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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)—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 99.1—Press 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)

 
   
  Guidance(2)
 
 
   
  Three Months Ended
   
   
 
 
   
  September 30, 2004
   
   
  Twelve Months Ended
December 31, 2004

 
 
  Actual
Six Months
Ended
June 30, 2004

  December 31, 2004
 
 
  Low
  High
  Low
  High
  Low
  High
 
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
 
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

 
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  
   
 
 
 
 
 
 
 

(1)
Third quarter guidance includes a charge to expense for unamortized debt issuance costs associated with the $200 million credit facility utilized for the Link acquisition. This facility is anticipated to be repaid during the third quarter, prior to its stated maturity.
(2)
The projected foreign exchange rate for the third and fourth quarter is $1.35 CAD to $1 USD.

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Notes and Significant Assumptions:

1.
Definitions.

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
2.
Link Acquisition.    The Link acquisition was completed and became effective April 1, 2004. Based on our acquisition analyses, we believed that the base level of EBITDA associated with this acquisition would be approximately $25 million per year. We currently expect to capture annual cost savings and commercial synergies in the range of $27 million to $32 million, which will be phased in within the first twelve months of operations.
3.
Pipeline Operations.    Pipeline volume estimates are based on historical and anticipated future operating performance. Actual segment earnings could vary materially depending on the level of volumes transported. The following table summarizes our pipeline volumes and specifically breaks out the major systems that are significant either in total volumes transported or in contribution to total net revenue.

 
  Calendar 2004
 
  Actual
  Guidance
 
  Three Months Ended
   
   
   
 
  Three Months Ended
   
 
  Twelve Months
Ended
December 31

 
  March 31
  June 30
  September 30
  December 31
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

 

 

 

 

 

 

 

 

 

 

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Volume Sensitivity Analysis


System

  Increase/Decrease
in Volume
(Bbls/d)

  % of System
Total

  Increase/Decrease
in Annualized
Segment
Profit

 
   
   
  (in millions)

All American   5,000   9 % $ 3.1
Basin   10,000   4 %   1.0
Capline   10,000   8 %   1.5
4.
Gathering, Marketing, Terminalling and Storage Operations.    Our guidance for the remainder of the year assumes continued volatility in the crude oil market. Average volumes for gathering and marketing are estimated to be approximately 675,000 Bbl/d for the third quarter of 2004 compared to average second quarter volumes of 662,000 Bbl/d. Volumes in the fourth quarter of 2004 are expected to remain relatively consistent with the third quarter with the exception of LPG volumes, which are expected to increase by approximately 20,000 Bbl/d due to seasonal demands. We expect a slightly weaker crude oil market structure during the fourth quarter as compared to the third quarter.

 
  Calendar 2004
 
  Actual
  Guidance
 
  Three Months Ended
   
   
   
 
  Three Months Ended
   
 
  Twelve Months
Ended
December 31

 
  March 31
  June 30
  September 30
  December 31
Average Daily Volumes
(000 Bbl/d)
                   
  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                    
5.
General and Administrative (G&A) Expense.    G&A expense, excluding charges related to our Long Term Incentive Plan (LTIP), totaled $19.6 million for the second quarter of 2004. Comparable mid-point expenditures for the third and fourth quarters are expected to be approximately $18.4 million for each quarter. The decrease in expenses reflects the anticipated reduction of duplicative administrative costs associated with the Link acquisition. Partially offsetting these cost

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6.
Depreciation & Amortization.    Depreciation and amortization is forecast based on our existing depreciable assets and forecast capital expenditures. Depreciation is computed using the straight-line method over estimated useful lives, which range from 3 years (for office property and equipment) to 50 years (for certain pipelines, crude oil terminals and facilities).

7.
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 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 (primarily non-cash, mark-to-market adjustments) could materially change reported net income.

8.
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 acquisition that may be made after the date hereof. Expansion capital expenditures are forecast to be approximately $100.0 million for the second half of 2004. Some of the more notable projects to be completed in the second half of 2004 include:

Coffeyville Pipeline Construction Project—$32.1 million;

Capital projects and upgrade capital associated with the Link acquisition—$19.1 million; and

Upgrade and expansion activities related to acquisitions made in 2003—$15.7 million.
9.
Capital Structure.    The forecast is based on our current capital structure, which includes the recent placement of 4.9 million common units for net proceeds of $159.1 million. Also included in the forecast is the planned refinancing of approximately $300 million of short-term variable rate debt with long-term fixed rate debt during the third quarter. It is anticipated that these notes will bear a fixed rate of interest that is substantially higher than the current variable rate of interest under our revolving credit facilities.

10.
Interest Expense.    Debt balances are projected based on estimated cash flows, current distribution rates, capital expenditures for maintenance and expansion projects, linefill purchases, planned sales of surplus equipment, expected timing of collections and payments, and forecast levels of inventory and other working capital sources and uses.

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11.
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 approximately 65.1 million units for the third quarter and 67.2 million units for the fourth quarter. The projected units include the recent issuance of equity 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.

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12.
Reconciliation of EBITDA and EBIT to Net Income and Cash Flows from Operating Activities.    The following table reconciles historical EBIT and EBITDA to historical net income and cash flows from operating activities as of June 30, 2004:

 
  Six
Months
Ended
6/30/04
(in millions)

 
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)


 
  Low
  High
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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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.

 

 

By:

PLAINS AAP, L. P., its general partner

 

 

By:

PLAINS ALL AMERICAN GP LLC, its general partner

Date: August 4, 2004

 

By:

/s/  
PHIL KRAMER      
      Name: Phil Kramer
      Title: Executive Vice President and Chief Financial Officer

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EXHIBIT INDEX

Exhibit Number
  Description

99.1   Press Release dated August 4, 2004



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SIGNATURES
EXHIBIT INDEX