01—Abstract
Summary
Summary of the 10-K filed February 28, 2012. Cited figures are marked; the original filing is the authoritative source.
Plains All American Pipeline, L.P.
(PAA), a Delaware limited partnership formed in 1998, reported net income attributable to Plains of $966 milliona for 2011, a $461 million increase over 2010's $505 million. The company operates three segments (Transportation, Facilities, and Supply and Logistics). Segment profit rose to $1,560 million in 2011 from $1,026 million in 2010, with Supply & Logistics segment profit of $647 million versus $240 million, driven by volatile crude oil market conditions, increased production in resource plays, and favorable market structure.
Adjusted EBITDA was $1,598 millionb and implied DCF was $1,149 million for 2011. Total debt was approximately $5.2 billion at December 31, 2011, and liquidity was over $3.6 billion. The company's growth program is substantial.
Completed acquisitions in 2011 totaled about $1.4 billionc, including Southern Pines ($765 million) and Gardendale Gathering System ($349 million). Internal growth projects were $531 million in 2011, and the 2012 projected expansion capital is $800 million to $950 million. The pending BP NGL acquisition, for approximately $1.67 billion and expected to close in the second quarter of 2012, is the most significant near-term event and would substantially reduce available liquidity to roughly $2 billion on a pro forma basis, per the filing.
The company declared a quarterly distribution of $1.025d per unit paid February 14, 2012, a 7.0% year-over-year increase. Key risks include crude oil market volatility and contango/backwardation transition periods affecting Supply & Logistics results, declining OCS production offshore California, environmental release exposure, the successful closing and integration of the BP NGL assets, and dependence on investment-grade credit ratings for access to supplier credit. The company also disclosed a $70 million cost for the April 2011 Rainbow Pipeline release in Alberta, of which roughly $41 million was expected to be recovered from insurance.
02—Key points
Key Highlights
- Net income attributable to Plains was $966 million in 2011, up $461 million (91%) from $505 million in 2010.
- Total segment profit reached $1,560 million in 2011 versus $1,026 million in 2010; Supply & Logistics segment profit was $647 million versus $240 million.
- Adjusted EBITDA was $1,598 million in 2011 versus $1,106 million in 2010; implied distributable cash flow was $1,149 million.
- Pending acquisition of BP Canada Energy Company (BP NGL Assets) for approximately $1.67 billion, expected to close in Q2 2012, would reduce available liquidity from over $3.6 billion to approximately $2 billion.
- 2012 projected expansion capital expenditures of $800 million to $950 million, plus maintenance capital of $130 million to $150 million.
- Total debt of approximately $5.2 billion at December 31, 2011; company states it is in compliance with all covenants.
- Quarterly distribution of $1.025 per unit paid February 14, 2012, a year-over-year increase of approximately 7.0%.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2011, Plains All American Pipeline kept $0.03.
- Revenue$34.27B100.0%
- Cost of revenue−$32.72B95.4%
- Gross profit$1.56B4.6%
- Operating costs−$262.0M0.8%
- Operating income$1.30B3.8%
- Interest, other & tax−$332.0M1.0%
- Net income$966.0M2.8%
Where FY2011 revenue went
$34.27B- Cost of revenue: $32.72B, 95% of revenue
- Net income: $966.0M, 2.8% of revenue
- Operating costs: $262.0M, 0.8% of revenue
- Interest, other & tax: $332.0M, 1.0% of revenue
Kept 2.8% as net incomeNet income $966.0M · 2.8%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2011filed February 28, 2012Financial Statements
FY2011 against FY2010
| Line item | FY2011FY2010 | Change |
|---|---|---|
| Revenue | $34.27B$25.89B | +32.4% |
| Gross Profit | $1.56B$1.03B | +52.0% |
| Operating Expenses | $32.98B$25.13B | +31.2% |
| Operating Income | $1.30B$767.00M | +69.2% |
| Interest Expense | $253.00M$248.00M | +2.0% |
| Net Income | $966.00M$505.00M | +91.3% |
| EPS (Basic) | $2.46— | — |
| EPS (Diluted) | $2.44— | — |
05—Questions
Frequently Asked Questions
Why did Supply & Logistics segment profit increase so significantly in 2011?
The filing attributes the increase to active development of crude oil and liquids-rich resource plays, which raised volumes; favorable crude oil basis differentials; and favorable market structure. Lease gathering purchases rose to 742 thousand barrels per day from 620 thousand in 2010. The company also noted that margins may normalize as pipeline and logistics constraints are addressed.
What is the impact of the pending BP NGL acquisition on the partnership?
The acquisition, for approximately $1.67 billion, would give PAA the Canadian NGL business and certain upper-Midwest NGL assets of BP North America, including about 2,600 miles of NGL pipelines and seven fractionation plants with about 232,000 barrels per day of net capacity. The general partner agreed to reduce incentive distributions by $15 million per year for two years and $10 million per year thereafter. The filing states the deal would reduce liquidity from over $3.6 billion to approximately $2 billion.
What are the main risks to unitholders identified in the filing?
Key risks include a loss of investment-grade credit rating, which could limit open credit from suppliers; volatility in crude oil market structure; declines in volumes from offshore California OCS fields, where a 5,000 barrel per day decline would reduce transportation segment profit by about $10 million annually; environmental releases and integrity-management costs; and the successful integration of acquisitions such as the BP NGL assets.
What was the financial impact of the Rainbow Pipeline release?
The April 2011 crude oil release on the Rainbow Pipeline in Alberta had an aggregate estimated cleanup cost of approximately $70 million before insurance recoveries, accrued to field operating costs. The company recorded a remaining receivable of approximately $41 million for the portion of the liability it believes is probable of recovery from insurance, net of deductibles. Revenues were reduced by an estimated $21 million, including effects of forest fires in the same region.
How does the company fund its growth and what liquidity does it have?
The company states it intends to fund 55% of growth capital requirements with equity and cash flow in excess of distributions, targeting an investment-grade credit profile. As of December 31, 2011, it had over $3.6 billion of available liquidity, including $1.56 billion under its PAA senior unsecured revolving facility, $752 million under its hedged inventory facility, $1.2 billion under its 364-day facility (not activated), and $126 million under PNG's facility. The company also completed $1.9 billion of debt and equity raises in 2011.
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