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48
The following table presents the operating results and key operating measures for our Crude Oil Pipelines segment for the
periods presented:
Successor Predecessor
Year Ended
December 31,
2014
Year Ended
December 31,
2013
Three Months
Ended
December 31,
2013
Nine Months
Ended
September 30,
2013
Period from
Acquisition,
October 5,
2012 to
December 31,
2012 (1)
Period from
January 1,
2012 to
October 4,
2012 (1)
(in millions, except for barrel amounts)
(in millions,
except for
barrel
amounts)
Sales and other operating revenue
Unaffiliated customers $ 326 $ 295 $ 85 $ 210 $ 70 $ 187
Affiliates ————— —
Intersegment revenue 229 200 54 146 40 101
Total sales and other operating
revenue $ 555 $ 495 $ 139 $ 356 $ 110 $ 288
Depreciation and amortization expense $ 99 $ 90 $ 23 $ 67 $ 22 $ 19
Adjusted EBITDA $ 377 $ 349 $ 102 $ 247 $ 72 $ 203
Pipeline throughput (thousands of
barrels per day ("bpd")) 2,125 1,866 2,009 1,817 1,584 1,546
Pipeline revenue per barrel (cents) 71.6 72.7 75.2 71.7 75.6 68.0
(1) The effective date of the acquisition for accounting and reporting purposes was deemed to be October 1, 2012. The activity from
October 1, 2012 through October 4, 2012 was not material in relation to our financial position, results of operations or cash flows.
Adjusted EBITDA for the Crude Oil Pipelines segment increased $28 million to $377 million for the year ended December
31, 2014 compared to the prior year period. The increase in Adjusted EBITDA was due primarily to higher throughput volumes
($69 million) driven by expansion projects placed into service in 2013 and 2014 to support the demand for West Texas crude oil.
This improvement was partially offset by lower average pipeline revenue per barrel ($9 million) and higher operating expenses
($29 million) which included lower pipeline operating gains, higher environmental remediation costs, increased pipeline
maintenance costs and higher costs associated with growth projects.
Adjusted EBITDA for the Crude Oil Pipelines segment for the fourth quarter 2013 increased $30 million compared to the
period from October 5, 2012 to December 31, 2012. The increase was due primarily to higher throughput volumes ($30 million)
largely attributable to expansion projects which began operating during 2013 to support the demand for transportation of West
Texas crude oil. Results also benefited from lower maintenance and integrity management costs ($2 million) which were offset
by increased utility costs associated with higher throughput volumes and lower pipeline operating gains ($2 million).
Adjusted EBITDA for the Crude Oil Pipelines segment increased $44 million to $247 million for the nine months ended
September 30, 2013, compared to $203 million for the period from January 1, 2012 to October 4, 2012. The increase in Adjusted
EBITDA was due primarily to higher throughput volumes ($49 million) largely attributable to our pipeline expansion projects in
Texas and Oklahoma and higher pipeline tariffs ($19 million). These improvements were partially offset by higher operating
expenses ($23 million) driven primarily by lower pipeline operating gains, increased environmental remediation expenses,
higher utility costs associated with higher throughput volumes and increased maintenance costs.
Crude Oil Acquisition and Marketing
Our Crude Oil Acquisition and Marketing segment reflects the sale of gathered and bulk purchased crude oil. The crude oil
acquisition and marketing operations generate substantial revenue and cost of products sold as a result of the significant volume
of crude oil bought and sold. The absolute price levels of crude oil normally do not bear a relationship to gross profit, although
the price levels significantly impact revenue and costs of products sold. As a result, period-to-period variations in revenue and
cost of products sold are not generally meaningful in analyzing the variation in gross profit for the Crude Oil Acquisition and
Marketing segment. The operating results of the Crude Oil Acquisition and Marketing segment are affected by overall levels of
supply and demand for crude oil and relative fluctuations in market related indices. To the extent there are periods of sustained
crude oil price declines, drilling activity could decline impacting the volume of crude oil we buy and sell. Generally, we expect
a base level of earnings from our Crude Oil Acquisition and Marketing segment that may be optimized and enhanced when there
is a high level of market volatility, favorable basis differentials and/or a steep contango or backwardated structure. Our
management believes gross profit, which is equal to sales and other operating revenue less cost of products sold and operating
expenses, is a key measure of financial performance for the Crude Oil Acquisition and Marketing segment. Although we