01—Abstract
Summary
Summary of the 10-K filed February 26, 2009. Cited figures are marked; the original filing is the authoritative source.
Plains All American Pipeline, L.P.
(PAA) reported 2008 total revenues of $30.06 billiona and net income of $437 million, up from $365 million in 2007. Results were driven mainly by fee-based Transportation and Facilities segments, which posted segment profit of $445 million and $153 million, respectively. Marketing segment profit fell to $221 million from $269 million, reflecting a $145 million inventory writedown partly offset by $134 million of related derivative gains.
Total segment profit rose to $819 millionb from $713 million. The Partnership's balance sheet showed total debt of $4.29 billion at December 31, 2008, including $1.03 billion of short-term debt, against partners' capital of $3.55 billion. Senior unsecured ratings were BBB- (S&P) and Baa3 (Moody's), both investment grade with stable outlooks.
Management stated it was in line with its targeted credit metrics at year-end and had about $1.0 billionc of available credit capacity across its committed facilities. Acquisitions in 2008 totaled $735 million, led by the $687 million Rainbow pipeline in Alberta.
Expansion capital for 2009 was reduced to approximately $295 milliond from $491 million in 2008, and the company said it could fund its 2009 capital program without accessing debt or equity markets. Key risks disclosed include declining Outer Continental Shelf volumes offshore California, dependence on credit ratings and open supplier credit, the Pier 400 Los Angeles project, whose cost had risen to an estimated $575 to $600 million, and pending environmental penalty proceedings with the EPA and DOJ.
02—Key points
Key Highlights
- Total revenues of $30.06 billion in 2008, versus $20.39 billion in 2007; net income of $437 million versus $365 million.
- Transportation segment profit rose to $445 million from $334 million, and Facilities segment profit rose to $153 million from $110 million.
- Marketing segment profit declined to $221 million from $269 million, after a $145 million inventory write-down to net realizable value partly offset by $134 million of related derivative gains.
- Distributions declared of $3.50 per unit for 2008, up from $3.28 in 2007; the fourth-quarter 2008 distribution was $0.8925 per unit.
- Total debt of $4.29 billion at year-end 2008; senior unsecured ratings of BBB- (S&P) and Baa3 (Moody's), both investment grade with stable outlooks.
- Approximately $1.0 billion of availability under committed credit facilities at December 31, 2008, subject to covenant compliance.
- 2009 expansion capital program reduced to approximately $295 million from $491 million in 2008; Pier 400 project estimated at $575 to $600 million to complete.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2008filed February 26, 2009Financial Statements
FY2008 against FY2007
| Line item | FY2008FY2007 | Change |
|---|---|---|
| Revenue | $30.06B$20.39B | +47.4% |
| Operating Expenses | $29.47B$19.88B | +48.3% |
| Operating Income | $594.00M$518.00M | +14.7% |
| Interest Expense | $196.00M$162.00M | +21.0% |
| Net Income | $437.00M$365.00M | +19.7% |
05—Questions
Frequently Asked Questions
How did the Marketing segment perform, and why did it decline?
Marketing segment profit was $221 million in 2008, down from $269 million in 2007. The filing attributes the decline to a $145 million write-down of crude oil and LPG inventory to net realizable value, partly offset by $134 million of related derivative gains. Lease gathering margins were stronger in 2008 than in 2007, but 2007 had benefited from a contango market, favorable differentials and LPG margins.
What is the Partnership's leverage and credit profile?
Total debt was $4.29 billion at December 31, 2008, including $1.03 billion of short-term debt. Management targets an average long-term debt-to-total capitalization of about 50%, long-term debt to adjusted EBITDA of about 3.5x, and adjusted EBITDA to interest coverage of about 3.3x or better, and stated that it was in line with these metrics at year-end. Ratings were BBB- and Baa3, and a downgrade could raise borrowing costs and affect access to open credit from suppliers.
What are the main risks to volumes and cash flow?
Among the risks cited are declining Outer Continental Shelf volumes from fields offshore California; the filing estimates a 5,000 barrel per day decline would reduce annual Transportation segment profit by about $7 million. Other risks include counterparty credit exposure amplified by the economic downturn, the Pier 400 project's uncertain regulatory approval and cost, and pending EPA and DOJ proceedings over pipeline releases, for which the maximum permissible penalty was cited at approximately $6.8 million.
How much did the Partnership spend on acquisitions and growth projects in 2008, and what is planned for 2009?
The Partnership completed acquisitions totaling $735 million in 2008, including the $687 million Rainbow pipeline in Alberta, and spent $491 million on internal growth projects. For 2009, expansion capital is planned at approximately $295 million, which management said would be funded from cash flow in excess of distributions, proceeds from pending asset sales, and planned reductions in inventories, without needing to access equity or debt markets.
What distributions have unitholders received?
Declared distributions were $3.50 per limited partner unit in 2008, compared with $3.28 in 2007. The distribution paid on February 13, 2009 was $0.8925 per unit, consistent with the third quarter of 2008 and a 5% year-over-year increase. Management said it intends to balance near-term distribution growth against retaining cash flow during challenging capital market conditions.
06—Continue