01—Abstract
Summary
Summary of the 10-K filed February 26, 2010. Cited figures are marked; the original filing is the authoritative source.
Plains All American Pipeline, L.P. reported full-year 2009 net income of $580 milliona ($579 million attributable to Plains) on total revenues of $18.52 billion, up from $437 million on $30.06 billion in 2008.
Segment profit rose to $1.03 billionb from $819 million, led by the Supply & Logistics segment ($345 million versus $221 million), which benefited from strong crude oil contango margins early in the year and derivative gains of $62 million. Transportation segment profit was $477 million and Facilities segment profit was $208 million, with growth driven by acquisitions such as the 50% PNGS interest purchased for $215 million in September 2009 and by internal expansion projects. The partnership ended 2009 with total debt of $5.2 billion, partners' capital of $4.16 billion, and approximately $950 million of available committed credit.
Its senior unsecured ratings were BBB- (S&P) and Baa3 (Moody's), both stable and investment grade. Common unit distributions were $3.62c per unit for 2009, and the February 2010 distribution was $0.9275 per unit, a 3.9% year-over-year increase. The company targets a long-term debt-to-adjusted EBITDA multiple of about 3.5x and a total debt-to-capitalization ratio of about 60%.
Key risks in the filing include the decline in offshore California (OCS) production that feeds the All American Pipeline, the Pier 400 Los Angeles project, which has been scaled back and whose cost has risen to about $445 milliond, pending environmental and legal matters including EPA and DOJ penalty proceedings, and the potential effect of a credit rating downgrade on open supplier credit. Its 2010 capital program was budgeted at $360 million.
02—Key points
Key Highlights
- Net income of $580 million in 2009 versus $437 million in 2008; net income attributable to Plains was $579 million, or $3.32 per diluted limited partner unit.
- Total segment profit rose to $1.03 billion from $819 million, with Supply & Logistics up to $345 million from $221 million and Transportation at $477 million.
- Total debt was $5.2 billion at December 31, 2009, including $4.1 billion of long-term debt, with about $950 million of available borrowing capacity.
- Senior unsecured ratings were BBB- (Standard & Poor's) and Baa3 (Moody's), both with stable outlooks and both investment grade.
- The company acquired the remaining 50% interest in PNGS for $215 million in September 2009, making it the owner of 100% of the natural gas storage business, and completed six other 2009 acquisitions for about $178 million.
- Distributions declared for 2009 totaled $3.62 per unit, and the February 2010 quarterly distribution was $0.9275 per unit, a 3.9% year-over-year increase.
- Pier 400 project cost estimate rose to about $445 million, two of three customer agreements were cancelled, and a Los Angeles court ruled in favor of the project respondents in January 2010.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2009, Plains All American Pipeline kept $0.03.
- Revenue$18.52B100.0%
- Cost of revenue−$17.49B94.4%
- Gross profit$1.03B5.6%
- Operating costs−$251.0M1.4%
- Operating income$779.0M4.2%
- Interest, other & tax−$199.0M1.1%
- Net income$580.0M3.1%
Where FY2009 revenue went
$18.52B- Cost of revenue: $17.49B, 94% of revenue
- Net income: $580.0M, 3.1% of revenue
- Operating costs: $251.0M, 1.4% of revenue
- Interest, other & tax: $199.0M, 1.1% of revenue
Kept 3.1% as net incomeNet income $580.0M · 3.1%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2009filed February 26, 2010Financial Statements
FY2009 against FY2008
| Line item | FY2009FY2008 | Change |
|---|---|---|
| Revenue | $18.52B$30.06B | −38.4% |
| Gross Profit | $1.03B— | — |
| Operating Expenses | $17.74B$29.47B | −39.8% |
| Operating Income | $779.00M$594.00M | +31.1% |
| Interest Expense | $224.00M$196.00M | +14.3% |
| Net Income | $580.00M$437.00M | +32.7% |
05—Questions
Frequently Asked Questions
How did the company's earnings and segment performance change in 2009?
Net income rose to $580 million from $437 million, and total segment profit increased to $1.03 billion from $819 million. Supply & Logistics segment profit rose to $345 million from $221 million, aided by strong crude oil contango margins in the first four months of 2009 and derivative gains of $62 million. Transportation segment profit increased to $477 million from $445 million, and Facilities segment profit increased to $208 million from $153 million, reflecting acquisitions and expansion projects. Total revenues declined to $18.52 billion from $30.06 billion, which the filing attributes largely to lower Supply & Logistics revenues.
How is the company financed and what is its credit profile?
At December 31, 2009 total debt was $5.2 billion, of which $4.1 billion was long-term. The company issued $1.35 billion of senior notes during 2009, including $350 million of 8.75% notes due 2019, $500 million of 4.25% notes due 2012, and $500 million of 5.75% notes due 2020. It also raised about $456 million of net equity proceeds in 2009. The filing states a targeted credit profile of about 3.5x long-term debt to adjusted EBITDA and about 50% long-term debt to total capitalization. Available liquidity was about $976 million, and the company stated it was in compliance with all covenants.
What are the main risks to the partnership's cash flow and distributions?
The filing identifies several risks. Production from the offshore California (OCS) fields that feed the All American Pipeline has declined, and a 5,000 barrel per day decline would reduce annual transportation segment profit by about $7 million. Third-party shippers generally have no long-term volume commitments. Credit rating downgrades could raise borrowing costs and reduce open credit from suppliers. Environmental releases, pending EPA and Department of Justice penalty proceedings, the SemCrude bankruptcy claims of about $23 million, and the Pier 400 project's regulatory and cost uncertainties are also disclosed. The partnership distributes all available cash each quarter, so distributions can fluctuate with performance.
How much of the company's cash distributions go to the general partner?
The general partner owns a 2% interest and receives incentive distributions that rise with per-unit payouts: 15% of amounts above $0.450 per unit, 25% above $0.495, and 50% above $0.675. In 2009 the company paid $127 million of incentive distributions to the general partner. Under the terms of the Pacific, Rainbow and PNGS acquisitions, the general partner agreed to reduce these incentive distributions by a total of $83 million over 2007 through 2011, with about $18 million remaining after the February 2010 distribution.
What growth projects does the company have underway?
The company's 2010 capital expansion program was estimated at $360 million, including Patoka Phase III, Cushing Phases VII and VIII, St. James Phase III, and West Texas gathering lines. Projects under construction at year-end 2009 included about 7 million barrels of crude oil and refined product storage and 31 Bcf of salt-cavern natural gas storage capacity, with Pine Prairie capacity expected to rise to 42 Bcf by mid-2012 and 45 Bcf by mid-2015. The Pier 400 project in Los Angeles is estimated to cost about $445 million, although the filing notes its timing and scope depend on pending permits and replacement customer agreements.
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