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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)—April 28, 2004
Plains All American Pipeline, L.P.
(Name of Registrant as specified in its charter)
| DELAWARE (State or other jurisdiction of incorporation or organization) |
1-14569 (Commission File Number) |
76-0582150 (I.R.S. Employer Identification No.) |
||
333 Clay Street, Suite 1600 Houston, Texas 77002 (713) 646-4100 (Address, including zip code, and telephone number, including area code, of Registrants principal executive offices) |
||||
N/A (Former name or former address, if changed since last report.) |
||||
Item 7. Financial Statements and Exhibits
- (c)
- Exhibit 99.1—Press Release dated April 28, 2004
Item 9 and 12. Regulation FD Disclosure; Results of Operations and Financial Condition
Today we issued a press release reporting our first quarter 2004 results. We are furnishing the press release attached as Exhibit 99.1 pursuant to Item 9 and Item 12 of Form 8-K. We are also furnishing, pursuant to Item 9, our projections of certain operating and financial results for the second quarter and second half of 2004. In accordance with General Instructions B.2. and B.6. of Form 8-K, the information presented herein under Item 9 and Item 12, including Exhibit 99.1, shall not be deemed "filed" for purposes of Section 18 of the Securities Act of 1934, as amended, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, except as expressly set forth by specific reference in such a filing.
Disclosure of Second Quarter 2004 and Second Half 2004 Estimates
EBIT and EBITDA (each as defined below in Note 1 to the "Operating and Financial Guidance" table) are non-GAAP financial measures, and are reconciled to net income and cash flow from operating activities in Note 13 below for historical periods presented. For forecasted periods, EBIT and EBITDA are reconciled to net income in the operating and financial guidance table below, but it is impractical to reconcile such forecasted measures to cash flows from operating activities. Net income and cash flow from operating activities are the most directly comparable GAAP measures for EBIT and EBITDA. We encourage you to visit our website at www.paalp.com, in particular the section entitled "Non-GAAP Reconciliation," which presents a historical reconciliation of certain commonly used non-GAAP financial measures, such as EBIT and EBITDA. We present EBIT and EBITDA because we believe they provide additional information with respect to both the performance of our fundamental business activities and our ability to meet our future debt service, capital expenditures and working capital requirements. We also believe that debt holders commonly use EBITDA to analyze partnership performance. In addition, we present selected items that impact the comparability of our operating results. Management considers an understanding of these selected items impacting comparability to be material to its evaluation of our operating results and prospects. Although we present selected items that management considers in evaluating our performance, you should also be aware that the items presented do not represent all items that affect comparability between the periods presented. Variations in our operating results are also caused by changes in volumes, prices, exchange rates, mechanical interruptions, acquisitions and numerous other factors. Because management believes these types of variations to be directly related to the actual operating activities for the periods presented, they are not separately identified in this guidance.
The following table reflects our current range of guidance for operating and financial results for the second quarter and second half of 2004. Our guidance is based on assumptions and estimates that we believe are reasonable based on our assessment of historical trends and business cycles and currently available information; however, our assumptions and our future performance are both subject to a wide range of business risks and uncertainties and also include projections for two recent acquisitions, so we cannot assure you that actual performance will fall within these guidance ranges. Please refer to the information under the caption "Forward-Looking Statements and Associated Risks" below. These risks and uncertainties could cause our actual results to differ materially from those in the following table. The operating and financial guidance provided below is given as of the date hereof, based on information known to us as of April 27, 2004.
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Operating and Financial Guidance
(in thousands, except per unit data)
| |
Three Monthd Ended March 31, 2004 |
Three Months Ended June 30, 2004 |
Six Months Ended December 31, 2004 |
Twelve Months Ended December 31, 2004 |
|||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| |
Actuals |
Low |
High |
Low |
High |
Low |
High |
||||||||||||||||
| Pipeline operations segment profit before segment general and administrative (G&A) expenses excluding Long Term Incentive Plan (LTIP) charge | $ | 33,343 | $ | 41,500 | $ | 43,250 | $ | 84,500 | $ | 87,000 | $ | 159,343 | $ | 163,593 | |||||||||
| Gathering, Marketing, Terminalling & Storage operations segment profit before segment G&A excluding LTIP charge | 39,964 | 35,750 | 37,500 | 75,000 | 77,500 | 150,714 | 154,964 | ||||||||||||||||
| LTIP charge — Operations | (567 | ) | (150 | ) | (150 | ) | — | — | (717 | ) | (717 | ) | |||||||||||
| Total Segment Profit before segment G&A | $ | 72,740 | $ | 77,100 | $ | 80,600 | $ | 159,500 | $ | 164,500 | $ | 309,340 | $ | 317,840 | |||||||||
G&A Expenses and Other(a) |
(15,437 |
) |
(26,250 |
) |
(24,750 |
) |
(44,800 |
) |
(42,800 |
) |
(86,487 |
) |
(82,987 |
) |
|||||||||
| LTIP charge—G&A | (3,661 | ) | (750 | ) | (750 | ) | (200 | ) | (200 | ) | (4,611 | ) | (4,611 | ) | |||||||||
| EBITDA | $ | 53,642 | $ | 50,100 | $ | 55,100 | $ | 114,500 | $ | 121,500 | $ | 218,242 | $ | 230,242 | |||||||||
Depreciation and Amortization Expense |
(13,120 |
) |
(16,800 |
) |
(16,400 |
) |
(34,600 |
) |
(33,100 |
) |
(64,520 |
) |
(62,620 |
) |
|||||||||
| EBIT | $ | 40,522 | $ | 33,300 | $ | 38,700 | $ | 79,900 | $ | 88,400 | $ | 153,722 | $ | 167,622 | |||||||||
Interest Expense |
(9,532 |
) |
(10,750 |
) |
(10,250 |
) |
(25,250 |
) |
(24,250 |
) |
(45,532 |
) |
(44,032 |
) |
|||||||||
| Net Income | $ | 30,990 | $ | 22,550 | $ | 28,450 | $ | 54,650 | $ | 64,150 | $ | 108,190 | $ | 123,590 | |||||||||
Net Income to Limited Partners |
$ |
28,759 |
$ |
20,381 |
$ |
26,163 |
$ |
49,454 |
$ |
58,764 |
$ |
98,594 |
$ |
113,686 |
|||||||||
| Basic Weighted Avg Units Outstanding | 58,414 | 61,551 | 61,551 | 65,315 | 65,315 | 62,663 | 62,663 | ||||||||||||||||
| Basic Net Income Per Limited Partner Unit | $ | 0.49 | $ | 0.33 | $ | 0.43 | $ | 0.76 | $ | 0.90 | $ | 1.57 | $ | 1.81 | |||||||||
| Selected Items Impacting Comparability (in thousands) | |||||||||||||||||||||||
| LTIP Charge | $ | (4,228 | ) | $ | (900 | ) | $ | (900 | ) | $ | (200 | ) | $ | (200 | ) | $ | (5,328 | ) | $ | (5,328 | ) | ||
| Loss on early extinguishment of debt | — | — | — | (300 | ) | (300 | ) | (300 | ) | (300 | ) | ||||||||||||
| SFAS 133 (See Note 8) | 7,498 | — | — | — | — | 7,498 | 7,498 | ||||||||||||||||
| $ | 3,270 | $ | (900 | ) | $ | (900 | ) | $ | (500 | ) | $ | (500 | ) | $ | 1,870 | $ | 1,870 | ||||||
| Excluding Selected Items Impacting Comparability (in thousands) | |||||||||||||||||||||||
| EBITDA | $ | 50,372 | $ | 51,000 | $ | 56,000 | $ | 115,000 | $ | 122,000 | $ | 216,372 | $ | 228,372 | |||||||||
| Net Income | $ | 27,720 | $ | 23,450 | $ | 29,350 | $ | 55,150 | $ | 64,650 | $ | 106,320 | $ | 121,720 | |||||||||
| Net Income per Limited Partner Unit | $ | 0.43 | $ | 0.35 | $ | 0.44 | $ | 0.76 | $ | 0.91 | $ | 1.54 | $ | 1.78 | |||||||||
- (a)
- General & Administrative Expenses and Other includes the anticipated write-down of debt issue costs of approximately $0.3 million during the second half of 2004 related to the refinancing of our $200 million credit facility utilized for the Link Acquisition. (See Note 2 below)
Notes and Significant Assumptions:
- 1.
- EBITDA means Earnings Before Interest, Taxes, Depreciation, and Amortization. EBIT means EBITDA less Depreciation and Amortization. Segment profit before segment general and administrative expenses (G&A) excludes depreciation.
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- 2.
- Link Acquisition. The Link acquisition was completed and became effective April 1, 2004. Based on our acquisition analyses, we
believe the base level of EBITDA associated with this acquisition is approximately $25 million per year. In addition, we forecast that we can capture annual cost savings and commercial
synergies in the range of $20 million to $30 million within the first eighteen months. As a result, we project an annualized forward-looking EBITDA of approximately $45 million to
$55 million within the first eighteen months. We project that 50% to 60% of the cost savings and commercial synergies will be incorporated into our forward-looking forecast within
6 months, 75% within 12 months, and 100% within 18 months. Included in our forecast are our estimates of cost savings and synergies to be realized for the remainder of 2004. Also
included in our forecast are certain one-time pipeline and tank integrity expenses required to meet regulatory requirements and catch-up operating expenses that we project will be incurred
in the next 6 to 12 months and will be charged against income. We forecast these expenses will range between $1.5 million and $2.0 million for the second quarter of 2004 and
between $3.0 million and $4.0 million for the second half of 2004. Inclusive of the negative impact of these expense items, the Link acquisition is forecast to contribute EBITDA of
between $5.0 million and $6.5 million for the second quarter and between $15.0 million and $18.0 million for the second half of 2004.
- 3.
- Pipeline Operations Segment Profit before Segment G&A. Pipeline volume and tariff estimates are based on historical operating
performance and our outlook for future performance. Actual results could vary materially depending on volumes that are shipped. Average pipeline volumes are estimated to be approximately 1,570,000
barrels per day for the second quarter of 2004 including approximately 360,000 barrels per day attributable to the Link acquisition. Excluding the Link volumes, the forecasted volumes for the second
quarter of 2004 are 1,210,000, or approximately 162,500 barrels per day more than the first quarter of 2004. The increase is primarily attributable to a full quarter versus partial quarter impact of
the Capline acquisition (effective March 1, 2004). The volumes for the second half of 2004 are estimated to average 1,550,000 barrels per day. Volumes on the Basin Pipeline (our largest volume
pipeline system) for the second quarter are forecast at approximately 250,000 barrels per day (compared to average first quarter of 2004 volumes of approximately 275,000 barrels per day) and 270,000
barrels per day in the second half of 2004. All American Pipeline volumes of Outer Continental Shelf (OCS) production (our highest per barrel tariff volumes) are estimated at approximately 56,000
barrels per day for the second quarter (compared to average first quarter volumes of 55,000 barrels per day) and approximately 56,000 barrels per day for the second half of 2004. Capline volumes are
forecast at approximately 150,000 barrels per day for the second quarter to reflect our estimates for April and May nominations and our projection for June shipments. For the second half of 2004,
Capline volumes are forecast at approximately 117,500 barrels per day, consistent with management's intermediate term expectations for average shipments. Revenues are forecast using these volume
assumptions, current tariffs, and estimates of tariff escalation rates and operating expenses, assumptions and estimates, each of which we believe are reasonable. A 5,000 barrel per day variance in
OCS volumes would have an approximate $0.8 million effect on segment profit before segment G&A for each quarter and an approximate $3.2 million effect on an annualized basis. Within a
reasonable range of forecasted levels, an average 10,000 barrel per day variance in the Basin Pipeline System, which is equivalent to an estimated 4% volume variance on that pipeline system, would
have an approximate $0.2 million effect on segment profit before segment G&A for each quarter and an approximate $0.8 million effect on an annualized basis. A 10,000 barrel per day
variance on our space in the Capline Pipeline, which is equivalent to an estimated 9% volume variance on that pipeline system, would have an approximate $0.3 million effect on segment profit
before segment G&A for each quarter and an approximate $1.3 million effect on an annualized basis.
- 4.
- Gathering, Marketing, Terminalling and Storage Operations Segment Profit before Segment G&A. Our guidance for the remainder of the year assumes normal crude oil market conditions (somewhat weaker than the stronger conditions of 2003 and the first quarter of 2004). Average gathered
4
volumes are estimated to be approximately 690,000 barrels per day for the second quarter of 2004, including approximately 185,000 barrels per day from the Link Acquisition. Excluding Link, the second quarter forecasted volumes are 505,000 barrels per day (including approximately 495,000 barrels per day of lease gathered crude oil and 10,000 barrels per day of liquified petroleum gas "LPG") compared to average first quarter volumes of 519,000 barrels per day (including 460,000 barrels per day of lease gathered crude oil and 59,000 barrels per day of LPG). LPG volumes are anticipated to decrease during the second quarter due to normal seasonal demand changes. Volumes in the second half of 2004 are estimated to average approximately 730,000 barrels per day (comprised of approximately 690,000 barrels per day of lease gathered crude oil and 40,000 barrels per day of LPG) and include approximately 185,000 barrels per day from the Link Acquisition. Segment profit before segment G&A is forecast using these volume assumptions and estimates of unit margins and operating expenses, assumptions and estimates, each of which we believe are reasonable, based on current and anticipated market conditions. Realized unit margins for any given lease gathered barrel could vary significantly based on a variety of factors including location, quality and contract structure. However, based on our projected average per barrel profit of $0.61 for the second quarter of 2004, a 5,000 barrel per day variance in lease gathered volumes would have an approximate $0.3 million effect on segment profit before segment G&A for each quarter and an approximate $1.1 million effect on an annualized basis. A $0.01 variance in the aggregate average per barrel profit would have an approximate $0.7 million effect on segment profit before segment G&A for each quarter and an approximate $2.7 million effect on an annualized basis based on estimated average second half of 2004 volumes.
- 5.
- General and Administrative (G&A) Expenses. G&A expenses are forecast to be between $24.8 million and $26.3 million for the
second quarter of 2004 and between $42.5 million and $44.5 million for the second half of 2004, excluding a $0.3 million loss on early extinguishment of debt. Our G&A expense
forecast includes the Link Acquisition, which is forecast to add between $10.0 million and $11.0 million for the second quarter and $15.0 million and $16.0 million for the
second half of 2004. Additionally, our forecast includes projected increases due to Sabanes-Oxley requirements, corporate insurance, and increased personnel required as a result of acquisition
activity and in anticipation of continued organic growth. We have forecast G&A expenses attributable to complying with requirements of the Sarbanes-Oxley Act using estimates we consider reasonable.
However, given the relatively short history of the Act and incremental costs associated with preparation for compliance with Section 404 of the Act, these expenses could increase significantly.
Section 404 will require management, at the time of filing our annual report on Form 10-K for the year ended December 31, 2004, to make an assessment of the
effectiveness of our internal controls over financial reporting as of such date. It will also require our independent auditors to attest to management's assertion.
- 6.
- Long-Term Incentive Plan (LTIP). LTIP expense is forecast to be approximately $0.9 million for the second quarter of
2004 and $0.2 million for the second half of 2004. Certain amounts of our obligations under the LTIP will be satisfied by the issuance of common units. This expense relates to units that will
vest in May 2004 and units that are being accrued for based on management's assessment that an annualized distribution rate of $2.30 per unit is probable. Our current annualized distribution
rate is $2.25 per unit.
- 7.
- Depreciation & Amortization. Depreciation and amortization is forecast based on our existing depreciable assets, forecast capital
expenditures and assets acquired as part of the Link acquisition. Depreciation is computed using the straight-line method over estimated useful lives, which range from 5 years for
office property and equipment to 40 years for certain pipelines, crude oil terminals and facilities.
- 8.
- Statement of Financial Accounting Standards No. 133 "Accounting for Derivative Instruments and Hedging Activities" (SFAS 133). The forecast presented above does not include assumptions or
5
projections with respect to potential gains or losses related to SFAS 133, as there is no accurate way to forecast these potential gains or losses. The potential gains or losses related to SFAS 133 could materially change reported net income (related primarily to non-cash, mark-to-market gains or losses). During the first quarter of 2004, we reported a non-cash mark-to-market gain.
- 9.
- Acquisitions and Capital Expenditures. Although acquisitions comprise a key element of our growth strategy, the forecasted results and
associated estimates do not include any assumptions or forecasts for any material future acquisition that may be made after the date hereof. Our forecast does include the Link Acquisition effective
April 1, 2004 for an aggregate cost of approximately $330 million. In addition, expansion capital expenditures are forecast to be approximately $24.0 million for the second
quarter and $65.7 million for the second half of 2004. Full-year totals for some of the more notable projects include:
- •
- Cushing to Caney Pipeline Project—$33.0 million;
- •
- Cushing Phase IV Expansion—$10.0 million;
- •
- Capital projects and upgrade capital associated with the Link acquisition—$17.0 million;
- •
- Upgrade and expansion activities related to acquisitions made in 2003 (e.g. Red River, ArkLaTex, Atchafalaya, Eugene Island, Alto, and South Sask)—$22.5 million; and
- •
- Iatan System Expansion—$6.0 million.
Maintenance capital expenditures are forecast to be approximately $4.8 million for the second quarter and $10.3 million for the second half of 2004. Unless otherwise known at the time, we forecast maintenance capital to be incurred ratably throughout the year.
- 10.
- Capital Structure. Our forecast is based on our capital structure as of March 31, 2004, as adjusted for the closing of the Link
Acquisition on April 1, 2004 and our private placement of $100 million of Class C common units on April 15, 2004. Additionally, in order to achieve our stated objectives
with regard to permanent financing of the Link Acquisition, including a target of 60% equity, we have incorporated into our forecast the effect of issuing the remaining equity and refinancing a
portion of our bank debt in the debt capital markets. Specifically, our forecast includes the effect of issuing approximately $100 million of additional equity by early third quarter 2004 and
shortly thereafter refinancing $200 million of floating rate debt with long-term, fixed rate debt at current market rates. To adhere to our established financial growth strategy, we
anticipate that we will issue additional equity in connection with any future acquisitions not included in the current forecast. Depending on the terms, any such equity issuance may dilute the net
income per unit forecasts included in the foregoing table. In connection with the CANPET acquisition in July 2001, approximately $26.5 million Canadian dollars of the purchase price,
payable in cash or common units, was deferred subject to various performance objectives being met. These objectives were met as of December 31, 2003 and the deferred amount is payable on
April 30, 2004. The total amount of the obligation, including an amount representing the total of the equivalent distributions that would have been paid on the common units had they been
outstanding since the acquisition was consummated, is approximately $23.3 million U.S. dollars. We anticipate settling the obligation by issuing approximately 385,000 units and by paying
approximately $10.2 million in cash.
- 11.
- Interest Expense. Second quarter interest expense is forecast to be between $10.3 million and $10.8 million assuming an average long-term debt balance of approximately $900.0 million and the current outlook for interest rate indices, which translates into an average interest rate of approximately 4.7%, including our fixed rate debt, commitment fees, and amortization of deferred amounts associated with terminated interest rate hedges. Interest expense for the second half of 2004 is forecast to be between $24.3 million and $25.3 million assuming an average long-term debt balance of approximately $900.0 million and the current outlook for interest rate indices, resulting in an average interest rate of approximately 5.5%, including our fixed rate debt, commitment fees, and amortization of deferred amounts associated with terminated interest rate hedges. The
6
amortization of deferred amounts associated with terminated interest rate hedges results in a non-cash component to interest expense of approximately $1.4 million per year or $0.4 million per quarter. The forecast is based on estimated cash flow, current distribution rates, capital projects and linefill purchases, planned sales of surplus equipment, forecast timing of collections and payments, and forecast levels of inventory and other working capital sources and uses, each of which we believe are reasonable. Approximately 30% of our expected average long-term debt balance for the second half of 2004 is anticipated to be subject to floating interest rates, generally based on LIBOR. Accordingly, an increase in LIBOR will have a negative impact on our results. LIBOR rates are currently at or near a historically low level. Such amounts are also based on certain assumed changes in the capital structure and composition of fixed and floating rate debt—See Note 10.
- 12.
- Net Income per Unit. Basic net income per limited partner unit is calculated by dividing the net income allocated to limited partners by the basic weighted average units outstanding during the period. Basic weighted average units outstanding are projected to be 61.6 million units for the second quarter of 2004 and 65.3 million units for the second half of 2004. Such projected amounts include our estimate of the anticipated issuances of equity associated with events previously discussed as well as an estimate for units to be issued under the partnership's long-term incentive plan during the respective periods. There are currently no dilutive securities anticipated to be outstanding as of June 30, 2004 or December 31, 2004. See Note 10 for a discussion of anticipated second half financing activities.
As noted below, the net income allocated to limited partners is impacted by the income allocated to the general partner and the amount of the incentive distribution paid to the general partner. Based on the forecasted number of units outstanding during the projection period and the current general partner incentive distribution level, for each $0.05 per unit annual increase in the distribution rate, net income available for limited partners will be decreased by approximately $1.0 million ($0.02 per unit) on an annualized basis. The amount of income allocated to our limited partnership interests is 98% of the total partnership income after deducting the amount of the general partner's incentive distribution. Based on a $2.25 annual distribution level and the units anticipated to be outstanding, our general partner's distribution is forecast to be approximately $10.0 million annually, of which $7.1 million is attributed to the incentive distribution rights. The relative amount of the incentive distribution varies directionally with the number of units outstanding and the level of the distribution on the units.
7
- 13.
- Reconciliation of EBIT and EBITDA to Net Income and Cash Flow from Operating Activities. The following table reconciles historical EBIT and EBITDA to historical net income and cash flow from operating activities for the three months ended March 31, 2004:
| |
Three Months Ended 3/31/04 |
||||
|---|---|---|---|---|---|
| Net income to earnings before interest, taxes, depreciation and amortization ("EBITDA") reconciliation | |||||
| Net Income (a) | $ | 30,990 | |||
| Interest expense | 9,532 | ||||
| Earnings before interest and taxes ("EBIT") | 40,522 | ||||
| Depreciation and amortization | 13,120 | ||||
| EBITDA (a) | $ | 53,642 | |||
Cash flow from operating activities to EBIT reconciliation |
|||||
| Net cash provided by operating activities | $ | 132,981 | |||
| Net change in assets and liabilities, net of acquisitions | (91,784 | ) | |||
| Other items not affecting cash flows from operating activities: | |||||
| Change in derivative fair value | 7,498 | ||||
| Non-cash portion of LTIP accrual | (4,228 | ) | |||
| Non-cash amortization of terminated interest rate swap | (357 | ) | |||
| Interest expense | 9,532 | ||||
| EBITDA (a) | $ | 53,642 | |||
| Depreciation and amortization | (13,120 | ) | |||
| EBIT | $ | 40,522 | |||
- (a)
- The effect of approximately $3.3 million of selected items impacting comparability is shown at the end of the "Operating and Financial Guidance" table, above.
Forward-Looking Statements and Associated Risks
All statements, other than statements of historical fact, included in this report are forward-looking statements, including, but not limited to, statements identified by the words "anticipate," "believe," "estimate," "expect," "plan," "intend" and "forecast" and similar expressions and statements regarding the business strategy, plans and objectives of our management for future operations. These statements reflect our current views with respect to future events, based on what we believe are reasonable assumptions. Certain factors could cause actual results to differ materially from results anticipated in the forward-looking statements. These factors include, but are not limited to:
- •
- successful integration and future performance of acquired assets;
- •
- abrupt or severe production declines or production interruptions in outer continental shelf crude oil production located offshore California and transported on the All American Pipeline;
- •
- declines in volumes shipped on the Basin Pipeline and our other pipelines by third party shippers;
- •
- the availability of adequate third party production volumes in the areas in which we operate;
- •
- demand for various grades of crude oil and resulting changes in pricing conditions or transmission throughput requirements;
- •
- fluctuations in refinery capacity in areas supplied by our transmission lines;
- •
- the effects of competition;
- •
- the success of our risk management activities;
8
- •
- the impact of crude oil price fluctuations;
- •
- the availability (or lack thereof) of acquisition or combination opportunities;
- •
- continued creditworthiness of, and performance by, our counterparties;
- •
- our levels of indebtedness and our ability to receive credit on satisfactory terms;
- •
- maintenance of our credit rating and ability to receive open credit from our suppliers;
- •
- successful third-party drilling efforts in areas in which we operate pipelines or gather crude oil;
- •
- completion of announced oil sands projects;
- •
- shortages or cost increases of power supplies, materials or labor;
- •
- weather interference with business operations or project construction;
- •
- the impact of current and future laws and governmental regulations;
- •
- the currency exchange rate of the Canadian dollar;
- •
- environmental liabilities that are not covered by an indemnity, insurance or existing reserves;
- •
- fluctuations in the debt and equity markets, including the price of our units at the time of vesting under our LTIP; and
- •
- general economic, market or business conditions.
We undertake no obligation to publicly update or revise any forward-looking statements. Further information on risks and uncertainties is available in our filings with the Securities and Exchange Commission, which information is incorporated by reference herein.
9
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: April 28, 2004 |
By: |
Plains AAP, L.P., its general partner |
|
By: |
/s/ PHIL KRAMER |
||
| Name: | Phil Kramer | ||
| Title: | Executive Vice President and Chief Financial Officer | ||
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| Exhibit Number |
Description |
|
|---|---|---|
| 99.1 | Press Release dated April 28, 2004 |
-
Item 7. Financial Statements and Exhibits
Item 9 and 12. Regulation FD Disclosure; Results of Operations and Financial Condition
EXHIBIT INDEX
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| Contacts: | Phillip D. Kramer Executive VP and CFO 713/646-4560—800/564-3036 |
A. Patrick Diamond Manager, Special Projects 713/646-4487—800/564-3036 |
FOR IMMEDIATE RELEASE
Plains All American Pipeline, L.P. Reports
Financial Results for First Quarter 2004—
Net Income Up 27%; EBITDA Up 21%
(Houston—April 28, 2004) Plains All American Pipeline, L.P. (NYSE: PAA) today reported operating and financial results for the first quarter of 2004 that exceeded previously published guidance. The Partnership reported net income of $31.0 million, or $0.49 per basic and diluted limited partner unit for the first quarter of 2004, an increase of 27% and 7%, respectively, as compared to net income of $24.4 million, or $0.46 per basic and diluted limited partner unit for the first quarter of 2003. Earnings before interest, taxes, depreciation and amortization ("EBITDA") for the first quarter of 2004 were $53.6 million, an increase of 21% as compared with EBITDA of $44.4 million for the first quarter of 2003. (See the section of this release entitled "Non-GAAP Financial Measures" and the attached tables for discussion of EBITDA and other non-GAAP financial measures, and reconciliations of such measures to the comparable GAAP measures.)
The following table summarizes selected items that the Partnership believes impact the comparability of financial results between reporting periods:
| |
For the Three Months Ended March 31, |
|||||
|---|---|---|---|---|---|---|
| |
2004 |
2003 |
||||
| |
(Dollars in millions) |
|||||
| Long-Term Incentive Plan ("LTIP") charge | $ | (4.2 | ) | $ | — | |
| SFAS 133 noncash mark-to-market adjustment | 7.5 | 0.9 | ||||
| Total | $ | 3.3 | $ | 0.9 | ||
| Per Basic and Diluted Limited Partner Unit | $ | 0.06 | $ | 0.02 | ||
Excluding these selected items impacting comparability, the Partnership's first quarter 2004 net income, net income per basic and diluted limited partner unit and EBITDA would have been $27.7 million, $0.43, and $50.4 million, respectively.
"We are pleased with the strong operating and financial performance the Partnership delivered in the first quarter," said Greg L. Armstrong, Chairman and CEO of Plains All American. "Our fundamental performance substantially exceeded our previously announced guidance and was underpinned by favorable crude oil market conditions and strong volumes on certain of our pipeline systems. Moreover, these results are especially notable given our significant investment of time and resources during the quarter in connection with the due diligence, structuring and negotiation of the Link acquisition and the simultaneous completion of the Capline acquisition. We are confident in the strength of our fundamental business and believe that these two acquisitions will facilitate the Partnership's continued progress and growth."
The following table presents certain selected financial information by segment for the first quarter reporting periods:
| |
Pipeline Operations |
Gathering, Marketing, Terminalling & Storage Operations |
||||
|---|---|---|---|---|---|---|
| |
(Dollars in millions) |
|||||
| Three Months Ended March 31, 2004(1) | ||||||
| Revenues | $ | 189.3 | $ | 3,631.3 | ||
| Purchases | 136.7 | 3,572.9 | ||||
| Field operating expenses (excluding LTIP charge) | 19.3 | 18.5 | ||||
| LTIP charge—field operations | 0.1 | 0.4 | ||||
| Segment profit before segment general and administrative expenses | 33.2 | 39.5 | ||||
| Segment general and administrative expenses (excluding LTIP charge)(2) | 6.0 | 9.4 | ||||
| LTIP charge—general and administrative | 1.7 | 2.0 | ||||
| Segment profit | $ | 25.5 | $ | 28.1 | ||
| Noncash SFAS 133 impact(3) | $ | — | $ | 7.5 | ||
| Maintenance capital | $ | 1.4 | $ | 0.3 | ||
Three Months Ended March 31, 2003(1) |
||||||
| Revenues | $ | 169.0 | $ | 3,123.1 | ||
| Purchases | 130.7 | 3,070.7 | ||||
| Field operating expenses | 13.5 | 19.6 | ||||
| Segment profit before segment general and administrative expenses | 24.8 | 32.8 | ||||
| Segment general and administrative expenses(2) | 4.6 | 8.5 | ||||
| Segment profit | $ | 20.2 | $ | 24.3 | ||
| Noncash SFAS 133 impact(3) | $ | — | $ | 0.9 | ||
| Maintenance capital | $ | 1.4 | $ | 0.2 | ||
- (1)
- Revenues
and purchases include inter-segment amounts.
- (2)
- General
and administrative (G&A) expenses reflect direct costs attributable to each segment and an allocation of other expenses to the segments based on the business activities that
existed at that time. The proportional allocations by segment require judgment by management and will continue to be based on the business activities that exist during each period.
- (3)
- Amounts related to SFAS 133 are included in revenues, and impact segment profit before segment general and administrative expenses and segment profit.
Excluding the LTIP charge, segment profit from pipeline operations was up 35% in the first quarter of 2004 when compared to the first quarter of 2003, while the segment profit from gathering, marketing, terminalling and storage operations, including the impact of SFAS 133 in both periods, was up 26%. However, also excluding the impact of SFAS 133 in both periods, the gathering, marketing, terminalling and storage segment in the first quarter of 2004 would have been consistent with the first quarter of 2003, which experienced an unusually strong market for LPG sales.
The Partnership's basic weighted average units outstanding for the first quarter of 2004 totaled 58.4 million (59.0 million on a diluted basis) as compared to 50.2 million (50.2 million on a diluted basis) in last year's first quarter. At March 31, 2004, the Partnership had 58.5 million units outstanding.
At April 15, 2004, including the Partnership's private placement of Class C Common Units, the Partnership had 61.7 million units outstanding.
At March 31, 2004, the Partnership's long-term debt totaled $688 million; the long-term debt-to-total capitalization ratio was approximately 48%.
On April 23, 2004, the Partnership declared a cash distribution of $0.5625 per unit ($2.25 per unit on an annualized basis) on its outstanding limited partner units. The distribution will be paid on May 14, 2004, to holders of record of such units at the close of business on May 4, 2004. The distribution represents a 2.3% increase over the May 2003 distribution.
The Partnership today furnished a current report on Form 8-K, which included material in this press release and financial and operational guidance for the second quarter, as well as the second half and full year of 2004. A copy of the Form 8-K is available on the Partnership's website at www.paalp.com.
Non-GAAP Financial Measures
In this release, the Partnership's EBITDA disclosure is not presented in accordance with generally accepted accounting principles and is not intended to be used in lieu of GAAP presentations of results of operations or cash provided by operating activities. EBITDA is presented because PAA management believes it provides additional information with respect to both the performance of our fundamental business activities as well as our ability to meet our future debt service, capital expenditures and working capital requirements. Management also believes that debt holders commonly use EBITDA to analyze Partnership performance. In addition, we present selected items that impact the comparability of our operating results as additional information that may be helpful to your understanding of our financial results. Management considers an understanding of these selected items impacting comparability to be material to its evaluation of our operating results and prospects. Although we present selected items that management considers in evaluating our performance, you should also be aware that the items presented do not represent all items that affect comparability between the periods presented. Variations in our operating results are also caused by changes in volumes, prices, exchange rates, mechanical interruptions, acquisitions and numerous other factors. Because management believes these types of variations to be directly related to the actual operating activities for the periods presented, they are not separately identified in this release, but will be discussed in management's discussion and analysis of operating results in our Quarterly Report on Form 10-Q for the period.
A reconciliation of EBITDA to net income and cash flow from operating activities for the periods presented is included in the tables attached to this release. In addition, the Partnership maintains on its website (www.paalp.com) a reconciliation of all non-GAAP financial information, such as EBITDA, that it reconciles to the most comparable GAAP measures. To access the information, investors should click on the "Investor Relations" link on the Partnership's home page and then the "Non-GAAP Reconciliations" link on the Investor Relations page.
Conference Call:
The Partnership will host a conference call to discuss the results and other forward-looking items on Wednesday, April 28, 2004. Specific items to be addressed in this call include:
- 1.
- A
brief review of the Partnership's first quarter results;
- 2.
- A
status report on expansion and organic growth projects and two recent acquisitions;
- 3.
- A
discussion of financial position and financing plans;
- 4.
- A
review of financial and operating guidance for the second quarter as well as an indication for the full year of 2004; and
- 5.
- Comments regarding recent developments and the Partnership's outlook for the future.
The call will begin at 10:00 AM (Central). To participate in the call, please call 877-780-2276, or, for international callers, 973-582-2757 at approximately 9:55 AM (Central). No password or reservation number is required.
Webcast Instructions:
To access the Internet webcast, please go to the Partnership's website at www.paalp.com, choose "Investor Relations", and then choose "Conference Calls". Following the live webcast, the call will be archived for a period of sixty (60) days on the Partnership's website.
Telephonic Replay Instructions:
Call 877-519-4471 or international call 973-341-3080 and enter PIN #
4618957
The replay will be available beginning Wednesday, April 28, 2004, at approximately 1:00 PM (Central) and continue until 11:59pm (Central) Monday, May 3, 2004.
Except for the historical information contained herein, the matters discussed in this news release are forward-looking statements that involve certain risks and uncertainties. These risks and uncertainties include, among other things, successful integration and future performance of assets acquired, abrupt or severe production declines or production interruptions in outer continental shelf production located offshore California and transported on the All American Pipeline, declines in volumes shipped on the Basin Pipeline and our other pipelines by third party shippers, the availability of adequate third party production volumes in the areas in which we operate, demand for various grades of crude oil and resulting changes in pricing conditions or transmission throughput requirements, fluctuations in refinery capacity in areas supplied by our transmission lines, the success of our risk management activities, the impact of crude oil price fluctuations, the availability (or lack thereof) of acquisition opportunities on terms favorable to the Partnership, continued credit worthiness of, and performance by, our counterparties, maintenance of our credit rating and ability to receive open credit from our suppliers, levels of indebtedness and ability to receive credit on satisfactory terms, successful third party drilling efforts in areas in which we operate pipelines or gather crude oil, regulatory changes, unanticipated shortages or cost increases in power supplies, materials and skilled labor, weather interference with business operations or project construction, the currency exchange rate of the Canadian dollar, environmental liabilities that are not covered by an indemnity or insurance, fluctuation in the debt and equity capital markets (including the price of our units at the time of vesting under our LTIP), and other factors and uncertainties inherent in the marketing, transportation, terminalling, gathering and storage of crude oil and liquefied petroleum gas ("LPG") discussed in the Partnership's filings with the Securities and Exchange Commission.
Plains All American Pipeline, L.P. is engaged in interstate and intrastate crude oil transportation, terminalling and storage, as well as crude oil and LPG gathering and marketing activities, primarily in Texas, California, Oklahoma and Louisiana and the Canadian Provinces of Alberta and Saskatchewan. The Partnership's common units are traded on the New York Stock Exchange under the symbol "PAA." The Partnership is headquartered in Houston, Texas.
# # #
PLAINS ALL AMERICAN PIPELINE, L.P. AND SUBSIDIARIES
FINANCIAL SUMMARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per unit data) (unaudited)
| |
Three Months Ended March 31, |
|||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| |
2004 |
2003 |
||||||||
| REVENUES | $ | 3,804,644 | $ | 3,281,908 | ||||||
COSTS AND EXPENSES |
||||||||||
| Purchases and related cost | 3,693,521 | 3,191,241 | ||||||||
| Field operating expenses (excluding LTIP charge) | 37,816 | 33,115 | ||||||||
| LTIP charge—field operations | 567 | — | ||||||||
| General and administrative (excluding LTIP charge) | 15,478 | 13,072 | ||||||||
| LTIP charge—general & administrative | 3,661 | — | ||||||||
| Depreciation and amortization | 13,120 | 10,871 | ||||||||
| Total costs and expenses | 3,764,163 | 3,248,299 | ||||||||
| OPERATING INCOME | 40,481 | 33,609 | ||||||||
OTHER INCOME/(EXPENSE) |
||||||||||
| Interest expense | (9,532 | ) | (9,154 | ) | ||||||
| Interest income and other, net | 41 | (104 | ) | |||||||
| NET INCOME | $ | 30,990 | $ | 24,351 | ||||||
BASIC AND DILUTED NET INCOME PER LIMITED PARTNER UNIT |
$ |
0.49 |
$ |
0.46 |
||||||
BASIC WEIGHTED AVERAGE NUMBER OF UNITS OUTSTANDING |
58,414 |
50,166 |
||||||||
| DILUTED WEIGHTED AVERAGE NUMBER OF UNITS OUTSTANDING | 59,017 | 50,166 | ||||||||
| OPERATING DATA (in thousands)(1) | ||||||||||
| Average Daily Volumes (barrels) | ||||||||||
| Pipeline activities: | ||||||||||
| Tariff activities | ||||||||||
| All American | 55 | 59 | ||||||||
| Basin | 275 | 210 | ||||||||
| Capline(2) | 54 | — | ||||||||
| Other domestic | 352 | 269 | ||||||||
| Canada | 240 | 194 | ||||||||
| Pipeline margin activities | 72 | 86 | ||||||||
| Total | 1,048 | 818 | ||||||||
Crude oil lease gathering |
460 |
434 |
||||||||
| Crude oil bulk purchases | 122 | 69 | ||||||||
| Total crude oil | 582 | 503 | ||||||||
| LPG sales(3) | 59 | 54 | ||||||||
Cushing terminal throughput |
223 |
175 |
||||||||
- (1)
- Volumes
associated with acquisitions represent weighted average daily amounts for the number of day we actually owned the assets over the total days in the period. Volumes are
presented in this manner to allow for relevant comparisons to revenues generated and segment profit, and is necessary to accurately calculate statistics on a per barrel basis.
- (2)
- Capline
volumes averaged approximately 160,000 barrels per day for March, 2004, which is the period we owned the system. Those volumes averaged over the first quarter of 2004 were
54,000 barrels per day.
- (3)
- Prior period volume amounts have been adjusted for consistency of comparison between years. LPG sales reflect only third party volumes.
FINANCIAL DATA RECONCILIATIONS
(in thousands) (unaudited)
| |
Three Months Ended March 31, |
|||||||
|---|---|---|---|---|---|---|---|---|
| |
2004 |
2003 |
||||||
| Earnings before interest, taxes, depreciation and amortization ("EBITDA") | ||||||||
| Net income reconciliation | ||||||||
| Net Income | $ | 30,990 | $ | 24,351 | ||||
| Interest expense | 9,532 | 9,154 | ||||||
| Earnings before interest and taxes ("EBIT") | 40,522 | 33,505 | ||||||
| Depreciation and amortization | 13,120 | 10,871 | ||||||
| EBITDA | $ | 53,642 | $ | 44,376 | ||||
Cash flow from operating activities reconciliation |
||||||||
| Net cash provided by operating activities | $ | 132,981 | $ | 91,393 | ||||
| Net change in assets and liabilities, net of acquisitions | (91,784 | ) | (57,101 | ) | ||||
| Other items to reconcile from cash flows from operating activities: | ||||||||
| Change in derivative fair value | 7,498 | 930 | ||||||
| Non-cash portion of LTIP charge | (4,228 | ) | — | |||||
| Non-cash amortization of terminated interest rate swap | (357 | ) | — | |||||
| Interest expense | 9,532 | 9,154 | ||||||
| EBITDA | 53,642 | 44,376 | ||||||
| Depreciation and amortization | (13,120 | ) | (10,871 | ) | ||||
| EBIT | $ | 40,522 | $ | 33,505 | ||||
Funds flow from operations (FFO) |
||||||||
| Net Income | $ | 30,990 | $ | 24,351 | ||||
| Depreciation and amortization | 13,120 | 10,871 | ||||||
| Non-cash amortization of terminated interest rate swap | 357 | — | ||||||
| FFO | 44,467 | 35,222 | ||||||
| Maintenance capital expenditures | (1,748 | ) | (1,590 | ) | ||||
| FFO after maintenance capital expenditures | $ | 42,719 | $ | 33,632 | ||||
Selected items impacting comparability |
||||||||
| LTIP charge | $ | (4,228 | ) | $ | — | |||
| SFAS 133 noncash mark-to-market adjustment | 7,498 | 930 | ||||||
| Selected items impacting comparability | $ | 3,270 | $ | 930 | ||||
CONDENSED CONSOLIDATED BALANCE SHEET DATA
(in thousands) (unaudited)
| |
March 31, 2004 |
December 31, 2003 |
||||
|---|---|---|---|---|---|---|
| ASSETS | ||||||
| Current assets | $ | 653,756 | $ | 732,974 | ||
| Property and equipment, net | 1,308,712 | 1,151,039 | ||||
| Pipeline linefill | 123,266 | 122,653 | ||||
| Other long-term assets, net | 79,339 | 88,965 | ||||
| $ | 2,165,073 | $ | 2,095,631 | |||
LIABILITIES AND PARTNERS' CAPITAL |
||||||
| Current liabilities | $ | 726,276 | $ | 801,919 | ||
| Long-term debt under credit facilities | 238,737 | 70,000 | ||||
| Senior notes, net of unamortized discount | 449,017 | 448,991 | ||||
| Other long-term liabilities and deferred credits | 14,865 | 27,994 | ||||
| 1,428,895 | 1,348,904 | |||||
| Partners' capital | 736,178 | 746,727 | ||||
| $ | 2,165,073 | $ | 2,095,631 | |||
Plains All American Pipeline, L.P. Reports Financial Results for First Quarter 2004— Net Income Up 27%; EBITDA Up 21%