Crude Oil Logistics
Overview. Our Crude Oil Logistics segment purchases crude oil from producers
and transports it to refineries or for resale at pipeline injection stations,
storage terminals, barge loading facilities, rail facilities, refineries, and
other trade hubs. We also lease space and capacity in our owned assets, such
as storage tanks, pipelines, trucks, barges, and railcars, to third parties
for a fee. Our operations are centered near areas of high crude oil production,
such as the Bakken shale play in North Dakota, the DJ Basin in Colorado, the
Permian Basin in Texas and New Mexico, the Eagle Ford shale play in Texas, the
Anadarko Basin, including the STACK, SCOOP, Granite Wash and Mississippi Lime
plays in Oklahoma and Texas, and southern Louisiana at the Gulf of Mexico.
We own a 550-mile pipeline that transports crude oil from its origin in Colorado
to Cushing, Oklahoma (the “Grand Mesa Pipeline”). Grand Mesa Pipeline
commenced operations on November 1, 2016, and the main line portion of this
pipe is comprised of a 37.5% undivided interest in a crude oil pipeline jointly
owned with Saddlehorn Pipeline Company, LLC (“Saddlehorn”) where
we have the right to utilize 150,000 barrels per day of capacity. During the
period from November 1, 2016 through March 31, 2017, there were approximately
42,000 barrels per day transported on the Grand Mesa Pipeline. Operating costs
are allocated to us based on our proportionate ownership interest and throughput.
We also own 970,000 barrels of operational tankage related to the Grand Mesa
Pipeline.
Retail Propane
Overview. Our Retail Propane segment consists of the retail marketing, sale
and distribution of propane and distillates, including the sale and lease of
propane tanks, equipment and supplies, to more than 350,000 residential, agricultural,
commercial and industrial customers. We also sell propane to certain resellers.
We purchase the majority of the propane sold in our Retail Propane business
from our Liquids business, which provides our Retail Propane business with a
stable and secure supply of propane.
Operations. We market retail propane and distillates through our customer service
locations. We sell propane primarily in rural areas, but we also have a number
of customers in suburban areas where energy alternatives to propane such as
natural gas are not generally available. We own or lease 128 customer service
locations and 119 satellite distribution locations, with aggregate propane storage
capacity of 17.5 million gallons and aggregate distillate storage capacity of
5.6 million gallons. Our customer service locations are staffed and operated
to service a defined geographic market area and typically include a business
office, product showroom, and secondary propane storage. Our satellite distribution
locations, which are unmanned storage tanks, allow our customer service centers
to serve an extended market area.
Liquids
Overview. Our Liquids segment provides natural gas liquids procurement, storage,
transportation, and supply services to customers through assets owned by us
and third parties. Our Liquids business supplies the majority of the propane
for our Retail Propane business as well as other retail propane businesses.
We also sell butanes and natural gasolines to refiners and producers for use
as blending stocks and diluent and assist refineries by managing their seasonal
butane supply needs. During the year ended March 31, 2017, we sold 2.1 billion
gallons of natural gas liquids, an average of 5.66 million gallons per day.
Operations. We procure natural gas liquids from refiners, gas processing plants,
producers and other resellers for delivery to leased or owned storage space,
common carrier pipelines, railcar terminals, and direct to certain customers.
Our customers take delivery by loading natural gas liquids into transport vehicles
from common carrier pipeline terminals, private terminals, our terminals, directly
from refineries and rail terminals, and by railcar.
A portion of our wholesale propane gallons are presold to third-party retailers
and wholesalers at a fixed price under back-to-back contracts. Back-to-back
contracts, in which we balance our contractual portfolio by buying propane supply
when we have a matching purchase commitment from our wholesale customers, protect
our margins and mitigate commodity price risk. Presales also reduce the impact
of warm weather because the customer is required to take delivery of the propaneregardless
of the weather or any other factors. We generally require cash deposits from
these customers. In addition, on a daily basis we have the ability to balance
our inventory by buying or selling propane, butanes, and natural gasoline to
refiners, resellers, and propane producers through pipeline inventory transfers
at major storage hubs.