued liabilities" on our Unaudited Condensed Consolidated Balance Sheet as of June 30, 2017 and December 31, 2016, respectively. The remainder of the ARO liability as of June 30, 2017 and December 31, 2016 is included in "Other long-term liabilities" on our Unaudited Condensed Consolidated Balance Sheet.
With respect to our AROs, the following table presents our forecast of accretion expense for the periods indicated:
Remainder of
2017
$
5,553

 
2018
$
9,393

 
2019
$
8,627

 
2020
$
9,209

 
2021
$
9,830

Certain of our unconsolidated affiliates have AROs recorded at June 30, 2017 relating to contractual agreements and regulatory requirements. These amounts are immaterial to our Consolidated Financial Statements.
5. Equity Investees
We account for our ownership in our joint ventures under the equity method of accounting. The price we pay to acquire an ownership interest in a company may exceed or be less than the underlying book value of the capital accounts we acquire. Such excess cost amounts are included within the carrying values of our equity investees. At June 30, 2017 and December 31, 2016, the unamortized excess cost amounts totaled $390.3 million and $398.1 million, respectively. We amortize the excess cost as a reduction in equity earnings in a manner similar to depreciation.
The following table presents information included in our Unaudited Condensed Consolidated Financial Statements related to our equity investees.
 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
 
2017
 
2016
 
2017
 
2016
Genesis’ share of operating earnings
$
14,368

 
$
16,139

 
$
29,645

 
$
30,837

Amortization of excess purchase price
(3,942
)
 
(3,982
)
 
(7,884
)
 
(7,963
)
Net equity in earnings
$
10,426

 
$
12,157

 
$
21,761

 
$
22,874

Distributions received
$
19,566

 
$
23,298

 
$
40,191

 
$
44,629


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GENESIS ENERGY, L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


The following tables present the unaudited balance sheet and income statement information (on a 100% basis) for Poseidon Oil Pipeline Company (which is our most significant equity investment):
 
June 30,
2017
 
December 31,
2016
BALANCE SHEET DATA:
 
 
 
Assets
 
 
 
Current assets
$
16,907

 
$
17,111

Fixed assets, net
224,996

 
232,736

Other assets
1,287

 
861

Total assets
$
243,190

 
$
250,708

Liabilities and equity
 
 
 
Current liabilities
$
20,876

 
$
20,727

Other liabilities
227,762

 
219,644

Equity
(5,448
)
 
10,337

Total liabilities and equity
$
243,190

 
$
250,708


 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
 
2017
 
2016
 
2017
 
2016
INCOME STATEMENT DATA:
 
 
 
 
 
 
 
Revenues
$
28,501

 
$
31,010

 
$
57,406

 
$
59,439

Operating income
$
20,038

 
$
23,527

 
$
40,825

 
$
45,059

Net income
$
18,580

 
$
22,385

 
$
38,015

 
$
42,749


Poseidon's revolving credit facility
Borrowings under Poseidon’s revolving credit facilities, which was amended and restated in February 2015, are primarily used to fund spending on capital projects. The February 2015 credit facility is non-recourse to Poseidon’s owners and secured by substantially all of Poseidon's assets. The February 2015 credit facility contains customary covenants such as restrictions on debt levels, liens, guarantees, mergers, sale of assets and distributions to owners. A breach of any of these covenants could result in acceleration of the maturity date of Poseidon’s debt. Poseidon was in compliance with the terms of its credit agreement for all periods presented in these Unaudited Combined Financial Statements.

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GENESIS ENERGY, L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


6. Intangible Assets
The following table summarizes the components of our intangible assets at the dates indicated:
 
 
June 30, 2017
 
December 31, 2016
 
Gross
Carrying
Amount
 
Accumulated
Amortization
 
Carrying
Value
 
Gross
Carrying
Amount
 
Accumulated
Amortization
 
Carrying
Value
Refinery Services:
 
 
 
 
 
 
 
 
 
 
 
Customer relationships
$
94,654

 
$
91,125

 
$
3,529

 
$
94,654

 
$
89,756

 
$
4,898

Licensing agreements
38,678

 
35,366

 
3,312

 
38,678

 
34,204

 
4,474

Segment total
133,332

 
126,491

 
6,841

 
133,332

 
123,960

 
9,372

Onshore Facilities & Transportation:
 
 
 
 
 
 
 
 
 
 
 
Customer relationships
35,430

 
34,379

 
1,051

 
35,430

 
33,676

 
1,754

Intangibles associated with lease
13,260

 
4,696

 
8,564

 
13,260

 
4,459

 
8,801

Segment total
48,690

 
39,075

 
9,615

 
48,690

 
38,135

 
10,555

Marine contract intangibles
27,000

 
9,000

 
18,000

 
27,000

 
6,300

 
20,700

Offshore pipeline contract intangibles
158,101

 
15,949

 
142,152

 
158,101

 
11,788

 
146,313

Other
28,816

 
12,035

 
16,781

 
28,569

 
10,622

 
17,947

Total
$
395,939

 
$
202,550

 
$
193,389

 
$
395,692

 
$
190,805

 
$
204,887

Our amortization of intangible assets for the periods presented was as follows:
 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
 
2017
 
2016
 
2017
 
2016
Amortization of intangible assets
$
5,872

 
$
6,040

 
$
11,744

 
$
12,032

We estimate that our amortization expense for the next five years will be as follows:
Remainder of
2017
$
11,842

 
2018
$
21,513

 
2019
$
17,178

 
2020
$
16,241

 
2021
$
10,634


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GENESIS ENERGY, L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


7. Debt
Our obligations under debt arrangements consisted of the following:
 
June 30, 2017
 
December 31, 2016
 
Principal
 
Unamortized Discount and Debt Issuance Costs
 
Net Value
 
Principal
 
Unamortized Discount and Debt Issuance Costs
 
Net Value
Senior secured credit facility
$
1,211,000

 
$
—

 
$
1,211,000

 
$
1,278,200

 
$
—

 
$
1,278,200

6.000% senior unsecured notes due May 2023
400,000

 
6,224

 
393,776

 
400,000

 
6,758

 
393,242

5.750% senior unsecured notes due February 2021
350,000

 
3,653

 
346,347

 
350,000

 
4,163

 
345,837

5.625% senior unsecured notes due June 2024
350,000

 
6,165

 
343,835

 
350,000

 
6,614

 
343,386

6.750% senior unsecured notes due August 2022
750,000

 
17,699

 
732,301

 
750,000

 
19,296

 
730,704

Total long-term debt
$
3,061,000

 
$
33,741

 
$
3,027,259

 
$
3,128,200

 
$
36,831

 
$
3,091,369

As of June 30, 2017, we were in compliance with the financial covenants contained in our credit agreement and senior unsecured notes indentures.
Senior Secured Credit Facility
In May 2017, we amended our credit agreement to, among other things, (i) extend the maturity date of the credit facility to May 9, 2022 (provided, that if Genesis does not refinance or repay in full its 5.750% senior notes due 2021 on or prior to November 15, 2020, the maturity date will be November 15, 2020), (ii) change the maximum consolidated leverage ratio to 5.75 to 1.0 for the second quarter of 2017 through the second quarter of 2018, 5.50 to 1.0 for the third quarter of 2018 through the fourth quarter of 2019, 5.25 to 1.0 for the first quarter of 2020 through the fourth quarter of 2020 and 5.00 to 1.0 from the first quarter of 2021 and all periods thereafter, and (iii) add an additional level to the leverage-based pricing grid used to calculate the applicable margin for base rate loans and LIBOR loans to account for changes to the maximum consolidated leverage ratio.
The key terms for rates under our $1.7 billion senior secured credit facility, which are dependent on our leverage ratio (as defined in the credit agreement), are as follows:
•The applicable margin varies from 1.50% to 3.00% on Eurodollar borrowings and from 0.50% to 2.00% on alternate base rate borrowings.
•Letter of credit fees range from 1.50% to 3.00%
•The commitment fee on the unused committed amount will range from 0.25% to 0.50%.
•The accordion feature is $300.0 million, giving us the ability to expand the size of the facility up to $2.0 billion for acquisitions or growth projects, subject to lender consent.
At June 30, 2017, we had $1.2 billion borrowed under our $1.7 billion credit facility, with $47.6 million of the borrowed amount designated as a loan under the inventory sublimit. Our credit agreement allows up to $100.0 million of the capacity to be used for letters of credit, of which $1.0 million was outstanding at June 30, 2017. Due to the revolving nature of loans under our credit facility, additional borrowings and periodic repayments and re-borrowings may be made until the maturity date. The total amount available for borrowings under our credit facility at June 30, 2017 was $488.0 million.
8. Partners’ Capital and Distributions
At June 30, 2017, our outstanding common units consisted of 122,539,221 Class A units and 39,997 Class B units.
On March 24, 2017, we issued 4,600,000 Class A common units in a public offering at a price of $30.65 per unit, which included the exercise by the underwriters of an option to purchase up to 600,000 additional common units from us. We received proceeds, net of offering costs, of approximately $140.5 million from that offering.

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GENESIS ENERGY, L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


Distributions
We paid or will pay the following distributions in 2016 and 2017:
Distribution For
 
Date Paid
 
Per Unit
Amount
 
Total
Amount
 
2016
 
 
 
 
 
 
 
1st Quarter
 
May 13, 2016
 
$
0.6725

 
$
73,961

 
2nd Quarter
 
August 12, 2016
 
$
0.6900

 
$
81,406

 
3rd Quarter
 
November 14, 2016
 
$
0.7000

 
$
82,585

 
4th Quarter
 
February 14, 2017
 
$
0.7100

 
$
83,765

 
2017
 
 
 
 
 
 
 
1st Quarter
 
May 15, 2017
 
$
0.7200

 
$
88,257

 
2nd Quarter
 
August 14, 2017
(1) 
$
0.7225

 
$
88,563

 
(1) This distribution will be paid to unitholders of record as of July 31, 2017.
9. Business Segment Information
In the fourth quarter of 2016, we reorganized our operating segments as a result of the way our Chief Executive Officer, who is our chief operating decision maker, evaluates the performance of operations, develops strategy and allocates resources. The results of our onshore pipeline transportation segment, formerly reported under its own segment, are now reported in our onshore facilities and transportation segment. The onshore facilities and transportation segment was formerly named our supply and logistics segment. This segment has been renamed in the second quarter of 2017 to more accurately describe the nature of its operations. This change is consistent with the increasingly integrated nature of our onshore operations. As a result of the above changes, we currently manage our businesses through four divisions that constitute our reportable segments - offshore pipeline transportation, refinery services, marine transportation, and onshore facilities and transportation. Our disclosures related to prior periods have been recast to reflect our reorganized segments.
We currently manage our businesses through four divisions that constitute our reportable segments:
•
Offshore pipeline transportation – offshore pipeline transportation and processing of crude oil and natural gas in the Gulf of Mexico;
•
Refinery services – processing high sulfur (or “sour”) gas streams as part of refining operations to remove the sulfur and selling the related by-product, NaHS;
•
Marine transportation – marine transportation to provide waterborne transportation of petroleum products and crude oil throughout North America; and
•
Onshore facilities and transportation – terminaling, blending, storing, marketing and transporting crude oil, petroleum products (primarily fuel oil, asphalt, and other heavy refined products) and CO2.
Substantially all of our revenues are derived from, and substantially all of our assets are located in, the United States.
We define Segment Margin as revenues less product costs, operating expenses (excluding non-cash gains and charges, such as depreciation and amortization), and segment general and administrative expenses, plus our equity in distributable cash generated by our equity investees. In addition, our Segment Margin definition excludes the non-cash effects of our legacy stock appreciation rights plan and includes the non-income portion of payments received under direct financing leases.
Our chief operating decision maker (our Chief Executive Officer) evaluates segment performance based on a variety of measures including Segment Margin, segment volumes, where relevant, and capital investment. 

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GENESIS ENERGY, L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


Segment information for the periods presented below was as follows:
 
Offshore Pipeline Transportation
 
Refinery
Services
 
Marine Transportation
 
Onshore Facilities & Transportation
 
Total
Three Months Ended June 30, 2017
 
 
 
 
 
 
 
 
 
Segment margin (a)
$
78,211

 
$
16,337

 
$
14,156

 
$
25,296

 
$
134,000

Capital expenditures (b)
$
3,903

 
$
432

 
$
11,132

 
$
42,383

 
$
57,850

Revenues:
 
 
 
 
 
 
 
 
 
External customers
$
78,577

 
$
45,210

 
$
49,311

 
$
233,625

 
$
406,723

Intersegment (c)
(939
)
 
(2,142
)
 
3,891

 
(810
)
 
—

Total revenues of reportable segments
$
77,638

 
$
43,068

 
$
53,202

 
$
232,815

 
$
406,723

Three Months Ended June 30 2016
 
 
 
 
 
 
 
 
 
Segment margin (a)
$
84,282

 
$
19,861

 
$
18,082

 
$
20,261

 
$
142,486

Capital expenditures (b)
$
2,373

 
$
832

 
$
27,562

 
$
84,754

 
$
115,521

Revenues:
 
 
 
 
 
 
 
 
 
External customers
$
76,829

 
$
43,618

 
$
50,964

 
$
274,565

 
$
445,976

Intersegment (c)
2,165

 
(2,294
)
 
1,645

 
(1,516
)
 
—

Total revenues of reportable segments
$
78,994

 
$
41,324

 
$
52,609

 
$
273,049

 
$
445,976

Six Months Ended June 30, 2017
 
 
 
 
 
 
 
 
 
Segment Margin (a)
$
165,300

 
$
33,833

 
$
27,119

 
$
46,393

 
$
272,645

Capital expenditures (b)
$
6,142

 
$
945

 
$
20,665

 
$
89,085

 
$
116,837

Revenues:
 
 
 
 
 
 
 
 
 
External customers
$
163,982

 
$
92,481

 
$
97,515

 
$
468,236

 
$
822,214

Intersegment (c)
(1,216
)
 
(4,367
)
 
5,989

 
(406
)
 
—

Total revenues of reportable segments
$
162,766

 
$
88,114

 
$
103,504

 
$
467,830

 
$
822,214

Six Months Ended June 30, 2016
 
 
 
 
 
 
 
 
 
Segment Margin (a)
$
162,900

 
$
41,060

 
$
36,998

 
$
46,409

 
$
287,367

Capital expenditures (b)
$
31,198

 
$
1,157

 
$
35,991

 
$
173,333

 
$
241,679

Revenues:
 
 
 
 
 
 
 
 
 
External customers
$
152,955

 
$
88,368

 
$
101,624

 
$
481,443

 
$
824,390

Intersegment (c)
2,165

 
(4,508
)
 
3,021

 
(678
)
 
—

Total revenues of reportable segments
$
155,120

 
$
83,860

 
$
104,645

 
$
480,765

 
$
824,390

Total assets by reportable segment were as follows:
 
June 30,
2017
 
December 31,
2016
Offshore pipeline transportation
$
2,514,688

 
$
2,575,335

Refinery services
391,208

 
395,043

Marine transportation
798,835

 
813,722

Onshore facilities and transportation
1,878,944

 
1,875,403

Other assets
56,701

 
43,089

Total consolidated assets
5,640,376

 
5,702,592

 
(a)
A reconciliation of total Segment Margin to net income attributable to Genesis Energy, L.P. for the periods is presented below.
(b)
Capital expenditures include maintenance and growth capital expenditures, such as fixed asset additions (including enhancements to existing facilities and construction of growth projects) as well as acquisitions of businesses and contributions to equity investees related to same.

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GENESIS ENERGY, L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


(c)
Intersegment sales were conducted under terms that we believe were no more or less favorable than then-existing market conditions.
Reconciliation of total Segment Margin to net income:
 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
 
2017
 
2016
 
2017
 
2016
Total Segment Margin
$
134,000

 
$
142,486

 
$
272,645

 
$
287,367

Corporate general and administrative expenses
(7,137
)
 
(10,491
)
 
(15,464
)
 
(21,849
)
Depreciation, amortization and accretion
(59,382
)
 
(62,213
)
 
(117,777
)
 
(111,388
)
Interest expense
(37,990
)
 
(35,535
)
 
(74,729
)
 
(69,922
)
Adjustment to exclude distributable cash generated by equity investees not included in income and include equity in investees net income (1)
(9,140
)
 
(11,141
)
 
(18,430
)
 
(21,755
)
Non-cash items not included in Segment Margin
(1,867
)
 
15

 
(1,430
)
 
(4,359
)
Cash payments from direct financing leases in excess of earnings
(1,709
)
 
(1,548
)
 
(3,376
)
 
(3,059
)
Differences in timing of cash receipts for certain contractual arrangements (2)
3,166

 
3,163

 
5,847

 
6,005

Gain on sale of assets
26,684

 
—

 
26,684

 
—

Non-cash provision for leased items no longer in use

(12,589
)
 
—

 
(12,589
)
 
—

Income tax expense
(303
)
 
(1,009
)
 
(558
)
 
(2,010
)
Net income attributable to Genesis Energy, L.P.
$
33,733

 
$
23,727

 
$
60,823

 
$
59,030

(1)
Includes distributions attributable to the quarter and received during or promptly following such quarter.
(2)
Certain cash payments received from customers under certain of our minimum payment obligation contracts are not recognized as revenue under GAAP in the period in which such payments are received.
10. Transactions with Related Parties
Sales, purchases and other transactions with affiliated companies, in the opinion of management, are conducted under terms no more or less favorable than then-existing market conditions. The transactions with related parties were as follows:
 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
 
2017
 
2016
 
2017
 
2016
Revenues:
 
 
 
 
 
 
 
Sales of CO2 to Sandhill Group, LLC (1)
$
726

 
$
762

 
$
1,403

 
$
1,488

Revenues from services and fees to Poseidon Oil Pipeline Company, LLC (2)
3,044

 
1,980

 
6,066

 
3,956

Costs and expenses:
 
 
 
 
 
 
 
Amounts paid to our CEO in connection with the use of his aircraft
$
165

 
$
165

 
$
330

 
$
330

Charges for services from Poseidon Oil Pipeline Company, LLC (2)
249

 
251

 
490

 
498

 
(1)
We own a 50% interest in Sandhill Group, LLC.
(2)
We own 64% interest in Poseidon Oil Pipeline Company, LLC.
Amount due from Related Party
At June 30, 2017 and December 31, 2016 (i) Sandhill Group, LLC owed us $0.2 million and $0.2 million, respectively, for purchases of CO2 and (ii) Poseidon Oil Pipeline Company, LLC owed us $1.9 million and $1.6 million, respectively, for services rendered.
Transactions with Unconsolidated Affiliates
Poseidon
We are the operator of Poseidon and provide management, administrative and pipeline operator services to Poseidon under an Operation and Management Agreement . Currently, that agreement renews automatically annually unless terminated

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GENESIS ENERGY, L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


by either party (as defined in the agreement). Our revenues for the three and six months ended June 30, 2017 reflect the $2.1 million and $4.2 million, respectively, of fees we earned through the provision of services under that agreement.

11. Supplemental Cash Flow Information
The following table provides information regarding the net changes in components of operating assets and liabilities.
 
 
Six Months Ended
June 30,
 
2017
 
2016
(Increase) decrease in:
 
 
 
Accounts receivable
$
3,666

 
$
(21,274
)
Inventories
29,800

 
(34,512
)
Deferred charges
(93
)
 
(6,272
)
Other current assets
(2,115
)
 
(4,335
)
Decrease in:
 
 
 
Accounts payable
(6,843
)
 
(5,642
)
Accrued liabilities
(16,102
)
 
(18,206
)
Net changes in components of operating assets and liabilities
8,313

 
(90,241
)
Payments of interest and commitment fees were $80.0 million and $78.4 million for the six months ended June 30, 2017 and June 30, 2016, respectively. We capitalized interest of $11.9 million and $12.3 million during the six months ended June 30, 2017 and June 30, 2016.
At June 30, 2017 and June 30, 2016, we had incurred liabilities for fixed and intangible asset additions totaling $23.2 million and $55.6 million, respectively, that had not been paid at the end of the quarter, and, therefore, were not included in the caption “Payments to acquire fixed and intangible assets” under Cash Flows from Investing Activities in the Unaudited Condensed Consolidated Statements of Cash Flows.

12. Derivatives
Commodity Derivatives
We have exposure to commodity price changes related to our inventory and purchase commitments. We utilize derivative instruments (primarily futures and options contracts traded on the NYMEX) to hedge our exposure to commodity prices, primarily of crude oil, fuel oil and petroleum products. Our decision as to whether to designate derivative instruments as fair value hedges for accounting purposes relates to our expectations of the length of time we expect to have the commodity price exposure and our expectations as to whether the derivative contract will qualify as highly effective under accounting guidance in limiting our exposure to commodity price risk. Most of the petroleum products, including fuel oil that we supply, cannot be hedged with a high degree of effectiveness with derivative contracts available on the NYMEX; therefore, we do not designate derivative contracts utilized to limit our price risk related to these products as hedges for accounting purposes. Typically we utilize crude oil and other petroleum products futures and option contracts to limit our exposure to the effect of fluctuations in petroleum products prices on the future sale of our inventory or commitments to purchase petroleum products, and we recognize any changes in fair value of the derivative contracts as increases or decreases in our cost of sales. The recognition of changes in fair value of the derivative contracts not designated as hedges for accounting purposes can occur in reporting periods that do not coincide with the recognition of gain or loss on the actual transaction being hedged. Therefore we will, on occasion, report gains or losses in one period that will be partially offset by gains or losses in a future period when the hedged transaction is completed.
We have designated certain crude oil futures contracts as hedges of crude oil inventory due to our expectation that these contracts will be highly effective in hedging our exposure to fluctuations in crude oil prices during the period that we expect to hold that inventory. We account for these derivative instruments as fair value hedges under the accounting guidance. Changes in the fair value of these derivative instruments designated as fair value hedges are used to offset related changes in the fair value of the hedged crude oil inventory. Any hedge ineffectiveness in these fair value hedges and any amounts excluded from effectiveness testing are recorded as a gain or loss in the Unaudited Consolidated Statements of Operations.

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GENESIS ENERGY, L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


In accordance with NYMEX requirements, we fund the margin associated with our loss positions on commodity derivative contracts traded on the NYMEX. The amount of the margin is adjusted daily based on the fair value of the commodity contracts. The margin requirements are intended to mitigate a party's exposure to market volatility and the associated contracting party risk. We offset fair value amounts recorded for our NYMEX derivative contracts against margin funding as required by the NYMEX in Current Assets - Other in our Unaudited Consolidated Balance Sheets.
At June 30, 2017, we had the following outstanding derivative commodity contracts that were entered into to economically hedge inventory or fixed price purchase commitments.
 
 
Sell (Short)
Contracts
 
Buy (Long)
Contracts
Designated as hedges under accounting rules:
 
 
 
 
Crude oil futures:
 
 
 
 
Contract volumes (1,000 bbls)
 
833

 
—

Weighted average contract price per bbl
 
$
46.73

 
$
—

 
 
 
 
 
Not qualifying or not designated as hedges under accounting rules:
 
 
 
 
Crude oil futures:
 
 
 
 
Contract volumes (1,000 bbls)
 
417

 
399

Weighted average contract price per bbl
 
$
45.01

 
$
45.82

NYM RBOB Gas futures:
 
 
 
 
Contract volumes (42,000 gallons)
 
2

 
2

Weighted average contract price per gal
 
$
1.51

 
$
1.42

#6 Fuel oil futures:
 
 
 
 
Contract volumes (1,000 bbls)
 
235

 
55

Weighted average contract price per bbl
 
$
41.96

 
$
42.38

Crude oil options:
 
 
 
 
Contract volumes (1,000 bbls)
 
115

 
60

Weighted average premium received
 
$
1.16

 
$
0.48

NYM RBOB Gas options:
 
 
 
 
Contract volumes (42,000 gallons)
 
5

 
—

Weighted average premium received
 
$
0.02

 
$
—

Financial Statement Impacts
Unrealized gains are subtracted from net income and unrealized losses are added to net income in determining cash flows from operating activities. To the extent that we have fair value hedges outstanding, the offsetting change recorded in the fair value of inventory is also eliminated from net income in determining cash flows from operating activities. Changes in margin deposits necessary to fund unrealized losses also affect cash flows from operating activities.

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GENESIS ENERGY, L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


The following tables reflect the estimated fair value gain (loss) position of our derivatives at June 30, 2017 and December 31, 2016:
Fair Value of Derivative Assets and Liabilities
 
 
Unaudited Condensed Consolidated Balance Sheets Location
 
Fair Value
 
June 30,
2017
 
December 31,
2016
Asset Derivatives:
 
 
 
 
 
Commodity derivatives - futures and call options (undesignated hedges):
 
 
 
 
 
Gross amount of recognized assets
Current Assets - Other
 
$
477

 
$
443

Gross amount offset in the Unaudited Condensed Consolidated Balance Sheets
Current Assets - Other
 
(477
)
 
(443
)
Net amount of assets presented in the Unaudited Condensed Consolidated Balance Sheets
 
 
$
—

 
$
—

Commodity derivatives - futures and call options (designated hedges):
 
 
 
 
 
Gross amount of recognized assets
Current Assets - Other
 
$
1,431

 
$
3,321

Gross amount offset in the Unaudited Condensed Consolidated Balance Sheets
Current Assets - Other
 
(931
)
 
(3,321
)
Net amount of assets presented in the Unaudited Condensed Consolidated Balance Sheets
 
 
$
500

 
$
—

Liability Derivatives:
 
 
 
 
 
Commodity derivatives - futures and call options (undesignated hedges):
 
 
 
 
 
Gross amount of recognized liabilities
Current Assets - Other (1)
 
$
(1,267
)
 
$
(1,772
)
Gross amount offset in the Unaudited Condensed Consolidated Balance Sheets
Current Assets - Other (1)
 
1,267

 
1,772

Net amount of liabilities presented in the Unaudited Condensed Consolidated Balance Sheets
 
 
$
—

 
$
—

Commodity derivatives - futures and call options (designated hedges):
 
 
 
 
 
Gross amount of recognized liabilities
Current Assets - Other (1)
 
$
(931
)
 
$
(9,506
)
Gross amount offset in the Unaudited Condensed Consolidated Balance Sheets
Current Assets - Other (1)
 
931

 
7,589

Net amount of liabilities presented in the Unaudited Condensed Consolidated Balance Sheets
 
 
$
—

 
$
(1,917
)
 (1)
These derivative liabilities have been funded with margin deposits recorded in our Unaudited Condensed Consolidated Balance Sheets under Current Assets - Other.
 
Our accounting policy is to offset derivative assets and liabilities executed with the same counterparty when a master netting arrangement exists.  Accordingly, we also offset derivative assets and liabilities with amounts associated with cash margin.  Our exchange-traded derivatives are transacted through brokerage accounts and are subject to margin requirements as established by the respective exchange.  On a daily basis, our account equity (consisting of the sum of our cash balance and the fair value of our open derivatives) is compared to our initial margin requirement resulting in the payment or return of variation margin.  As of June 30, 2017, we had a net broker receivable of approximately $1.4 million (consisting of initial margin of $2.6 million decreased by $1.2 million of variation margin).  As of December 31, 2016, we had a net broker receivable of approximately $5.6 million (consisting of initial margin of $5.1 million increased by $0.5 million of variation margin).  At June 30, 2017 and December 31, 2016, none of our outstanding derivatives contained credit-risk related contingent features that would result in a material adverse impact to us upon any change in our credit ratings. 

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GENESIS ENERGY, L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


Effect on Operating Results 
 
 
 
Amount of Gain (Loss) Recognized in Income
 
Unaudited Condensed Consolidated Statements of Operations Location
 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
 
 
2017
 
2016
 
2017
 
2016
Commodity derivatives - futures and call options:
 
 
 
 
 
 
 
 
 
Contracts designated as hedges under accounting guidance
Onshore facilities and transportation product costs
 
$
5,546

 
$
(9,398
)
 
$
11,832

 
$
(9,951
)
Contracts not considered hedges under accounting guidance
Onshore facilities and transportation product costs
 
886

 
(3,145
)
 
1,979

 
(3,482
)
Total commodity derivatives
 
 
$
6,432

 
$
(12,543
)
 
$
13,811

 
$
(13,433
)
13. Fair-Value Measurements
We classify financial assets and liabilities into the following three levels based on the inputs used to measure fair value:
(1)
Level 1 fair values are based on observable inputs such as quoted prices in active markets for identical assets and liabilities;
(2)
Level 2 fair values are based on pricing inputs other than quoted prices in active markets for identical assets and liabilities and are either directly or indirectly observable as of the measurement date; and
(3)
Level 3 fair values are based on unobservable inputs in which little or no market data exists.
As required by fair value accounting guidance, financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.
Our assessment of the significance of a particular input to the fair value requires judgment and may affect the placement of assets and liabilities within the fair value hierarchy levels.
The following table sets forth by level within the fair value hierarchy our financial assets and liabilities that were accounted for at fair value on a recurring basis as of June 30, 2017 and December 31, 2016. 
 
 
Fair Value at
 
Fair Value at
 
 
June 30, 2017
 
December 31, 2016
Recurring Fair Value Measures
 
Level 1
 
Level 2
 
Level 3
 
Level 1
 
Level 2
 
Level 3
Commodity derivatives:
 
 
 
 
 
 
 
 
 
 
 
 
Assets
 
$
1,908

 
$
—

 
$
—

 
$
3,764

 
$
—

 
$
—

Liabilities
 
$
(2,198
)
 
$
—

 
$
—

 
$
(11,278
)
 
$
—

 
$
—

Our commodity derivatives include exchange-traded futures and exchange-traded options contracts. The fair value of these exchange-traded derivative contracts is based on unadjusted quoted prices in active markets and is, therefore, included in Level 1 of the fair value hierarchy.
See Note 12 for additional information on our derivative instruments.
Other Fair Value Measurements
We believe the debt outstanding under our credit facility approximates fair value as the stated rate of interest approximates current market rates of interest for similar instruments with comparable maturities. At June 30, 2017 our senior unsecured notes had a carrying value of $1.8 billion and a fair value of $1.8 billion, respectively, compared to $1.8 billion and $1.9 billion, respectively, at December 31, 2016. The fair value of the senior unsecured notes is determined based on trade information in the financial markets of our public debt and is considered a Level 2 fair value measurement.
    

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GENESIS ENERGY, L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


14. Commitments and Contingencies
We are subject to various environmental laws and regulations. Policies and procedures are in place to aid in monitoring compliance and detecting and addressing releases of crude oil from our pipelines or other facilities; however, no assurance can be made that such environmental releases may not substantially affect our business.
We are subject to lawsuits in the normal course of business and examination by tax and other regulatory authorities. We do not expect such matters presently pending to have a material effect on our financial position, results of operations, or cash flows.
In the 2017 Quarter, we recorded a non-cash provision of $12.6 million (included within Onshore facilities and transportation operating costs in our Unaudited Condensed Consolidated Statements of Operations) relating to certain leased railcars no longer in use. Of this amount, $4.1 million is considered current and included in accrued liabilities in our Unaudited Condensed Consolidated Balance Sheet, with the remainder included in other long-term liabilities.

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GENESIS ENERGY, L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


15. Subsequent Events
On August 2, 2017, we entered into a stock purchase agreement with a subsidiary of Tronox Limited (“Tronox”) pursuant to which we will acquire for approximately $1.325 billion in cash all of Tronox’s trona and trona-based exploring, mining, processing, producing, marketing and selling business. The business holds leases covering acres of land containing proved and probable reserves of trona ore, a soda ash production facility, underground trona ore mines and solution mining operations and related equipment, logistics and other assets.
We currently expect to fund the acquisition price and related transaction costs with proceeds from a notes offering, a preferred units offering and/or borrowings under our $1.7 billion revolving credit facility, as well as cash on hand. We expect to close the acquisition in the second half of 2017.

16. Condensed Consolidating Financial Information
Our $1.8 billion aggregate principal amount of senior unsecured notes co-issued by Genesis Energy, L.P. and Genesis Energy Finance Corporation are fully and unconditionally guaranteed jointly and severally by all of Genesis Energy, L.P.’s current and future 100% owned domestic subsidiaries, except Genesis Free State Pipeline, LLC, Genesis NEJD Pipeline, LLC and certain other minor subsidiaries. Genesis NEJD Pipeline, LLC is 100% owned by Genesis Energy, L.P., the parent company. The remaining non-guarantor subsidiaries are owned by Genesis Crude Oil, L.P., a guarantor subsidiary. Genesis Energy Finance Corporation has no independent assets or operations. See Note 7 for additional information regarding our consolidated debt obligations.
The following is condensed consolidating financial information for Genesis Energy, L.P., the guarantor subsidiaries and the non-guarantor subsidiaries.



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GENESIS ENERGY, L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


Unaudited Condensed Consolidating Balance Sheet
June 30, 2017

 
Genesis
Energy, L.P.
(Parent and
Co-Issuer)
 
Genesis
Energy Finance
Corporation
(Co-Issuer)
 
Guarantor
Subsidiaries
 
Non-Guarantor
Subsidiaries
 
Eliminations
 
Genesis
Energy, L.P.
Consolidated
ASSETS
 
 
 
 
 
 
 
 
 
 
 
Current assets:
 
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
6

 
$
—

 
$
9,595

 
$
476

 
$
—

 
$
10,077

Other current assets
100

 
—

 
305,676

 
12,178

 
(321
)
 
317,633

Total current assets
106

 
—

 
315,271

 
12,654

 
(321
)
 
327,710

Fixed assets, at cost
—

 
—

 
4,765,422

 
77,585

 
—

 
4,843,007

Less: Accumulated depreciation
—

 
—

 
(603,726
)
 
(25,467
)
 
—

 
(629,193
)
Net fixed assets
—

 
—

 
4,161,696

 
52,118

 
—

 
4,213,814

Goodwill
—

 
—

 
325,046

 
—

 
—

 
325,046

Other assets, net
16,060

 
—

 
384,724

 
130,265

 
(147,569
)
 
383,480

Advances to affiliates
2,507,192

 
—

 
—

 
81,991

 
(2,589,183
)
 
—

Equity investees
—

 
—

 
390,326

 
—

 
—

 
390,326

Investments in subsidiaries
2,698,899

 
—

 
80,505

 
—

 
(2,779,404
)
 
—

Total assets
$
5,222,257

 
$
—

 
$
5,657,568

 
$
277,028

 
$
(5,516,477
)
 
$
5,640,376

LIABILITIES AND PARTNERS’ CAPITAL
 
 
 
 
 
 
 
 
 
 
 
Current liabilities
$
35,300

 
$
—

 
$
187,009

 
$
15,040

 
$
(153
)
 
$
237,196

Senior secured credit facility
1,211,000

 
—

 
—

 
—

 
—

 
1,211,000

Senior unsecured notes
1,816,259

 
—

 
—

 
—

 
—

 
1,816,259

Deferred tax liabilities
—

 
—

 
26,249

 
—

 
—

 
26,249

Advances from affiliates
—

 
—

 
2,589,189

 
—

 
(2,589,189
)
 
—

Other liabilities
—

 
—

 
164,414

 
182,839

 
(147,418
)
 
199,835

Total liabilities
3,062,559

 
—

 
2,966,861

 
197,879

 
(2,736,760
)
 
3,490,539

Partners’ capital, common units
2,159,698

 
—

 
2,690,707

 
89,010

 
(2,779,717
)
 
2,159,698

Noncontrolling interests
—

 
—

 
—

 
(9,861
)
 
—

 
(9,861
)
Total liabilities and partners’ capital
$
5,222,257

 
$
—

 
$
5,657,568

 
$
277,028

 
$
(5,516,477
)
 
$
5,640,376



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GENESIS ENERGY, L.P.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


Unaudited Condensed Consolidating Balance Sheet
December 31, 2016
 
 
Genesis
Energy, L.P.
(Parent and
Co-Issuer)
 
Genesis
Energy Finance
Corporation
(Co-Issuer)
 
Guarantor
Subsidiaries
 
Non-Guarantor
Subsidiaries
 
Eliminations
 
Genesis
Energy, L.P.
Consolidated
ASSETS
 
 
 
 
 
 
 
 
 
 
 
Current assets:
 
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
6

 
$
—

 
$
6,360

 
$
663

 
$
—

 
$
7,029

Other current assets
50

 
—

 
340,555

 
12,237

 
(302
)
 
352,540

Total current assets
56

 
—

 
346,915

 
12,900

 
(302
)
 
359,569

Fixed assets, at cost
—

 
—

 
4,685,811

 
77,585

 
—

 
4,763,396

Less: Accumulated depreciation
—

 
—

 
(524,315
)
 
(24,217
)
 
—

 
(548,532
)
Net fixed assets
—

 
—

 
4,161,496

 
53,368

 
—

 
4,214,864

Goodwill
—

 
—

 
325,046

 
—

 
—

 
325,046

Other assets, net