================================================================================ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported) - June 22, 2001 PLAINS ALL AMERICAN PIPELINE, L.P. (Name of Registrant as specified in its charter) DELAWARE 0-9808 76-0582150 (State or other jurisdiction (Commission File Number) (I.R.S.Employer of incorporation or organization) Identification No.) 500 DALLAS STREET, SUITE 700 HOUSTON, TEXAS 77002 (713) 654-1414 (Address, including zip code, and telephone number, including area code, of Registrant's principal executive offices) N/A (Former name or former address, if changed since last report.) ================================================================================
ITEM 5. OTHER EVENTS Plains All American Pipeline, L.P. has commenced a private placement of senior notes due 2011 pursuant to exemptions from registration of the offering under the Securities Act of 1933. This Form 8-K does not constitute an offer to sell or a solicitation of an offer to buy the notes. The offering of notes will not be registered under the Securities Act or applicable state securities laws and the notes may not be offered or sold in the United States absent available exemptions from such registration requirements. Certain financial statements included in the offering memorandum have not been previously publicly disclosed, and are attached to this Form 8-K as Exhibits 99.1, 99.2, 99.3 and 99.4. Item 7. Financial Statements and Exhibits (c) Exhibits 99.1 Murphy Oil Company Ltd. Supply and Transportation Business Unaudited Interim Financial Statements. 99.2 Murphy Oil Company Ltd. Supply and Transportation Business Financial Statements. 99.3 Summary Selected Historical and Pro Forma Financial and Operating Data for Plains All American Pipeline, L.P. 99.4 Unaudited Pro Forma Consolidated Financial Statements of Plains All American Pipeline, L.P.
SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. PLAINS ALL AMERICAN PIPELINE, L.P. Date: June 25, 2001 By: Plains AAP, L.P., its general partner By: Plains All American GP LLC, its general partner By: /s/ Tim Moore ----------------------------------- Name: Tim Moore Title: Vice President
INDEX TO EXHIBITS 99.1 Murphy Oil Company Ltd. Supply and Transportation Business Unaudited Interim Financial Statements. 99.2 Murphy Oil Company Ltd. Supply and Transportation Business Financial Statements. 99.3 Summary Selected Historical and Pro Forma Financial and Operating Data for Plains All American Pipeline, L.P. 99.4 Unaudited Pro Forma Consolidated Financial Statements of Plains All American Pipeline, L.P.
EXHIBIT 99.1 MURPHY OIL COMPANY LTD. SUPPLY & TRANSPORTATION BUSINESS BALANCE SHEET As at March 31, 2001 (expressed in thousands of U.S. dollars) 2001 -------- ASSETS Current assets Cash.................................................................. $ 3,782 Accounts receivable Trade............................................................... 58,173 Related parties..................................................... 2,861 Inventory............................................................. 3,751 Deferred income tax................................................... 1,660 -------- 70,227 Property and equipment--net........................................... 52,298 -------- $122,525 ======== LIABILITIES AND OWNERS' NET INVESTMENT Current liabilities Accounts payable and other accrued liabilities Trade............................................................... $ 40,125 Related parties..................................................... 16,116 -------- 56,241 Deferred income taxes................................................. 2,872 -------- 59,113 -------- Commitments and contingencies (Note 2)................................ -- Owners' Net Investment................................................ 63,412 -------- $122,525 ======== See notes to the financial statements. 1
MURPHY OIL COMPANY LTD. SUPPLY & TRANSPORTATION BUSINESS STATEMENT OF OPERATIONS AND NET INVESTMENT For the period ended March 31, 2001 (expressed in thousands of U.S. dollars) 2001 -------- Revenues Crude oil and condensate sales........................................ $129,937 Crude oil and condensate sales--related parties....................... 24,768 Pipeline tariffs...................................................... 2,227 Trucking.............................................................. 3,799 Trucking--related parties............................................. 534 -------- 161,265 -------- Costs and expenses Cost of crude oil and condensate sales................................ 104,468 Cost of crude oil and condensate sales--related parties............... 42,711 Pipeline tariff expense............................................... 801 Operating costs....................................................... 6,807 General and administrative............................................ 493 Depreciation and amortization......................................... 700 -------- 155,980 -------- Income before income taxes............................................ 5,285 -------- Income tax expense Current............................................................... 2,180 Deferred.............................................................. 147 -------- 2,327 -------- Net income for the year............................................... 2,958 Owners' net investment--Beginning of period........................... 60,454 -------- Owners' net investment--End of period................................. $ 63,412 ======== See notes to the financial statements. 2
MURPHY OIL COMPANY LTD. SUPPLY & TRANSPORTATION BUSINESS STATEMENT OF CASH FLOWS For the period ended March 31, 2001 (expressed in thousands of U.S. dollars) 2001 ------- Cash provided by (used in) Operating activities Net income for the year................................................ $ 2,958 Items not affecting cash Depreciation and amortization........................................ 700 Deferred income tax.................................................. 147 ------- 3,805 ------- Net change in non-cash working capital items Accounts receivable Trade.............................................................. 5,217 Related party...................................................... 11,675 Inventory............................................................ 1,148 Accounts payable and other accrued liabilities Trade.............................................................. (10,282) Related party...................................................... (7,767) ------- (9) ------- 3,796 ------- Investing activities Capital expenditures................................................... (14) ------- Increase in cash for the period........................................ -- Cash--Beginning of period.............................................. -- ------- Cash--End of period.................................................... $ 3,782 ======= See notes to the financial statements. 3
MURPHY OIL COMPANY LTD. SUPPLY & TRANSPORTATION BUSINESS NOTES TO FINANCIAL STATEMENTS March 31, 2001 Note--1 Organization and basis of presentation The Supply and Transportation business is involved in the pipeline transport of crude oil and condensates, including associated services of trucking and terminalling, and marketing of crude oil in Western Canada. The accompanying financial statements present, in conformity with accounting principles generally accepted in the United States of America the assets, liabilities, revenues and expenses related to the historical operations of the Canadian supply and transportation ("S&T") business of the Murphy Oil Company Ltd. ("Murphy"). These financial statements should be read in conjunction with the Murphy S&T financial statements for the year ended December 31, 2000. The interim financial statements as of March 31, 2001 and for the three months ended March 31, 2001 is unaudited; however, in the opinion of the S&T Business, the interim statements includes all adjustments, consisting only of normal recurring adjustments, necessary for a fair statement of the results for the interim period. The accompanying financial statements have been prepared from Murphy's historical accounting records and are presented on a carve-out basis to include the historical operations applicable to the S&T business. All assets and liabilities specifically identified with the S&T business have been presented in the balance sheet. The owner's net investment ("Owner's net investment") in the S&T business has been presented in lieu of stockholder's equity in the financial statements. The financial information included herein includes certain allocations based on historical activity levels to reflect the financial statements in accordance with accounting principles generally accepted in the United States of America and may not necessarily reflect the financial position or results of operations of the S&T business in the future or had it existed as a separate, stand-alone business during the period presented. The allocations consist of general and administrative expenses incurred on behalf of the S&T business by Murphy. This allocation has been made on a reasonable basis. No amount in respect of interest has been allocated to this business. Note--2 Commitments and contingencies Purchase and sales agreements The S&T business has entered into evergreen purchase and sales agreements, cancellable with thirty days notice, for crude oil and condensates. At March 31, 2001, the S&T business had evergreen contracts for purchases of 427,000 m/3/ and sales of 304,000 m/3/ of crude oil and condensates at market related prices. Environmental matters The parent, Murphy is liable for the reclamation costs associated with a condensate spill on the Dulwich pipeline. The amount of reclamation costs is dependent upon the method selected under current environmental laws but has been estimated by management to be in the range of $67,000 to $1,901,000. An accrual for these clean up costs has not been provided for in these financial statements. 4
MURPHY OIL COMPANY LTD. SUPPLY & TRANSPORTATION BUSINESS NOTES TO FINANCIAL STATEMENTS Note--3 Segment information The S&T division's reportable segments are organized into three major types of business activities all operating within one geographic area, Western Canada. The pipeline segment derives tariff revenue primarily from the transportation of crude oil, the crude oil trading segment derives revenue from the purchase and sale of crude oil and the trucking segment derives revenue from the use of tractor trailers in hauling petroleum products and water. Information about business segments is reported on the following tables. Corporate and other activities are shown in the tables to reconcile the business segments to the financial statement totals. Corporate Crude oil and Pipelines trading Trucking eliminations Total --------- --------- -------- ------------ -------- Revenues from external customers................. $4,902 $129,930 $5,072 $(3,941) $135,963 Revenues from related parties................... -- 24,768 534 -- 25,302 -------- Total revenues............. 161,265 Income tax expense......... (132) 2,952 (284) (209) 2,327 Significant non-cash charges (credits) Depreciation and amortization............ 609 -- 91 -- 700 Deferred income taxes.... 147 -- -- -- 147 Additions to property and equipment................. 14 -- -- -- 14 Property and equipment..... 50,011 -- 2,287 -- 52,298 Net income (loss).......... (169) 3,773 (363) (283) 2,958 Note--4 Subsequent Event In May 2001, substantially all of the crude oil pipeline, gathering, storage and terminalling assets of Murphy were acquired by Plains All American Pipeline, L.P. ("PAA") for approximately $161.0 million in cash. The purchase price included $6.5 million for excess inventory in the systems. The principle assets acquired include four pipeline systems covering 275 miles, approximately 1.1 million barrels of crude oil storage and terminalling capacity located primarily in Kerrobert, Saskatchewan, approximately 254,000 barrels of linefill and tank bottoms and 121 trailers used primarily for crude oil transportation. PAA has entered into a new long-term contract with Murphy to continue transporting its production from fields currently delivering crude oil to these pipelines systems. The current volume transported for Murphy under the contract is approximately 11,000 barrels per day. In aggregate, the pipeline systems transport approximately 200,000 barrels per day of light, medium and heavy crudes, as well as condensate. 5
EXHIBIT 99.2 MURPHY OIL COMPANY LTD. SUPPLY & TRANSPORTATION BUSINESS BALANCE SHEET As at December 31, 2000 (expressed in thousands of U.S. dollars) 2000 -------- ASSETS Current assets Accounts receivable Trade............................................................... $ 65,775 Related parties (Note 4)............................................ 14,877 Inventory............................................................. 5,069 Deferred income tax (Note 5).......................................... 1,933 -------- 87,654 Property and equipment--net (Note 3).................................. 55,050 -------- $142,704 ======== LIABILITIES AND OWNERS' NET INVESTMENT Current liabilities Accounts payable and other accrued liabilities Trade............................................................... $ 50,986 Related parties (Note 4)............................................ 25,791 -------- 76,777 Deferred income taxes (Note 5)........................................ 3,042 -------- 79,819 Commitments and contingencies (Note 7)................................ -- Owners' Net Investment................................................ 62,885 -------- $142,704 ======== See notes to the financial statements. 1
MURPHY OIL COMPANY LTD. SUPPLY & TRANSPORTATION BUSINESS STATEMENT OF OPERATIONS AND NET INVESTMENT For the year ended December 31, 2000 (expressed in thousands of U.S. dollars) 2000 -------- Revenues Crude oil and condensate sales........................................ $536,060 Crude oil and condensate sales--related parties....................... 106,479 Pipeline tariffs...................................................... 9,756 Trucking.............................................................. 13,176 Trucking--related parties............................................. 1,852 -------- 667,323 -------- Costs and expenses Cost of crude oil and condensate sales................................ 438,931 Cost of crude oil and condensate sales--related parties............... 179,456 Pipeline tariff expense............................................... 8,668 Operating costs....................................................... 21,279 General and administrative............................................ 1,834 Depreciation and amortization......................................... 2,660 -------- 652,828 -------- Income before income taxes............................................ 14,495 -------- Income tax expense (Note 5) Current............................................................... 6,455 Deferred.............................................................. 143 -------- 6,598 -------- Net income for the year............................................... 7,897 Owners' net investment--Beginning of year............................. 54,988 -------- Owners' net investment--End of year................................... $ 62,885 ======== See notes to the financial statements. 2
MURPHY OIL COMPANY LTD. SUPPLY & TRANSPORTATION BUSINESS STATEMENT OF CASH FLOWS For the year ended December 31, 2000 (expressed in thousands of U.S. dollars) 2000 ------- Cash provided by (used in) Operating activities Net income for the year................................................ $ 7,897 Items not affecting cash Depreciation and amortization........................................ 2,660 Deferred income tax.................................................. 143 ------- 10,700 ------- Net change in non-cash working capital items Accounts receivable Trade.............................................................. (22,994) Related party...................................................... (2,771) Inventory............................................................ 209 Accounts payable and other accrued liabilities Trade.............................................................. 14,360 Related party...................................................... 13,524 ------- 2,328 ------- 13,028 ------- Investing activities Capital expenditures................................................... (29,236) ------- Financing activity Cash contributions by owner............................................ 16,208 ------- Increase in cash for the year.......................................... -- Cash--Beginning of year................................................ -- ------- Cash--End of year...................................................... $ -- ======= See notes to the financial statements. 3
MURPHY OIL COMPANY LTD. SUPPLY & TRANSPORTATION BUSINESS NOTES TO FINANCIAL STATEMENTS December 31, 2000 Note--1 Organization and basis of presentation The Supply and Transportation business is involved in the pipeline transport of crude oil and condensates, including associated services of trucking and terminalling, and marketing of crude oil in Western Canada. The accompanying financial statements present, in conformity with accounting principles generally accepted in the United States of America the assets, liabilities, revenues and expenses related to the historical operations of the Canadian supply and transportation ("S&T") business of the Murphy Oil Company Ltd. ("Murphy"). The accompanying financial statements have been prepared from Murphy's historical accounting records and are presented on a carve-out basis to include the historical operations applicable to the S&T business. All assets and liabilities specifically identified with the S&T business have been presented in the balance sheet. The owner's net investment ("Owner's net investment") in the S&T business has been presented in lieu of stockholder's equity in the financial statements. The financial information included herein includes certain allocations based on historical activity levels to reflect the financial statements in accordance with U.S. generally accepted accounting principles and may not necessarily reflect the financial position, results of operations of cash flows of the S&T business in the future or had it existed as a separate, stand-alone business during the period presented. The allocations consist of general and administrative expenses incurred on behalf of the S&T business by Murphy. This allocation has been made on a reasonable basis. No amount in respect of interest has been allocated to this business. Note--2 Significant accounting policies Use of estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities and the disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reported period. Significant estimates made by management include depreciation, impairment of long-lived assets, salvage values and income taxes and related deferred tax valuation allowance. Although management believes these estimates are reasonable, actual results could differ from those estimates. Revenue recognition Gathering and marketing revenues are accrued at the time title to the product sold transfers to the purchaser, which occurs upon receipt of the product by the purchaser, and purchases are accrued at the time title to the product purchased transfers to the S&T business, which occurs upon receipt of the product. Terminalling and storage revenues are recognized at the time service is performed. Revenues for the transportation of crude are recognized based upon regulated and non-regulated tariff rates and the related transportation volumes. Trucking revenue is recognized when the transportation services have been rendered. Foreign currency translation The functional currency of the S&T business is Canadian dollars. The translation of these financial statements into United States of America dollars (U.S. dollars) have been recorded using the exchange rate at the balance sheet date for assets and liabilities and the exchange rate applicable at the date of transaction for the revenues, expenses and cash flows. The effect of translating the S&T business into U.S. dollars is included in owners' net investment. 4
MURPHY OIL COMPANY LTD. SUPPLY & TRANSPORTATION BUSINESS NOTES TO FINANCIAL STATEMENTS Pipeline tariff expense Pipeline tariff expense represents amounts paid to third parties to transport crude oil and condensates. These costs are expensed on an accrual basis. Property and equipment Crude oil pipeline, gathering and terminal assets are carried at cost. Costs subject to depreciation are net of expected salvage values and depreciation is calculated on a straight-line basis over the estimated useful lives of the respective assets as follows: . Crude oil pipelines--10 to 35 years; . Crude oil pipeline operation facilities--10 years; . Crude oil terminal, storage facilities and communication equipment--10 years; . Trucking equipment--10 years. Acquisitions and improvements are capitalized; maintenance and repairs are expensed as incurred. Pipeline linefill is recorded at cost and consists of oil linefill used to pack a pipeline such that when an incremental barrel enters a pipeline it forces a barrel out of another location. Net gains or losses on property and equipment disposed of are reflected in the statement of operations and net investment when incurred. Impairment of long-lived assets The carrying values of long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of any asset may not be recoverable. Recoverability of the carrying value of an asset is assessed by reference to an estimate of the asset's undiscounted future net cash flows. Measurement of any impairment would include a comparison of discounted estimated future net cash flows to the net carrying value of the related assets. Inventories Inventories of crude oil and condensates are valued at the lower of cost, calculated on a last in first out (LIFO) basis, or market value. At December 31, 2000 the replacement cost of crude oil and condensate inventory was $9,304,435. Environmental liabilities A provision for environmental obligations is charged to expense when the S&T business' liability for an environmental assessment and/or clean up is probable and the cost can be reasonably estimated. Related expenditures are charged against the reserve. Environmental remediation liabilities have not been discounted for the time value of future expected payments. Income taxes The S&T business accounts for income taxes using the asset and liability method in accordance with Statement of Financial Accounting Standards No. 109, Accounting for Income Taxes. Under this method, income taxes are provided for amounts currently payable, and for amounts deferred as tax assets and liabilities 5
MURPHY OIL COMPANY LTD. SUPPLY & TRANSPORTATION BUSINESS NOTES TO FINANCIAL STATEMENTS based on differences between the financial statement carrying amounts and the tax bases of existing assets and liabilities. Deferred income taxes are measured using enacted tax rates that are assumed to be in effect when the differences reverse. Income taxes have been calculated as if the S&T business had filed a separate return for the year ended December 31, 2000. Fair value of financial instruments Pursuant to Statement of Financial Accounting Standards No. 107, Disclosure About Fair Value of Financial Instruments, the S&T business has estimated fair value of its accounts receivables, due from related party and accounts payable and accrued liabilities to approximate the carrying values due to the short term to maturity of these instruments. Recent accounting pronouncements In June 1998, the FASB issued Statement of Financial Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging Activities ("SFAS 133"). SFAS 133, as amended by SFAS 138, requires that all derivative instruments be recorded on the balance sheet at their fair value. Changes in the fair value of derivatives are recorded each period in current earnings or other comprehensive income, depending on whether a derivative is designated as part of the hedge transaction and, if so, the type of hedge transaction. For fair value hedge transactions in which the S&T business is hedging changes in an asset's, liability's, or firm commitment's fair value, changes in the fair value of the derivative instrument will generally be offset in the income statement by changes in the hedged item's fair value. For cash flows related to a variable rate asset, liability, or a forecasted transaction, changes in the fair value of the derivative instrument will be reported in other comprehensive income. The gains and losses on the derivative instrument that are reported in other comprehensive income will be reclassified as earnings in the periods in which earnings are affected by the variability of the cash flows of the hedged item. The S&T business is required to adopt this statement beginning in fiscal 2001. Management has determined that there is no effect on the financial statements of the adoption of SFAS 133. Note--3 Property and equipment Accumulated Cost amortization Net -------- ------------ ------- Pipelines......................................... $ 52,090 $(16,760) $35,330 Pipeline equipment................................ 19,408 (3,052) 16,356 Trucking equipment................................ 5,721 (3,342) 2,379 Linefill.......................................... 985 -- 985 -------- -------- ------- $ 78,204 $(23,154) $55,050 ======== ======== ======= During the year ended December 31, 2000, the S&T business acquired a partner's ownership interest in the Manito pipeline for $26.6 million. 6
MURPHY OIL COMPANY LTD. SUPPLY & TRANSPORTATION BUSINESS NOTES TO FINANCIAL STATEMENTS Note--4 Related party transactions and balances During the year ended December 31, 2000, the S&T business has entered into transactions with other divisions of Murphy and affiliated companies. All transactions were entered into in the ordinary course of business at market prices. The aggregate amounts of related party transactions were as follows: Revenues Crude oil and condensate sales................................... $106,479 Trucking......................................................... 1,852 Costs and expenses Cost of crude oil and condensate purchases....................... 179,456 General and administrative....................................... 925 Revenues Sales to related parties are derived from the crude oil and condensate sales and trucking services to Murphy and its affiliates. Costs and expenses The S&T business purchases crude oil and condensate from related parties. General and administrative costs are allocated to the S&T business and other divisions of Murphy. Accounts receivable--related parties The accounts receivable from related party represents crude oil and condensate sales to related parties subject to normal customer trade terms. Accounts payable and other accrued liabilities--related parties The accounts payable to related parties represents crude oil and condensate purchases from related parties subject to normal customer trade terms and the S&T business current income tax payable which is paid by Murphy. As described above, the S&T business has significant transactions and balances with related parties. Because of these relationships, it is possible that the terms of the these transactions are not the same as those that would result from transactions among wholly unrelated parties. 7
MURPHY OIL COMPANY LTD. SUPPLY & TRANSPORTATION BUSINESS NOTES TO FINANCIAL STATEMENTS Note--5 Income taxes Deferred income taxes are provided for the temporary differences between the book and tax bases of the S&T business's assets and liabilities. Significant components of deferred tax assets and liabilities as of December 31, 2000 are as follows: Deferred tax assets Inventories...................................................... $ 1,933 ------- Deferred tax liabilities Property and equipment............................................. (3,042) ------- Financial statements Current deferred tax assets........................................ 1,933 Non-current deferred tax liabilities............................... (3,042) ------- Net deferred tax liability......................................... $(1,109) ======= The reconciliation of the differences between the company's tax expense for income taxes and taxes at the statutory rate is as follows: Income tax expense based on the Canadian Statutory rate (44.89%)..... $6,506 Non-deductible items................................................. 92 ------ Total income tax expense............................................. $6,598 ====== Note--6 Financial instruments The S&T business is primarily responsible for the transportation and sale of Murphy owned production in Western Canada, and, accordingly the S&T business enters into various forward purchase and sale agreements for crude oil and condensates. The extent of these agreements are disclosed in Note 7. The S&T business primary credit risks are associated with trade accounts receivable, evergreen sales contracts and cash. Trade accounts receivable arise mainly from the sale of crude oil and condensates, pipeline tariffs charged to shippers on S&T pipelines, and for trucking services performed. The credit history and financial condition of potential customers are reviewed before credit is extended, security is obtained when deemed appropriate based on a potential customers' financial condition, and routine follow-up evaluations are made. The combination of these evaluations and the large number of customers tends to limit the risk of credit concentration to an acceptable level. Note--7 Commitments and contingencies Purchase and sales agreements The S&T business has entered into evergreen purchase and sales agreements, cancellable with thirty days notice, for crude oil and condensates. As at December 31, 2000, the S&T business had evergreen contracts for purchases of 444,000 m3 and sales of 298,000 m3 of crude oil and condensates at market related prices. 8
MURPHY OIL COMPANY LTD. SUPPLY & TRANSPORTATION BUSINESS NOTES TO FINANCIAL STATEMENTS Environmental matters The parent, Murphy, is liable for the reclamation costs associated with a condensate spill on the Dulwich pipeline. The amount of reclamation costs is dependent upon the method selected under current environmental laws but has been estimated by management to be in the range of $67,000 to $1,901,000. An accrual for these clean up costs has not been provided for in these financial statements. Note--8 Employee and retiree benefit plans Murphy provides pension plans to its employees, including persons employed in the S&T business. Murphy has a defined benefit and defined contribution pension plan covering all the S&T employees. The defined benefit pension plan provides a pension based on a formula of best average earnings and years of credited service. The plan is non- contributory however, an optional ancillary contribution account to provide ancillary benefits or enhancements to the defined benefit pension is contributory. The net pension credit recognized in the S&T business earnings under the defined benefit pension plan for the year ended December 31, 2000 was $583,000. The defined contribution plan provides benefits based on the accumulated balance in an employees account. The plan is non-contributory, however, employees may contribute up to 2% of their earnings as an optional contribution which is matched by Murphy dollar for dollar. The amount charged to the S&T business earnings under the defined contribution pension plan for the year ended December 31, 2000 was $61,000. Note--9 Segment information The S&T division's reportable segments are organized into three major types of business activities all operating within one geographic area, Western Canada. The pipeline segment derives tariff revenue primarily from the transportation of crude oil, the crude oil trading segment derives revenue from the purchase and sale of crude oil and the trucking segment derives revenue from the use of tractor trailers in hauling petroleum products and water. Information about business segments is reported on the following tables. Corporate and other activities are shown in the tables to reconcile the business segments to the financial statement totals. Crude Corporate oil and Pipelines trading Trucking eliminations Total --------- -------- -------- ------------ -------- Revenues from external customers.................. $16,137 $536,059 $15,443 $(8,646) $558,992 Revenues from related parties (note 4)........... -- 106,479 1,852 -- 108,331 Total revenues.............. 667,323 Income tax expense.......... 3,224 3,525 641 (792) 6,598 Significant non-cash charges (credits) Depreciation and abandonment.............. 2,151 -- 374 135 2,660 Deferred income taxes..... 143 -- -- -- 143 Additions to property and equipment.................. 29,236 -- -- -- 29,236 Property and equipment...... 52,672 -- 2,378 -- 55,050 Net income (loss)........... 3,957 4,329 787 (1,176) 7,897 9
EXHIBIT 99.3 SUMMARY SELECTED HISTORICAL AND PRO FORMA FINANCIAL AND OPERATING DATA The historical financial information below for Plains All American Pipeline was derived from our audited consolidated financial statements as of December 31, 1999 and 2000 and for the years then ended and from our unaudited financial statements as of and for the three months ended March 31, 2000 and 2001. The selected financial data should be read in conjunction with the consolidated and combined financial statements, including the notes thereto, the unaudited pro forma consolidated financial statements and "Management's Discussion and Analysis of Financial Condition and Results of Operations," each as included in our Form 10-K for the year ended December 31, 2000 and our Form 10-Q for the quarter ended March 31, 2001. The unaudited pro forma as adjusted information presented below gives effect to: (a) the completion of the notes offering, (b) our Murphy acquisition in May 2001 and (c) our public offering of 3,966,700 common units for total net proceeds of approximately $100.7 million. The unaudited pro forma as adjusted information does not reflect our pending CANPET acquisition. A more complete description of these adjustments is included in the notes to our unaudited pro forma consolidated financial statements. Historical Pro Forma As Adjusted ----------------------------------------------- ------------------------- Year Ended Three Months Ended Three Months December 31, March 31, Year Ended Ended ----------------------- ---------------------- December 31, March 31, 1999 2000 2000 2001 2000 2001 ----------- ---------- ---------- ---------- ------------ ------------ (unaudited) (unaudited) (in thousands, except per unit amounts) Statement of Operations Data: Revenues................ $10,910,423 $6,641,187 $2,002,507 $1,520,124 $7,310,717 $1,681,389 Cost of sales and operations............. 10,800,109 6,506,504 1,965,955 1,487,394 7,156,530 1,642,487 Unauthorized trading losses and related expenses (1)........... 166,440 6,963 -- -- 6,963 -- ----------- ---------- ---------- ---------- ---------- ---------- Gross margin............ (56,126) 127,720 36,552 32,730 147,224 38,902 ----------- ---------- ---------- ---------- ---------- ---------- General and administrative expenses (2).................... 23,211 40,821 8,626 8,989 43,693 9,233 Depreciation and amortization........... 17,344 24,523 10,138 4,670 32,270 6,607 Restructuring expense... 1,410 -- -- -- -- -- ----------- ---------- ---------- ---------- ---------- ---------- Total expenses.......... 41,965 65,344 18,764 13,659 75,963 15,840 ----------- ---------- ---------- ---------- ---------- ---------- Operating income (loss)................. (98,091) 62,376 17,788 19,071 71,261 23,062 Interest expense........ (21,139) (28,691) (9,158) (6,606) (41,571) (9,826) Gain on sale of assets (3).................... 16,457 48,188 48,188 -- 48,188 -- Interest and other income (4)............. 958 10,776 7,482 42 10,776 42 ----------- ---------- ---------- ---------- ---------- ---------- Income (loss) from continuing operations before extraordinary item................... $ (101,815) $ 92,649 $ 64,300 $ 12,507 $ 88,654 $ 13,278 =========== ========== ========== ========== ========== ========== Basic and diluted income (loss) from continuing operations per limited partner unit before extraordinary item (5).................... $ (3.16) $ 2.64 $ 1.83 $ 0.36 $ 2.27 $ 0.34 =========== ========== ========== ========== ========== ========== Weighted average number of limited partner units outstanding...... 31,633 34,386 34,386 34,386 38,353 38,353 =========== ========== ========== ========== ========== ========== Cash distributions per common unit............ $ 1.84 $ 1.84 $ 0.45 $ 0.46 =========== ========== ========== ========== 1
Historical Pro Forma As Adjusted -------------------------------------------- ------------------------- Year Ended Three Months Ended Three Months December 31, March 31, Year Ended Ended --------------------- --------------------- December 31, March 31, 1999 2000 2000 2001 2000 2001 ---------- --------- ---------- --------- ------------ ------------ (unaudited) (unaudited) (in thousands, except ratios and operating data) Balance Sheet Data (at end of period): Working capital (6).... $ 101,539 $ 47,111 $ 53,914 $ 39,960 $ 115,311 Total assets........... 1,223,037 885,801 1,036,713 889,477 1,123,666 Total long-term debt (7)................... 373,450 320,000 273,100 316,550 450,000 Partners' capital...... 192,973 213,999 242,075 208,185 308,924 Other Data: Adjusted EBITDA (8).... $ 89,074 $ 103,048 $ 28,737 $ 23,904 $120,136 $ 29,946 Maintenance capital expenditures (9)...... 1,741 1,785 668 409 Net cash provided by (used in) operating activities............ (71,245) (33,511) (42,574) 10,568 Net cash provided by (used in) investing activities............ (186,093) 211,001 216,902 (2,247) Net cash provided by (used in) financing activities............ 305,603 (227,832) (220,903) (10,545) Long-term debt to adjusted EBITDA (10)(18).............. 4.19x 3.11x 2.38x 3.31x 3.19x Ratio of earnings to fixed charges (11).... -- 3.78x 7.34x 2.59x 2.90x 2.19x Adjusted EBITDA to interest expense (12).................. 4.21x 3.59x 3.14x 3.62x 3.09x 3.28x Long-term debt to total capital (18).... 66% 60% 53% 60% 55% Operating Data: Volumes (barrels per day): All American Tariff (13)................ 102,700 73,800 71,000 70,000 Margin (14).......... 54,100 60,000 44,000 65,000 Other.................. 61,400 106,500 139,000 161,000 ---------- --------- ---------- --------- Total pipeline....... 218,200 240,300 254,000 296,000 ========== ========= ========== ========= Lease gathering (15)... 264,700 262,600 257,000 288,000 Bulk purchases (16).... 138,200 27,700 29,000 21,000 ---------- --------- ---------- --------- Total................ 402,900 290,300 286,000 309,000 ========== ========= ========== ========= Terminal throughput (17).................. 83,300 67,000 50,000 97,000 ========== ========= ========== ========= Storage leased to third parties (average)............. 1,975,000 1,657,000 820,000 1,931,000 ========== ========= ========== ========= - -------- (1) In November 1999, we discovered that a former employee had engaged in unauthorized trading activity, resulting in losses of approximately $174.0 million, including estimated associated costs and legal expenses, of which $166.4 million and $7.1 million were recognized in 1999 and 1998, respectively. In 2000, we recognized an additional $7.0 million charge for litigation related to the unauthorized trading losses. See "Management's Discussion and Analysis of Financial Condition and Results of Operation-- Unauthorized Trading Losses" in our Form 10-K for the year ended December 31, 2001. (2) General and administrative expense for 2000 includes a $5.0 million charge to reserve potentially uncollectible accounts receivable and a $3.1 million charge for non-cash compensation expense. General and administrative expense for 1999 includes a $1.0 million charge for non- cash compensation expense. See "Management's Discussion and Analysis of Financial Condition and Results of Operations--Results of Operations" in our Form 10-K for the year ended December 31, 2001. (3) In March 2000, we completed the sale of 5.2 million barrels of crude oil linefill from the All American Pipeline. We recognized gains of $28.1 million and $16.5 million in 2000 and 1999, respectively, in connection with that sale. We also sold a segment of the All American Pipeline to El Paso Corporation and recognized a gain of $20.1 million in the first quarter of 2000. 2
(4) For the year ended December 31, 2000, this amount includes $9.7 million of previously deferred gains from terminated interest rate swaps recognized as a result of debt extinguishment. (5) Basic and diluted income (loss) from continuing operations per unit is computed by dividing the limited partners' interest in income (loss) from continuing operations by the weighted average number of outstanding common and subordinated units. (6) At December 31, 1999, working capital included $37.9 million of pipeline linefill and $103.6 million for a segment of the All American Pipeline, both of which were sold in the first quarter of 2000. (7) Excludes short-term borrowings primarily related to hedged inventory and margin deposits of $110.2 million and $1.3 million at December 31, 1999 and 2000, respectively, and $0.0 and $10.5 million at March 31, 2000 and 2001, respectively. The amount borrowed at December 31, 1999, includes $40.0 million attributable to the sale of linefill from the All American Pipeline. See note 3. (8) EBITDA means earnings (from continuing operations before extraordinary items) before interest expense, income taxes, depreciation and amortization. Adjusted EBITDA excludes unauthorized trading losses, noncash compensation, restructuring expense, gains on the sale of linefill and pipeline and allowance for accounts receivable. EBITDA and Adjusted EBITDA are not measurements presented in accordance with generally accepted accounting principles ("GAAP") and are not intended to be used in lieu of GAAP presentations of results of operations and cash provided by operating activities. EBITDA is commonly used by debt holders and financial statement users as a measurement to determine the ability of an entity to meet its interest obligations. These measures may not be comparable to measures of other companies. (9) Maintenance capital expenditures are capital expenditures made to replace partially or fully depreciated assets, to maintain the existing operating capacity of existing assets or to extend their useful lives. Capital expenditures made to expand our existing capacity, whether through construction or acquisition, are not considered maintenance capital expenditures. Repair and maintenance expenditures associated with existing assets that do not extend the useful life or expand operating capacity are charged to expense as incurred. (10) Based on annualized adjusted EBITDA for the quarter ended periods. (11) In 1999, available earnings failed to cover fixed charges by $101.8 million. Included in earnings for 1999 was $166.4 million in unauthorized trading losses, a $16.5 million gain on the sale of linefill and restructuring expenses of $1.4 million. If these events had not occurred, the ratio of earnings to fixed charges would have been 2.91x. Income from continuing operations before extraordinary items used to calculate the ratio of earnings to fixed charges for the (historical) year ended December 31, 2000, the (historical) three months ended March 31, 2000, and the (pro forma) year ended December 31, 2000 includes a gain on sale of assets of $48.2 million. If this event had not occurred, the ratio of earnings to fixed charges would have been 2.34x, 2.59x, and 1.87x, respectively. (12) For purposes of calculating the pro forma as adjusted ratio of adjusted EBITDA to interest expense for the year ended December 31, 2000 and the three months ended March 31, 2001, interest expense has been reduced to reflect the amount of interest income (invested at 4%) assumed to be earned by investing the amount of net proceeds from the senior notes offering in excess of the amount used to repay indebtedness. (13) Represents crude oil deliveries on the All American Pipeline for the account of third parties. (14) Represents crude oil deliveries on the All American Pipeline and the San Joaquin Valley ("SJV") Gathering System. (15) Represents barrels of crude oil purchased at the wellhead, including volumes which were purchased under our marketing agreement with Plains Resources. (16) Represents barrels of crude oil purchased at collection points, terminals and pipelines. (17) Represents total crude oil barrels delivered from the Cushing Terminal and the Ingleside Terminal. (18) In addition, pro forma as adjusted long-term debt as of March 31, 2001 has been calculated as if the total amount of the net proceeds from the senior notes offering was used to reduce long-term debt. 3
EXHIBIT 99.4 UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS Plains All American Pipeline is a limited partnership formed in the third quarter of 1998 to acquire and operate the midstream crude oil business and assets of Plains Resources and its wholly owned subsidiaries. The following unaudited pro forma consolidated financial statements are presented to give effect to the transactions described below: (1) The Murphy acquisition for approximately $161.0 million in cash funded from the bank credit facility. The acquisition was effective April 1, 2001 and was accounted for using the purchase method of accounting. (2) The public offering of 3,966,700 common units at a price of $26.05 per unit, which raised approximately $100.7 million of total net proceeds. (3) The application of the proceeds from the offering of common units to repay a portion of our borrowings outstanding under the bank credit facility. (4) The issuance of the notes in aggregate principal amount of $350.0 million. (5) The application of the proceeds from the notes to repay a portion of our borrowings outstanding under the bank credit facility. The unaudited pro forma consolidated balance sheet as of March 31, 2001 and the unaudited pro forma statements of income for the three months ended March 31, 2001 and the year ended December 31, 2000 are based upon the following, respectively: (1) The historical balance sheet of Plains All American Pipeline at March 31, 2001. (2) The historical consolidated statement of income of Plains All American Pipeline for the three months ended March 31, 2001 and the historical statement of income for the assets acquired in the Murphy acquisition for the same period. (3) The historical consolidated statement of income of Plains All American Pipeline for the year ended December 31, 2000 and the historical statement of income for the assets acquired in the Murphy acquisition for the same period. The unaudited pro forma consolidated financial statements are not necessarily indicative of the results of the actual or future operations or financial condition that would have been achieved had the transactions occurred at the dates assumed (as noted below). The unaudited pro forma consolidated financial statements should be read in conjunction with the notes thereto and the historical financial statements of Plains All American Pipeline and the assets acquired in the Murphy acquisition. The following unaudited pro forma consolidated statements of income for the three months ended March 31, 2001 and the year ended December 31, 2000 have been prepared as if the transactions described above had taken place on January 1, 2000 and the unaudited pro forma consolidated balance sheet at March 31, 2001 assumes the transactions were consummated on March 31, 2001. 1
PLAINS ALL AMERICAN PIPELINE, L.P. AND SUBSIDIARIES UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET March 31, 2001 ------------------------------------------------------------------------------------------------------------ Plains All American Pro Forma Adjusted for the Pro Forma Plains All Plains All Pro Forma Pro Forma Murphy Acquisition Notes American American Acquisition Equity Offering and the Equity Offering Pro Forma Historical Adjustments Total Adjustments Offering Adjustments As Adjusted ---------- ----------- ---------- --------------- ------------------ ----------- ----------- (in thousands) ASSETS Current Assets: Cash and cash equivalents.... $ 1,202 $161,000 (1) $ 1,202 $100,739 (3) $ 1,202 $345,200 (6) $ 69,591 (161,000) (2) (100,739) (4) (276,811) (7) Accounts receivable and other.......... 328,567 -- 328,567 -- 328,567 -- 328,567 Inventory....... 73,924 6,962 (2) 80,886 -- 80,886 -- 80,886 -------- -------- ---------- -------- ---------- -------- ---------- Total current assets......... 403,693 6,962 410,655 -- 410,655 68,389 479,044 -------- -------- ---------- -------- ---------- -------- ---------- Property and Equipment...... 468,978 150,448 (2) 619,426 -- 619,426 -- 619,426 Less allowance for depreciation and amortization... (30,933) -- (30,933) -- (30,933) -- (30,933) -------- -------- ---------- -------- ---------- -------- ---------- 438,045 150,448 588,493 -- 588,493 -- 588,493 -------- -------- ---------- -------- ---------- -------- ---------- Other Assets: Pipeline linefill....... 33,924 2,337 (2) 36,261 -- 36,261 -- 36,261 Other........... 13,815 1,253 (2) 15,068 -- 15,068 4,800 (6) 19,868 -------- -------- ---------- -------- ---------- -------- ---------- $889,477 $161,000 $1,050,477 $ -- $1,050,477 $ 73,189 1,123,666 ======== ======== ========== ======== ========== ======== ========== LIABILITIES AND PARTNERS' CAPITAL Current Liabilities: Accounts payable and other current liabilities.... $342,460 $ -- $ 342,460 $ -- $ 342,460 $ -- $ 342,460 Due to affiliates..... 21,273 -- 21,273 -- 21,273 -- 21,273 -------- -------- ---------- -------- ---------- -------- ---------- Total current liabilities.... 363,733 -- 363,733 -- 363,733 -- 363,733 Long-Term Liabilities: Bank debt....... 316,550 161,000 (1) 477,550 (100,739) (4) 376,811 (276,811) (7) 100,000 Senior notes.... -- -- -- -- -- 350,000 (6) 350,000 Other........... 1,009 -- 1,009 -- 1,009 -- 1,009 -------- -------- ---------- -------- ---------- -------- ---------- Total liabilities.... 681,292 161,000 842,292 (100,739) 741,553 73,189 814,742 -------- -------- ---------- -------- ---------- -------- ---------- Partners' Capital: Partners' capital........ 210,840 -- 210,840 100,739 (3) 311,579 -- 311,579 Other comprehensive income......... (2,655) -- (2,655) -- (2,655) -- (2,655) -------- -------- ---------- -------- ---------- -------- ---------- 208,185 -- 208,185 100,739 308,924 -- 308,924 -------- -------- ---------- -------- ---------- -------- ---------- $889,477 $161,000 $1,050,477 $ -- $1,050,477 $ 73,189 $1,123,666 ======== ======== ========== ======== ========== ======== ========== See notes to unaudited pro forma consolidated financial statements. 2
PLAINS ALL AMERICAN PIPELINE, L.P. AND SUBSIDIARIES UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS Three Months Ended March 31, 2001 ------------------------------------------------------------------------------------- Plains All Pro Forma American Plains All Pro Forma Equity and Notes Pro Forma American Murphy Acquisition Offerings As Historical Acquisition Adjustments Total Adjustments Adjusted ---------- ----------- ----------- ---------- ---------------- ---------- (in thousands, except per unit data) Revenues................ $1,520,124 $161,265 $ -- $1,681,389 $ -- $1,681,389 Cost of sales and operations............. 1,487,394 154,787 306 (8) 1,642,487 -- 1,642,487 ---------- -------- ------- ---------- ------ ---------- Gross Margin............ 32,730 6,478 (306) 38,902 -- 38,902 ---------- -------- ------- ---------- ------ --- ---------- Expenses: General and administrative......... 8,989 493 (363) (9) 9,233 -- 9,233 114 (10) Depreciation and amortization........... 4,670 700 (700) (12) 6,607 -- 6,607 1,937 (11) ---------- -------- ------- ---------- ------ ---------- Total expenses........ 13,659 1,193 988 15,840 -- 15,840 ---------- -------- ------- ---------- ------ ---------- Operating income........ 19,071 5,285 (1,294) 23,062 -- 23,062 Interest expense........ (6,606) -- (3,017) (13) (9,623) (203) (5) (9,826) Interest and other income................. 42 -- -- 42 -- 42 ---------- -------- ------- ---------- ------ ---------- Income from continuing operations before income taxes and cumulative effect of accounting change...... 12,507 5,285 (4,311) 13,481 (203) 13,278 Income tax expense...... -- 2,327 (2,327) (14) -- -- -- ---------- -------- ------- ---------- ------ ---------- Income from continuing operations before cumulative effect of accounting change...... $ 12,507 $ 2,958 $(1,984) $ 13,481 $ (203) $ 13,278 ========== ======== ======= ========== ====== ========== Basic and diluted earnings per limited partner unit........... $ 0.36 $ 0.38 $ 0.05 $ 0.34 ========== ========== ====== ========== Weighted average number of units outstanding... 34,386 34,386 3,967 38,353 ========== ========== ====== ========== See notes to unaudited pro forma consolidated financial statements. 3
PLAINS ALL AMERICAN PIPELINE, L.P. AND SUBSIDIARIES UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS Year Ended December 31, 2000 ------------------------------------------------------------------------------------- Plains All Pro Forma American Plains All Pro Forma Equity and Notes Pro Forma American Murphy Acquisition Offerings As Historical Acquisition Adjustments Total Adjustments Adjusted ---------- ----------- ----------- ---------- ---------------- ---------- (in thousands, except per unit data) Revenues................ $6,641,187 $667,323 $ 2,207 (15) $7,310,717 $ -- $7,310,717 Cost of sales and operations............. 6,506,504 648,334 821 (15) 7,156,530 -- 7,156,530 871 (8) Unauthorized trading losses and related expenses............... 6,963 -- -- 6,963 -- 6,963 ---------- -------- -------- ---------- ----- ---------- Gross margin............ 127,720 18,989 515 147,224 -- 147,224 ---------- -------- -------- ---------- ----- ---------- Expenses: General and administrative......... 40,821 1,834 583 (9) 43,693 -- 43,693 455 (10) Depreciation and amortization........... 24,523 2,660 (2,660) (12) 32,270 -- 32,270 7,747 (11) ---------- -------- -------- ---------- ----- ---------- Total expenses........ 65,344 4,494 6,125 75,963 -- 75,963 ---------- -------- -------- ---------- ----- ---------- Operating income........ 62,376 14,495 (5,610) 71,261 -- 71,261 Interest expense........ (28,691) -- (12,069) (13) (40,760) (811) (5) (41,571) Gain on sale of assets.. 48,188 -- -- 48,188 -- 48,188 Interest and other income................. 10,776 -- -- 10,776 -- 10,776 ---------- -------- -------- ---------- ----- ---------- Income from continuing operations before income taxes and extraordinary item..... 92,649 14,495 (17,679) 89,465 811 88,654 Income tax expense...... -- 6,598 (6,598) (14) -- -- -- ---------- -------- -------- ---------- ----- ---------- Income from continuing operations before extraordinary item..... $ 92,649 $ 7,897 $(11,081) $ 89,465 $ 811 $ 88,654 ========== ======== ======== ========== ===== ========== Basic and diluted earnings per limited partner unit........... $ 2.64 $ 2.55 $0.20 $ 2.27 ========== ========== ===== ========== Weighted average number of units outstanding... 34,386 34,386 3,967 38,353 ========== ========== ===== ========== See notes to unaudited pro forma consolidated financial statements. 4
PLAINS ALL AMERICAN PIPELINE, L.P. AND SUBSIDIARIES NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS Pro Forma Adjustments 1. Reflects the net proceeds of borrowings under the bank credit facility to fund the Murphy acquisition. 2. Records the assets purchased from Murphy based on the purchase method of accounting. 3. Reflects the estimated net proceeds to Plains All American Pipeline of $100.7 million from the second quarter of 2001 issuance of 3,966,700 common units at an offering price of $26.05 per common unit, net of underwriters' discounts and commissions and offering expenses of approximately $4.7 million and the general partner's capital contribution of approximately $2.1 million to maintain its aggregate 2% general partner interest. 4. Reflects the repayment of approximately $100.7 million of debt outstanding under our bank credit facility with the total net proceeds from our second quarter of 2001 equity offering. 5. Reflects adjustments to interest expense to account for (i) the repayment of approximately $100.7 million of debt outstanding under our bank credit facility with the total net proceeds from our second quarter of 2001 equity offering, (ii) the repayment of outstanding borrowings under our bank credit facility with net proceeds raised in the notes offering and (iii) the increase in total long term debt of $350.0 million from proceeds raised in the notes offering. 6. Reflects the estimated net proceeds to Plains All American Pipeline of $345.2 million from the issuance of $350.0 million aggregate principal amount of notes, net of initial purchasers' discounts and estimated issuance expenses of approximately $4.8 million. 7. Reflects the repayment of outstanding borrowings under the bank credit facility at March 31, 2001 from net proceeds raised in the notes offering. 8. Reflects the adjustment of the historical market valuation charge/credit reflected in Murphy's historical financial statements to reflect such amounts based on the average cost inventory method utilized by Plains All American Pipeline. Murphy utilized the last-in, first-out method to determine inventory cost. 9. Reflects the elimination of expenses associated with Murphy's pension plan in which Murphy's employees are no longer entitled to participate so that general and administrative expenses reflect the ongoing cost of employee benefits to Plains All American Pipeline. 10. Reflects Canadian withholding tax (at the rate of 10%) on interest expense paid on an intercompany loan used to complete the Murphy acquisition. 11. Reflects pro forma depreciation and amortization expense based on the purchase price of the Murphy acquisition. The pro forma composite useful depreciable life of the Murphy assets acquired is 20 years. Debt issue costs incurred in connection with the acquisition, which totaled $1.3 million, are amortized using the straight-line method over the term of the related debt. These costs are not materially different from the amortization of debt issue costs computed under the interest method. 12. Reflects the elimination of historical Murphy depreciation and amortization expense. 5
PLAINS ALL AMERICAN PIPELINE, L.P. AND SUBSIDIARIES NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS 13. Reflects pro forma interest expense on (i) borrowings of approximately $100 million under the Term Loan and (ii) borrowings of $61 million under the U.S. Revolver. Pro forma interest expense was calculated based on a composite annual interest rate of 7.5%. The effect of a 1/8% change in the pro forma interest rate would be approximately $200,000 for the year ended December 31, 2000 and $50,000 for the three month period ended March 31, 2001. 14. Reflects the elimination of the historical income tax provision as income taxes will be borne by the partners and not Plains All American Pipeline. 15. Reflects revenues and costs of sales related to the Manito pipeline system for January through June 2000 due to the fact that Murphy purchased the remaining 47.5% interest in the system effective July, 2000. Pro Forma As Adjusted Earnings Per Limited Partner Unit Pro forma as adjusted earnings per limited partner unit is determined by dividing the pro forma income from continuing operations that would have been allocated to the common and subordinated unitholders, which is 98% of pro forma income from continuing operations, by the number of common and subordinated units expected to be outstanding at the closing of the offering. For purposes of this calculation the minimum quarterly distribution was assumed to have been paid to both common and subordinated unitholders and the number of common and subordinated units outstanding was assumed to have been outstanding the entire period. Pursuant to the partnership agreement, to the extent that the minimum quarterly distribution is exceeded, the general partner is entitled to certain incentive distributions which will result in less income proportionately being allocated to the common and subordinated unitholders. Basic and diluted pro forma earnings per limited partner common and subordinated unit are equal as there are no dilutive units. 6