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)August 4, 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 99.1Press Release dated August 4, 2004
Item 9 and 12. Regulation FD Disclosure; Results of Operations and Financial Condition
Plains All American Pipeline, L.P. (the "Partnership") today issued a press release reporting its second quarter results. The Partnership is furnishing the press release, attached as Exhibit 99.1, pursuant to Item 9 and Item 12 of Form 8-K. The Partnership is also furnishing pursuant to Item 9 its projections of certain operating and financial results for the third and fourth quarter of 2004 and preliminary projections of certain operating and financial results for calendar year 2005. In accordance with General Instructions B.2. and B.6. of Form 8-K, the information presented herein under Item 9 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 Third and Fourth Quarter 2004 Estimates
EBIT and EBITDA (each as defined below in Note 1 to the "Operating and Financial Guidance" table) are non-GAAP financial measures. Net income and cash flows from operating activities are the most directly comparable GAAP measures for EBIT and EBITDA. However, it is impractical to reconcile EBIT and EBITDA to cash flows from operating activities for forecasted periods. As a result, for forecasted periods in the operating and financial guidance table below, we have reconciled EBIT and EBITDA to net income, but not to cash flows from operating activities. In Note 12 below, we reconcile historical EBIT and EBITDA to historical net income and cash flow from operating activities for the periods presented. We also 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, including 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 have highlighted the impact on EBITDA and EBIT of our long-term incentive program, loss on early extinguishment of debt and, to the extent known at the time of preparation, items related to SFAS 133.
The following table reflects our actual results for the first six months of 2004 and management's current range of guidance for operating and financial results for the third and fourth quarter 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 future performance are both subject to a wide range of business risks and uncertainties and also include projections for several 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 August 3, 2004. We undertake no obligation to publicly update or revise any forward-looking statements.
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Operating and Financial Guidance
(in millions, except per unit data)
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Guidance(2) |
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Three Months Ended |
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September 30, 2004 |
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Twelve Months Ended December 31, 2004 |
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Actual Six Months Ended June 30, 2004 |
December 31, 2004 |
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Low |
High |
Low |
High |
Low |
High |
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Pipeline | |||||||||||||||||||||||
Net revenues | $ | 142.5 | $ | 82.5 | $ | 83.5 | $ | 82.0 | $ | 83.0 | $ | 307.0 | $ | 309.0 | |||||||||
Field operating costs | (51.3 | ) | (35.5 | ) | (35.3 | ) | (34.0 | ) | (33.8 | ) | (120.8 | ) | (120.4 | ) | |||||||||
General and administrative | (18.0 | ) | (9.4 | ) | (9.1 | ) | (9.1 | ) | (8.8 | ) | (36.5 | ) | (35.9 | ) | |||||||||
Segment profit | 73.2 | 37.6 | 39.1 | 38.9 | 40.4 | 149.7 | 152.7 | ||||||||||||||||
Gathering, Marketing, Terminalling & Storage | |||||||||||||||||||||||
Net revenues | 108.4 | 59.0 | 60.0 | 57.5 | 58.5 | 224.9 | 226.9 | ||||||||||||||||
Field operating costs | (46.1 | ) | (26.5 | ) | (26.2 | ) | (25.0 | ) | (24.7 | ) | (97.6 | ) | (97.0 | ) | |||||||||
General and administrative | (20.7 | ) | (9.2 | ) | (9.0 | ) | (9.5 | ) | (9.3 | ) | (39.4 | ) | (39.0 | ) | |||||||||
Segment profit | 41.6 | 23.3 | 24.8 | 23.0 | 24.5 | 87.9 | 90.9 | ||||||||||||||||
Other Income (Expense)(1) | 0.5 | (0.6 | ) | (0.6 | ) | | | (0.1 | ) | (0.1 | ) | ||||||||||||
EBITDA before cumulative effect of change in accounting principle | 115.3 | 60.3 | 63.3 | 61.9 | 64.9 | 237.5 | 243.5 | ||||||||||||||||
Depreciation and Amortization Expense | (29.1 | ) | (16.2 | ) | (16.0 | ) | (16.3 | ) | (16.1 | ) | (61.6 | ) | (61.2 | ) | |||||||||
EBIT before cumulative effect of change in accounting principle | 86.2 | 44.1 | 47.3 | 45.6 | 48.8 | 175.9 | 182.3 | ||||||||||||||||
Interest expense | (19.5 | ) | (13.0 | ) | (12.7 | ) | (13.6 | ) | (13.1 | ) | (46.1 | ) | (45.3 | ) | |||||||||
Income before cumulative effect of change in accounting principle | 66.7 | 31.1 | 34.6 | 32.0 | 35.7 | 129.8 | 137.0 | ||||||||||||||||
Cumulative effect of change in accounting principle | (3.1 | ) | | | | | (3.1 | ) | (3.1 | ) | |||||||||||||
Net Income | $ | 63.6 | $ | 31.1 | $ | 34.6 | $ | 32.0 | $ | 35.7 | $ | 126.7 | $ | 133.9 | |||||||||
Net Income to Limited Partners | $ | 59.0 | $ | 28.3 | $ | 31.7 | $ | 28.9 | $ | 32.6 | $ | 116.2 | $ | 123.3 | |||||||||
Basic and Weighted: | |||||||||||||||||||||||
Average Units Outstanding | 60.0 | 65.7 | 65.7 | 67.2 | 67.2 | 63.3 | 63.3 | ||||||||||||||||
Net Income Per Limited Partner Unit | $ | 0.98 | $ | 0.43 | $ | 0.48 | $ | 0.43 | $ | 0.48 | $ | 1.84 | $ | 1.95 | |||||||||
Selected Items Impacting Comparability |
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LTIP Charge | $ | (4.2 | ) | $ | (0.1 | ) | $ | (0.1 | ) | $ | (0.1 | ) | $ | (0.1 | ) | $ | (4.4 | ) | $ | (4.4 | ) | ||
Loss on early extinguishment of debt | | (0.6 | ) | (0.6 | ) | | | (0.6 | ) | (0.6 | ) | ||||||||||||
SFAS 133 (See Note 7) | 0.5 | | | | | 0.5 | 0.5 | ||||||||||||||||
Cumulative effect of change in accounting principle | (3.1 | ) | | | | | (3.1 | ) | (3.1 | ) | |||||||||||||
$ | (6.8 | ) | $ | (0.7 | ) | $ | (0.7 | ) | $ | (0.1 | ) | $ | (0.1 | ) | $ | (7.6 | ) | $ | (7.6 | ) | |||
Excluding Selected Items Impacting Comparability |
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EBITDA | $ | 119.0 | $ | 61.0 | $ | 64.0 | $ | 62.0 | $ | 65.0 | $ | 242.0 | $ | 248.0 | |||||||||
Net Income | $ | 70.4 | $ | 31.8 | $ | 35.3 | $ | 32.1 | $ | 35.8 | $ | 134.3 | $ | 141.5 | |||||||||
Net Income per Limited Partner Unit | $ | 1.09 | $ | 0.44 | $ | 0.49 | $ | 0.43 | $ | 0.49 | $ | 1.96 | $ | 2.07 | |||||||||
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Notes and Significant Assumptions:
EBIT | Earnings before interest and taxes | |
EBITDA | Earnings before interest, taxes and depreciation and amortization expense | |
Bbl/d | Barrels per day | |
Segment Profit | Revenues less purchases, field operating costs, and segment general and administrative expenses | |
LTIP | Long-Term Incentive Plan | |
LPG | Liquified petroleum gas |
Also included in our forecast are certain one-time pipeline and tank integrity expenses required to meet regulatory requirements and catch-up operating expenses. We forecast these expenses will range between $2.0 million and $3.0 million during the second half of 2004.
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Calendar 2004 |
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Actual |
Guidance |
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Three Months Ended |
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Three Months Ended |
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Twelve Months Ended December 31 |
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March 31 |
June 30 |
September 30 |
December 31 |
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Average Daily Volumes (000's Bbl/d) | |||||||||||
All American | 55 | 59 | 52 | 52 | 54 | ||||||
Capline(1) | 54 | 169 | 130 | 118 | 118 | ||||||
Basin | 275 | 271 | 270 | 270 | 271 | ||||||
Link(2) | | 369 | 380 | 360 | 278 | ||||||
Canada | 240 | 260 | 250 | 250 | 250 | ||||||
Other | 424 | 541 | 518 | 515 | 500 | ||||||
1,048 | 1,669 | 1,600 | 1,565 | 1,471 | |||||||
(1) Effective March 1, 2004 | |||||||||||
(2) Effective April 1, 2004 |
Average volumes for the third quarter are expected to be in the range of 1,600,000 Bbl/d, approximately 69,000 Bbl/d or 4% lower than the second quarter of 2004, in which Capline volumes were significantly above our guidance. As volumes on Capline are subject to seasonal swings, we have forecast volumes on Capline for the third quarter to average approximately 130,000 Bbl/d. This is below the actual volume level experienced during the second quarter
Net revenues were forecasted using the above volume assumptions priced at tariff rates currently received, with adjustments where appropriate, for estimated escalation rates as allowed by
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contractual terms. To illustrate the impact volume changes may have on segment profit, the following table provides a volume sensitivity analysis of three systems representing approximately 32% of total pipeline net revenues.
Volume Sensitivity Analysis
System |
Increase/Decrease in Volume (Bbls/d) |
% of System Total |
Increase/Decrease in Annualized Segment Profit |
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(in millions) |
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All American | 5,000 | 9 | % | $ | 3.1 | ||
Basin | 10,000 | 4 | % | 1.0 | |||
Capline | 10,000 | 8 | % | 1.5 |
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Calendar 2004 |
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Actual |
Guidance |
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Three Months Ended |
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Three Months Ended |
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Twelve Months Ended December 31 |
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March 31 |
June 30 |
September 30 |
December 31 |
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Average Daily Volumes (000 Bbl/d) |
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Crude Oil Lease Gathering | ||||||||||||
Base operations | 460 | 470 | 470 | 480 | 470 | |||||||
Link acquisition(1) | | 171 | 175 | 175 | 130 | |||||||
LPG | 59 | 21 | 30 | 50 | 40 | |||||||
519 | 662 | 675 | 705 | 640 | ||||||||
(1) The Link Acquisition was effective April 1, 2004 |
Segment profit is forecast using the volume assumptions stated above and estimates of unit margins, operating expenses and G&A 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. Based on our projected segment profit per barrel for the third quarter of 2004, a 5,000 Bbl/d variance in lease gathering volumes would impact segment profit by an approximate $1.0 million on an annualized basis. A $0.01 variance in the aggregate average per-barrel margin would impact segment profit by an approximate $2.5 million on an annualized basis.
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savings are projected increases in costs associated with Sarbanes-Oxley requirements, corporate insurance, health insurance and increased personnel required due to continued organic growth.
Maintenance capital expenditures are forecast to be approximately $11.3 million for the second half of 2004. Unless otherwise known at the time, we forecast maintenance capital to be incurred ratably throughout the year.
To mitigate the potential effect of an increase in U.S. Treasury yields on the anticipated issuance of long-term debt discussed in Note 9, we executed a treasury lock in July 2004 to hedge the treasury rate component on $150 million of the planned refinancing.
Based on the current outlook for LIBOR indices and the expected mix of fixed and variable rate debt, third quarter interest expense is expected to be between $12.7 million and $13.0 million assuming an average debt balance of approximately $825 million, and an average rate of 6.2%. Included in the effective cost of debt are not only current cash payments, but also commitment fees, amortization of long-term debt premiums and discounts, and deferred amounts associated with terminated interest rate hedges. The 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 (approximately $350,000 per quarter). The majority of this amount (approximately 80%) will be completely amortized in two years. The remainder will be amortized over the next ten years.
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Fourth-quarter interest expense is expected to be between $13.1 million and $13.6 million, assuming an average debt balance of approximately $890 million, or an average rate of 6%. Approximately 84% of our projected average debt balance (including the projected third quarter issue of new notes) is assumed to have fixed interest rates.
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 (i) the forecasted number of units outstanding during the projection period, (ii) the current general partner incentive distribution level and (iii) forecasted net income, 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 the current annual distribution rate of $2.31 per unit, our potential distribution growth for 2004 and the anticipated units outstanding, our general partner's distribution is forecast to be approximately $11.9 million to $14.2 million annually, of which $8.8 million to $10.9 million, respectively 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.
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Six Months Ended 6/30/04 (in millions) |
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Reconciliation to Net Income | ||||||
Net Income | $ | 63.6 | ||||
Cumulative effect of change in accounting principle | 3.1 | |||||
Interest expense | 19.5 | |||||
EBIT before cumulative effect of change in accounting principle | 86.2 | |||||
Depreciation and amortization | 29.1 | |||||
EBITDA before cumulative effect of change in accounting principle | $ | 115.3 | ||||
Reconciliation to Cash Flows from Operating Activities | ||||||
Net cash provided by (used in) operating activities | $ | 147.1 | ||||
Net change in assets and liabilities, net of acquisitions | (46.9 | ) | ||||
Other items not affecting cash flows from operating activities | ||||||
Change in derivative fair value | 0.5 | |||||
Non-cash portion of LTIP accrual | (4.2 | ) | ||||
Non-cash amortization of terminated interest rate swap | (0.7 | ) | ||||
Interest expense | 19.5 | |||||
EBITDA before cumulative effect of change in accounting principle | 115.3 | |||||
Depreciation and amortization | (29.1 | ) | ||||
EBIT before cumulative effect of change in accounting principle | $ | 86.2 | ||||
Preliminary 2005 Guidance
We have not completed our normal detailed plan for calendar year 2005 and final estimates will not be available until February 2005 after we have completed our formal business plan. Accordingly, while the following forward-looking information for 2005 was prepared based on information we consider to be reasonable, it should be considered preliminary and subject to refinement.
This preliminary guidance is based on continued operating and financial performance of our existing assets under normalized market conditions, continuation of current pipeline shipments and anticipated natural field declines. In that regard, we would expect average daily pipeline shipments to average approximately 270,000 Bbl/d for Basin, 50,000 Bbl/d for All American and 125,000 Bbl/d for Capline. Similarly, we would expect gathering and marketing volumes to average approximately 700,000 Bbl/d, and that realized margins would be consistent with historical results adjusted slightly for lower oil price volatility. The overall guidance also assumes the inclusion of recent acquisitions along with the successful integration and realization of cost savings and revenue synergies identified in our acquisition analysis, as well as completion of our current capital projects.
The following table summarizes the range of selected key financial data from our projections for calendar year 2005.
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Preliminary Calendar 2005 Guidance (in millions)
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Low |
High |
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EBITDA | $ | 265 | $ | 275 | ||
Interest Expense | 58 | 54 | ||||
Depreciation and Amortization | 70 | 65 | ||||
Maintenance Capital Expenditures | 18 | 15 |
Based on the data provided above, we expect EBIT for 2005 to range from $195 million to $210 million. The potential effects of any gains or losses from SFAS 133 (see Note 7 above) are not included in the guidance for 2005.
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 our 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:
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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.
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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. | ||||
By: |
PLAINS AAP, L. P., its general partner |
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By: |
PLAINS ALL AMERICAN GP LLC, its general partner |
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Date: August 4, 2004 |
By: |
/s/ PHIL KRAMER |
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Name: | Phil Kramer | |||
Title: | Executive Vice President and Chief Financial Officer |
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Exhibit Number |
Description |
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99.1 | Press Release dated August 4, 2004 |