01—Abstract
Summary
Summary of the 10-K/A filed July 19, 2004. Cited figures are marked; the original filing is the authoritative source.
Plains All American Pipeline, L.P. reported 2003 total revenues of $12,589.8 milliona, up from $8,384.2 million in 2002, driven mainly by its gathering, marketing, terminalling and storage segment, which posted revenues of $11,985.6 million.
Operating income was $98.2 millionb compared with $94.6 million in 2002, but net income fell to $59.4 million from $65.3 million, reflecting $28.8 million of Long-Term Incentive Plan (LTIP) compensation charges. Diluted net income per limited partner unit was $1.00, versus $1.34 in 2002. Segment profit totaled $144.4 million, with pipeline operations contributing $81.3 million and the gathering, marketing, terminalling and storage segment $63.1 million.
The company describes its counter-cyclical balance of gathering, marketing and storage activities as stabilizing its cash flows. The balance sheet at December 31, 2003 showed total assets of $2,095.6 millionc, long-term debt of $519.0 million and partners' capital of $746.7 million, with a working capital deficit of $68.9 million. Net cash provided by operating activities fell to $68.5 million from $173.9 million in 2002.
The company completed ten acquisitions for about $159.5 milliond in 2003, issued equity and senior notes, and raised its distribution to $0.5625 per unit for the fourth quarter. Its credit profile was within its targeted range, and it had $596.8 million of unused committed credit capacity at year end.
After year end, the company completed the acquisition of substantially all of the North American crude oil and pipeline operations of Link Energy LLC on April 1, 2004 for approximately $330 million, and a pending acquisition of Shell's interests in the Capline and Capwood pipeline systems for about $158 million was expected to close in the first quarter of 2004. Risks highlighted include declining volumes from California offshore fields, a Texas Attorney General investigation of the Link acquisition, a pending export license matter with the Bureau of Industry and Security, and a shareholder class action tied to the proposed buyout of Plains Resources Inc.
02—Key points
Key Highlights
- Total revenues rose to $12,589.8 million in 2003 from $8,384.2 million in 2002, with the gathering, marketing, terminalling and storage segment generating $11,985.6 million.
- Net income was $59.4 million, or $1.00 per diluted limited partner unit, down from $65.3 million and $1.34 in 2002, after a $28.8 million LTIP compensation charge.
- Segment profit was $144.4 million: $81.3 million from pipeline operations and $63.1 million from gathering, marketing, terminalling and storage.
- Total assets were $2,095.6 million and long-term debt was $519.0 million at December 31, 2003; the company had a $68.9 million working capital deficit.
- Operating cash flow dropped to $68.5 million from $173.9 million, largely reflecting inventory and linefill timing as described in the filing.
- The company completed ten acquisitions for about $159.5 million in 2003 and agreed to buy Shell's Capline and Capwood interests for about $158 million.
- Subsequent to year end, the Link Energy acquisition for approximately $330 million closed on April 1, 2004.
03—Questions
Frequently Asked Questions
What drove the increase in revenues in 2003?
Revenues increased to $12,589.8 million from $8,384.2 million, primarily from the gathering, marketing, terminalling and storage segment, where the filing attributes the increase to higher average crude oil prices and higher sales volumes, including barrels sold under buy/sell and bulk purchase arrangements. Pipeline margin activities also rose, and tariff revenues increased approximately 48% or $49.6 million, mainly from acquisitions.
Why did net income decline despite higher operating income?
Operating income rose to $98.2 million from $94.6 million, but net income fell to $59.4 million from $65.3 million. The filing attributes the change largely to LTIP charges of $5.7 million in operations and $23.1 million in general and administrative expenses, totaling about $28.8 million, related to the probable vesting of phantom units following the conversion of subordinated units.
How is the company funding its acquisitions?
The company states it intends to fund acquisitions with approximately equal proportions of equity and debt. In 2003 it issued about $250 million of common units through three offerings and $250 million of 5.625% senior notes due 2013, and it had $596.8 million of unused committed credit capacity at December 31, 2003. For the April 2004 Link acquisition, it used cash on hand, a new $200 million 364-day credit facility and borrowings under existing revolving facilities, and it raised about $101 million through a private placement of Class C units.
What are the main risks identified in the filing?
Key risks include declining volumes from the Santa Ynez and Point Arguello offshore California fields, which the filing says have experienced natural production declines; dependence on third-party shippers and crude supplies; intense competition; environmental liabilities; and the impact of crude oil price volatility and market structure shifts. The filing also notes a pending export license matter with the Bureau of Industry and Security for which the company cannot estimate the ultimate impact, and a shareholder class action related to the proposed acquisition of Plains Resources Inc.
What legal and regulatory matters are pending?
The company disclosed an export license matter involving possible crude oil exports in excess of authorized amounts, for which it had made a voluntary disclosure and has received no indication of penalties. It also disclosed the Alfons Sperber putative class action in Delaware Chancery Court, which seeks to enjoin or rescind the proposed acquisition of Plains Resources Inc. The company intends to vigorously defend the suit. After year end, the Texas Attorney General opened an investigation into whether the Link acquisition might reduce competition in Texas.
04—Continue