Common use of Operating Segments Clause in Contracts

Operating Segments. We manage our operations through three operating segments: Transportation, Facilities and Supply and Logistics. See Note 3 for a summary of the types of products and services from which each segment derives its revenues. Our Chief Operating Decision Maker (“CODM”) (our Chief Executive Officer) evaluates segment performance based on measures including Segment Adjusted EBITDA (as defined below) and maintenance capital investment. The measure of Segment Adjusted EBITDA forms the basis of our internal financial reporting and is the primary performance measure used by our CODM in assessing performance and allocating resources among our operating segments. We define Segment Adjusted EBITDA as revenues and equity earnings in unconsolidated entities less (a) purchases and related costs, (b) field operating costs and (c) segment general and administrative expenses, plus our proportionate share of the depreciation and amortization expense and gains and losses on significant asset sales by unconsolidated entities, and further adjusted for certain selected items including (i) gains or losses on derivative instruments that are related to underlying activities in another period (or the reversal of such adjustments from a prior period), gains and losses on derivatives that are related to investing activities (such as the purchase of linefill) and inventory valuation adjustments, as applicable, (ii) long-term inventory costing adjustments, (iii) charges for obligations that are expected to be settled with the issuance of equity instruments, (iv) amounts related to deficiencies associated with minimum volume commitments, net of applicable amounts subsequently recognized into revenue and (v) other items that our CODM believes are integral to understanding our core segment operating performance. Segment Adjusted EBITDA excludes depreciation and amortization. As an MLP, we make quarterly distributions of our “available cash” (as defined in our partnership agreement) to our unitholders. We look at each period’s earnings before non- cash depreciation and amortization as an important measure of segment performance. The exclusion of depreciation and amortization expense could be viewed as limiting the usefulness of Segment Adjusted EBITDA as a performance measure because it does not account in current periods for the implied reduction in value of our capital assets, such as crude oil pipelines and facilities, caused by age-related decline and wear and tear. We compensate for this limitation by recognizing that depreciation and amortization are largely offset by repair and maintenance investments, which act to partially offset the aging and wear and tear in the value of our principal fixed assets. These maintenance investments are a component of field operating costs included in Segment Adjusted EBITDA or in maintenance capital, depending on the nature of the cost. Capital expenditures made to expand the existing operating and/or earnings capacity of our assets are classified as expansion capital. Capital expenditures for the replacement and/or refurbishment of partially or fully depreciated assets in order to maintain the operating and/or earnings capacity of our existing assets are classified as maintenance capital, which is deducted in determining “available cash.” Repair and maintenance expenditures incurred in order to maintain the day to day operation of our existing assets are charged to expense as incurred. The following tables reflect certain financial data for each segment (in millions): Transportation Facilities Supply and Logistics Intersegment Adjustment Total Revenues: External customers (1) $ 1,116 $ 588 $ 32,819 $ (468) $ 34,055 Intersegment (▇) ▇▇▇ ▇▇▇ ▇ ▇▇▇ 1,918 Total revenues of reportable segments $ 1,990 $ 1,161 $ 32,822 $ — $ 35,973 Equity earnings in unconsolidated entities $ 375 $ — $ — $ 375 Segment Adjusted EBITDA $ 1,508 $ 711 $ 462 $ 2,681 Capital expenditures (3) $ 1,631 $ 234 $ 23 $ 1,888 Maintenance capital $ 139 $ 100 $ 13 $ 252 Total assets $ 13,288 $ 7,200 $ 5,023 $ 25,511 Investments in unconsolidated entities $ 2,594 $ 108 $ — $ 2,702 Revenues: External customers (1) $ 1,021 $ 555 $ 25,056 $ (409) $ 26,223 Intersegment (▇) ▇▇▇ ▇▇▇ ▇ ▇▇▇ 1,733 Total revenues of reportable segments $ 1,718 $ 1,173 $ 25,065 $ — $ 27,956 Equity earnings in unconsolidated entities $ 290 $ — $ — $ 290 Segment Adjusted EBITDA $ 1,287 $ 734 $ 60 $ 2,081 Capital expenditures (3) $ 2,126 $ 312 $ 20 $ 2,458 Maintenance capital $ 120 $ 114 $ 13 $ 247 Total assets $ 12,661 $ 7,313 $ 5,377 $ 25,351 Investments in unconsolidated entities $ 2,681 $ 75 $ — $ 2,756 Revenues: External customers (1) $ 954 $ 546 $ 19,004 $ (322) $ 20,182 Intersegment (▇) ▇▇▇ ▇▇▇ ▇▇ ▇▇▇ ▇,527 Total revenues of reportable segments $ 1,584 $ 1,107 $ 19,018 $ — $ 21,709 Equity earnings in unconsolidated entities $ 195 $ — $ — $ 195 Segment Adjusted EBITDA $ 1,141 $ 667 $ 359 $ 2,167 Capital expenditures (3) $ 1,063 $ 577 $ 54 $ 1,694 Maintenance capital $ 121 $ 55 $ 10 $ 186 Total assets $ 10,917 $ 7,556 $ 5,737 $ 24,210 Investments in unconsolidated entities $ 2,290 $ 53 $ — $ 2,343

Operating Segments. We manage our operations through three operating segments: Transportation, Facilities and Supply and Logistics. See “Revenue Recognition” in Note 3 2 for a summary of the types of products and services from which each segment derives its revenues. Our Chief Operating Decision Maker (“CODM”) (our Chief Executive Officer) evaluates segment performance based on measures including Segment Adjusted segment adjusted EBITDA (as defined below) and maintenance capital investment. The measure of Segment Adjusted segment adjusted EBITDA forms the basis of our internal financial reporting and is the primary performance measure used by our CODM in assessing performance and allocating resources among our operating segments. We define Segment Adjusted segment adjusted EBITDA as revenues and equity earnings in unconsolidated entities less (a) purchases and related costs, (b) field operating costs and (c) segment general and administrative expenses, plus our proportionate share of the depreciation and amortization expense and gains and or losses on significant asset sales by of unconsolidated entities, and further adjusted for certain selected items including (i) gains or losses on derivative instruments that are related to underlying activities in another period (or the reversal of such adjustments from a prior period), gains and losses on derivatives that are related to investing activities (such as the purchase of linefill) and inventory valuation adjustments, as applicable, (ii) long-term inventory costing adjustments, (iii) charges for obligations that are expected to be settled with the issuance of equity instruments, (iv) amounts related to deficiencies associated with minimum volume commitments, net of applicable amounts subsequently recognized into revenue and (v) other items that our CODM believes are integral to understanding our core segment operating performance. Segment Adjusted adjusted EBITDA excludes depreciation and amortization. Maintenance capital consists of capital expenditures for the replacement and/or refurbishment of partially or fully depreciated assets in order to maintain the operating and/or earnings capacity of our existing assets. As an MLP, we make quarterly distributions of our “available cash” (as defined in our partnership agreement) to our unitholders. We look at each period’s earnings before non- non-cash depreciation and amortization as an important measure of segment performance. The exclusion of depreciation and amortization expense could be viewed as limiting the usefulness of Segment Adjusted segment adjusted EBITDA as a performance measure because it does not account in current periods for the implied reduction in value of our capital assets, such as crude oil pipelines and facilities, caused by age-age- related decline and wear and tear. We compensate for this limitation by recognizing that depreciation and amortization are largely offset by repair and maintenance investments, which act to partially offset the aging and wear and tear in the value of our principal fixed assets. These maintenance investments are a component of field operating costs included in Segment Adjusted segment adjusted EBITDA or in maintenance capital, depending on the nature of the cost. Capital expenditures made to expand the existing operating and/or earnings capacity of our assets are classified as expansion capital. Capital expenditures for the replacement and/or refurbishment of partially or fully depreciated assets in order to maintain the operating and/or earnings capacity of our existing assets are classified as maintenance capital, which is deducted in determining “available cash.” ”. Repair and maintenance expenditures incurred in order to maintain the day to day operation of our existing assets are charged to expense as incurred. The following tables reflect certain financial data for each segment (in millions): Transportation Facilities Supply and Logistics Intersegment Adjustment Total Revenues: External customers (1) $ 1,116 $ 588 $ 32,819 $ (468) $ 34,055 Intersegment (▇) ▇▇▇ ▇▇▇ ▇ ▇▇▇ 1,918 Total revenues of reportable segments $ 1,990 $ 1,161 $ 32,822 $ — $ 35,973 Equity earnings in unconsolidated entities $ 375 $ — $ — $ 375 Segment Adjusted EBITDA $ 1,508 $ 711 $ 462 $ 2,681 Capital expenditures (3) $ 1,631 $ 234 $ 23 $ 1,888 Maintenance capital $ 139 $ 100 $ 13 $ 252 Total assets $ 13,288 $ 7,200 $ 5,023 $ 25,511 Investments in unconsolidated entities $ 2,594 $ 108 $ — $ 2,702 Revenues: External customers (1) $ 1,021 $ 555 $ 25,056 $ (409) $ 26,223 Intersegment (▇) ▇▇▇ ▇▇▇ ▇ ▇▇▇ 1,733 Total revenues of reportable segments $ 1,718 $ 1,173 $ 25,065 $ — $ 27,956 Equity earnings in unconsolidated entities $ 290 $ — $ — $ 290 Segment Adjusted adjusted EBITDA $ 1,287 $ 734 $ 60 $ 2,081 Capital expenditures (3) $ 2,126 $ 312 $ 20 $ 2,458 Maintenance capital $ 120 $ 114 $ 13 $ 247 Total assets $ 12,661 $ 7,313 $ 5,377 $ 25,351 Investments in unconsolidated entities $ 2,681 $ 75 $ — $ 2,756 Revenues: External customers (1) $ 954 $ 546 $ 19,004 $ (322) $ 20,182 Intersegment (▇) ▇▇▇ ▇▇▇ ▇▇ ▇▇▇ ▇,527 Total revenues of reportable segments $ 1,584 $ 1,107 $ 19,018 $ — $ 21,709 Equity earnings in unconsolidated entities $ 195 $ — $ — $ 195 Segment Adjusted adjusted EBITDA $ 1,141 $ 667 $ 359 $ 2,167 Capital expenditures (3) $ 1,063 $ 577 $ 54 $ 1,694 Maintenance capital $ 121 $ 55 $ 10 $ 186 Total assets $ 10,917 $ 7,556 $ 5,737 $ 24,210 Investments in unconsolidated entities $ 2,290 $ 53 $ — $ 2,3432,343 Revenues: External customers (1) $ 953 $ 528 $ 21,927 $ (256) $ 23,152 Intersegment (▇) ▇▇▇ ▇▇▇ ▇▇ ▇▇▇ ▇,437 Total revenues of reportable segments $ 1,594 $ 1,050 $ 21,945 $ — $ 24,589 Equity earnings in unconsolidated entities $ 183 $ — $ — $ 183 Segment adjusted EBITDA $ 1,056 $ 588 $ 568 $ 2,212 Capital expenditures (3) $ 1,278 $ 813 $ 184 $ 2,275 Maintenance capital $ 144 $ 68 $ 8 $ 220 Total assets $ 10,345 $ 7,330 $ 4,613 $ 22,288 Investments in unconsolidated entities $ 1,998 $ 29 $ — $ 2,027 (1) Transportation revenues from external customers include inventory exchanges that are substantially similar to tariff- like arrangements with our customers. Under these arrangements, our Supply and Logistics segment has transacted the inventory exchange and serves as the shipper on our pipeline systems. See Note 2 for a discussion of our related accounting policy. We have included an estimate of the revenues from these inventory exchanges in our Transportation segment revenue presented above and adjusted those revenues out such that Total revenue from External customers reconciles to our Consolidated Statements of Operations. This presentation is consistent with the information provided to our CODM. (2) Segment revenues include intersegment amounts that are eliminated in Purchases and related costs and Field operating costs in our Consolidated Statements of Operations. Intersegment sales are conducted at posted tariff rates, rates similar to those charged to third parties or rates that we believe approximate market. (3) Expenditures for acquisition capital and expansion capital, including investments in unconsolidated entities.

Operating Segments. We manage our operations through three operating segments: Transportation, Facilities and Supply and Logistics. See “Revenue Recognition” in Note 3 2 for a summary of the types of products and services from which each segment derives its revenues. Our Chief Operating Decision Maker (“CODM”) (our Chief Executive Officer) evaluates segment performance based on measures including Segment Adjusted segment adjusted EBITDA (as defined below) and maintenance capital investment. The measure of Segment Adjusted segment adjusted EBITDA forms the basis of our internal financial reporting and is the primary performance measure used by our CODM in assessing performance and allocating resources among our operating segments. We define Segment Adjusted segment adjusted EBITDA as revenues and equity earnings in unconsolidated entities less (a) purchases and related costs, (b) field operating costs and (c) segment general and administrative expenses, plus our proportionate share of the depreciation and amortization expense and gains and or losses on significant asset sales by of unconsolidated entities, and further adjusted for certain selected items including (i) gains or losses on derivative instruments that are related to underlying activities in another period (or the reversal of such adjustments from a prior period), gains and losses on derivatives that are related to investing activities (such as the purchase of linefill) and inventory valuation adjustments, as applicable, (ii) long-term inventory costing adjustments, (iii) charges for obligations that are expected to be settled with the issuance of equity instruments, (iv) amounts related to deficiencies associated with minimum volume commitments, net of applicable amounts subsequently recognized into revenue and (v) other items that our CODM believes are integral to understanding our core segment operating performance. Segment Adjusted adjusted EBITDA excludes depreciation and amortization. As an MLP, we make quarterly distributions Maintenance capital consists of capital expenditures for the replacement and/or refurbishment of partially or fully depreciated assets in order to maintain the operating and/or earnings capacity of our “available cash” (as defined in our partnership agreement) to our unitholdersexisting assets. We look at each period’s earnings before non- non-cash depreciation and amortization as an important measure of segment performance. The exclusion of depreciation and amortization expense could be viewed as limiting the usefulness of Segment Adjusted segment adjusted EBITDA as a performance measure because it does not account in current periods for the implied reduction in value of our capital assets, such as crude oil pipelines and facilities, caused by age-age- related decline and wear and tear. We compensate for this limitation by recognizing that depreciation and amortization are largely offset by repair and maintenance investments, which act to partially offset the aging and wear and tear in the value of our principal fixed assets. These maintenance investments are a component of field operating costs included in Segment Adjusted segment adjusted EBITDA or in maintenance capital, depending on the nature of the cost. Capital expenditures made to expand the existing operating and/or earnings capacity of our assets are classified as expansion capital. Capital expenditures for the replacement and/or refurbishment of partially or fully depreciated assets in order to maintain the operating and/or earnings capacity of our existing assets are classified as maintenance capital, which is deducted in determining “available cash.” . Repair and maintenance expenditures incurred in order to maintain the day to day operation of our existing assets are charged to expense as incurred. The following tables reflect certain financial data for each segment (in millions): Transportation Facilities Supply and Logistics Intersegment Adjustment Total Revenues: External customers (1) $ 1,116 $ 588 $ 32,819 $ (468) $ 34,055 Intersegment (▇) ▇▇▇ ▇▇▇ ▇ ▇▇▇ 1,918 Total revenues of reportable segments $ 1,990 $ 1,161 $ 32,822 $ — $ 35,973 Equity earnings in unconsolidated entities $ 375 $ — $ — $ 375 Segment Adjusted EBITDA $ 1,508 $ 711 $ 462 $ 2,681 Capital expenditures (3) $ 1,631 $ 234 $ 23 $ 1,888 Maintenance capital $ 139 $ 100 $ 13 $ 252 Total assets $ 13,288 $ 7,200 $ 5,023 $ 25,511 Investments in unconsolidated entities $ 2,594 $ 108 $ — $ 2,702 Revenues: External customers (1) $ 1,021 $ 555 $ 25,056 $ (409) $ 26,223 Intersegment (▇) ▇▇▇ ▇▇▇ ▇ ▇▇▇ 1,733 Total revenues of reportable segments $ 1,718 $ 1,173 $ 25,065 $ — $ 27,956 Equity earnings in unconsolidated entities $ 290 $ — $ — $ 290 Segment Adjusted adjusted EBITDA $ 1,287 $ 734 $ 60 $ 2,081 Capital expenditures (3) $ 2,126 $ 312 $ 20 $ 2,458 Maintenance capital $ 120 $ 114 $ 13 $ 247 Total assets $ 12,661 13,362 $ 7,313 7,593 $ 5,377 5,798 $ 25,351 26,753 Investments in unconsolidated entities $ 2,681 $ 75 $ — $ 2,756 Transportation Facilities Supply and Logistics Intersegment Adjustment Total Revenues: External customers (1) $ 954 $ 546 $ 19,004 $ (322) $ 20,182 Intersegment (▇) ▇▇▇ ▇▇▇ ▇▇ ▇▇▇ ▇,527 Total revenues of reportable segments $ 1,584 $ 1,107 $ 19,018 $ — $ 21,709 Equity earnings in unconsolidated entities $ 195 $ — $ — $ 195 Segment Adjusted adjusted EBITDA $ 1,141 $ 667 $ 359 $ 2,167 Capital expenditures (3) $ 1,063 $ 577 $ 54 $ 1,694 Maintenance capital $ 121 $ 55 $ 10 $ 186 Total assets $ 10,917 11,863 $ 7,556 7,878 $ 5,737 6,362 $ 24,210 26,103 Investments in unconsolidated entities $ 2,290 $ 53 $ — $ 2,3432,343 Transportation Facilities Supply and Logistics Intersegment Adjustment Total Revenues: External customers (1) $ 953 $ 528 $ 21,927 $ (256) $ 23,152 Intersegment (▇) ▇▇▇ ▇▇▇ ▇▇ ▇▇▇ ▇,437 Total revenues of reportable segments $ 1,594 $ 1,050 $ 21,945 $ — $ 24,589 Equity earnings in unconsolidated entities $ 183 $ — $ — $ 183 Segment adjusted EBITDA $ 1,056 $ 588 $ 568 $ 2,212 Capital expenditures (3) $ 1,278 $ 813 $ 184 $ 2,275 Maintenance capital $ 144 $ 68 $ 8 $ 220 Total assets $ 11,272 $ 7,645 $ 5,225 $ 24,142 Investments in unconsolidated entities $ 1,998 $ 29 $ — $ 2,027 (1) Transportation revenues from external customers include inventory exchanges that are substantially similar to tariff- like arrangements with our customers. Under these arrangements, our Supply and Logistics segment has transacted the inventory exchange and serves as the shipper on our pipeline systems. See Note 2 for a discussion of our related accounting policy. We have included an estimate of the revenues from these inventory exchanges in our Transportation segment revenue presented above and adjusted those revenues out such that Total revenue from External customers reconciles to our Consolidated Statements of Operations. This presentation is consistent with the information provided to our CODM. (2) Segment revenues include intersegment amounts that are eliminated in Purchases and related costs and Field operating costs in our Consolidated Statements of Operations. Intersegment sales are conducted at posted tariff rates, rates similar to those charged to third parties or rates that we believe approximate market. (3) Expenditures for acquisition capital and expansion capital, including investments in unconsolidated entities.