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Plains All American Pipeline Annual Report, Year Ended Dec 31, 2002

Filing Date
Filed February 28, 2003
Period End
December 31, 2002
Securities
PAAPAAPU
In the record · 2016–202610-K1110-Q328-K167

PAA filed 11 annual reports (10-K), 32 quarterly reports (10-Q) and 167 current reports (8-K) between 2016 and 2026.

  1. Leadership change8-K · Aug ’17Aug ’17
  2. Leadership change8-K · Sep ’19Sep ’19
  3. Deal closed8-K · Oct ’21Oct ’21
  4. Material agreement8-K · Dec ’25Dec ’25

01—Abstract

Summary

Summary of the 10-K filed February 28, 2003. Cited figures are marked; the original filing is the authoritative source.

Plains All American Pipeline, L.P.

(NYSE: PAA) reported net income of $65.3 milliona on revenues of $8.38 billion for the year ended December 31, 2002, compared with net income of $44.2 million on revenues of $6.87 billion in 2001. The Partnership is a Delaware limited partnership engaged in interstate and intrastate marketing, transportation and terminalling of crude oil and marketing of LPG, with operations concentrated in Texas, Oklahoma, California, Louisiana and Alberta and Saskatchewan. Gross margin rose to $174.3 million from $142.3 million, and net cash provided by operating activities was $173.9 million, versus cash used of $30.0 million in 2001.

Adjusted EBITDA was $130.4 millionb, and the Partnership stated it was within its targeted credit profile at December 31, 2002. The largest 2002 event was the $324.4 million Shell West Texas acquisition on August 1, 2002, which added about 2,000 miles of gathering and mainline pipelines and 8.9 million barrels of storage net to the Partnership's interest. The Rancho Pipeline System will be taken out of service in March 2003, with no nominations accepted after February 28, 2003, and management expects increased Basin System movements to substantially offset the adverse impact.

In February 2003, Standard & Poor's upgraded the Partnership's corporate credit rating to investment grade (BBB-, stable outlook). The filing also discloses an export license matter under review by the Bureau of Industry and Security for which the Partnership cannot estimate the ultimate impact, and it describes the 1999 unauthorized trading losses of approximately $174.0 millionc and their resolution. Key risks highlighted include production declines from the offshore California Santa Ynez and Point Arguello fields, dependence on third-party shipper volumes, credit risk among counterparties, and the subordinated unit conversion schedule, with 25% of subordinated units expected to convert in the fourth quarter of 2003 if testing requirements are met and the remainder in the first quarter of 2004.

02—Key points

Key Highlights

  1. Net income of $65.3 million for 2002, up from $44.2 million in 2001; revenues of $8.38 billion versus $6.87 billion
  2. Gross margin of $174.3 million in 2002 versus $142.3 million in 2001; Adjusted EBITDA of $130.4 million versus $109.6 million
  3. Net cash provided by operating activities of $173.9 million in 2002, compared with cash used of $30.0 million in 2001
  4. Shell West Texas acquisition completed August 1, 2002 for a total purchase price of $324.4 million, financed mainly with revolver borrowings
  5. Standard & Poor's upgraded the corporate credit rating to investment grade (BBB-, stable outlook) in February 2003
  6. Rancho Pipeline System to be taken out of service in March 2003; no nominations accepted after February 28, 2003
  7. Export License Matter with the Bureau of Industry and Security remains unresolved, and the Partnership cannot estimate the ultimate impact

03—Questions

Frequently Asked Questions

  1. How did Plains All American's financial performance change in 2002?

    Net income rose to $65.3 million from $44.2 million in 2001 on revenues of $8.38 billion, up from $6.87 billion. Gross margin increased to $174.3 million from $142.3 million, and operating income increased to $94.6 million from $71.4 million.

  2. What was the most significant acquisition in 2002?

    The Shell West Texas acquisition, completed on August 1, 2002, for a total purchase price of $324.4 million. It included interests in about 2,000 miles of gathering and mainline crude oil pipelines and about 8.9 million barrels (net) of terminalling and storage assets, including interests in the Basin, Permian Basin and Rancho pipeline systems.

  3. Why is the Rancho Pipeline System being shut down, and what is the expected effect?

    The Rancho System Agreement terminates in March 2003 and requires the owners to take the system out of service. The Partnership will not accept nominations after February 28, 2003. Management expects a negative influence on operating results in the first and second quarters of 2003, but estimates that increased movements on the Basin System will substantially offset the adverse impact.

  4. What risks could affect future cash flows?

    The filing cites declining volumes from the Santa Ynez and Point Arguello offshore California fields, with 66,000 average daily barrels in 2002 versus 94,000 in 1998; reliance on third-party shippers without long-term commitments; counterparty credit risk amid industry credit market disruptions; and an unresolved export license matter with the Bureau of Industry and Security.

  5. When might the subordinated units convert to common units?

    The Partnership is in its testing period. If it continues to meet the financial requirements, 25% of the subordinated units would convert into common units in the fourth quarter of 2003 and the remainder in the first quarter of 2004. The subordination period cannot end sooner than December 31, 2003.

04—Continue

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