01—Abstract
Summary
Summary of the 10-K filed February 28, 2014. Cited figures are marked; the original filing is the authoritative source.
Plains All American Pipeline, L.P.
(PAA) reported net income attributable to PAA of approximately $1.361 billiona, or $2.80 per diluted limited partner unit, for 2013, compared with $1.094 billion, or $2.40 per diluted unit, in 2012. Adjusted EBITDA rose to $2.292 billion from $2.107 billion, and total segment profit was $2.167 billion versus $1.945 billion. Management attributed the improvement mainly to contributions from the USD Rail Terminal and BP NGL acquisitions, incremental fee-based contributions from expansion capital, and favorable unit margins in the Supply and Logistics segment, partly offset by narrower crude oil differentials in 2013.
The partnership ended 2013 with total debt of $7.828 billionb, partners' capital of $7.703 billion, and about $1.9 billion of liquidity. It reported net cash from operating activities of $1.954 billion and invested $1.653 billion in investing activities. The 2014 capital program is projected at $1.7 billion of expansion projects, with a range of $1.6 to $1.8 billion, led by the Permian Basin area projects and the Cactus Pipeline.
The filing notes the completion of the PNG Merger on December 31, 2013, in which PAA issued about 14.7 million common units valued at roughly $760 millionc. Distributions remain a central focus: the quarterly distribution was raised to $0.6150 per unit and paid on February 14, 2014, a year-over-year increase of approximately 9.3%. The filing also highlights risks including commodity price volatility, reliance on the supply and logistics segment, rising rail regulatory scrutiny following recent derailments, and ongoing environmental and pipeline-integrity costs.
02—Key points
Key Highlights
- Net income attributable to PAA rose to $1.361 billion ($2.80 per diluted unit) in 2013 from $1.094 billion ($2.40 per diluted unit) in 2012.
- Adjusted EBITDA increased to $2.292 billion from $2.107 billion; total segment profit reached $2.167 billion versus $1.945 billion.
- Facilities segment profit rose to $616 million from $482 million, while Transportation segment profit was $729 million and Supply and Logistics segment profit was $822 million.
- Total debt was $7.828 billion at year-end 2013, with about $1.9 billion of liquidity and a working capital deficit of about $447 million.
- The 2014 expansion capital plan totals approximately $1.7 billion, including $430 million for Permian Basin area projects and $310 million for the Cactus Pipeline.
- The quarterly distribution was increased to $0.6150 per unit, paid February 14, 2014, a year-over-year increase of approximately 9.3%.
- The PNG Merger closed December 31, 2013, with PAA issuing about 14.7 million common units valued at roughly $760 million to acquire the publicly held PNG units.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2013, Plains All American Pipeline kept $0.03.
- Revenue$42.25B100.0%
- Cost of revenue−$40.08B94.9%
- Gross profit$2.17B5.1%
- Operating costs−$429.0M1.0%
- Operating income$1.74B4.1%
- Interest, other & tax−$377.0M0.9%
- Net income$1.36B3.2%
Where FY2013 revenue went
$42.25B- Cost of revenue: $38.47B, 91% of revenue
- Net income: $1.36B, 3.2% of revenue
- Operating costs: $2.05B, 4.8% of revenue
- Interest, other & tax: $377.0M, 0.9% of revenue
Kept 3.2% as net incomeNet income $1.36B · 3.2%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2013filed February 28, 2014Financial Statements
FY2013 against FY2012
| Line item | FY2013FY2012 | Change |
|---|---|---|
| Revenue | $42.25B$37.80B | +11.8% |
| Cost of Revenue | $38.47B— | — |
| Gross Profit | $2.17B$1.95B | +11.4% |
| Operating Expenses | $40.51B$36.37B | +11.4% |
| Operating Income | $1.74B$1.43B | +22.0% |
| Interest Expense | $313.00M$288.00M | +8.7% |
| Net Income | $1.36B$1.09B | +24.4% |
| EPS (Basic) | $2.82$2.41 | +17.0% |
| EPS (Diluted) | $2.80$2.40 | +16.7% |
05—Questions
Frequently Asked Questions
What drove the increase in PAA's 2013 earnings?
Net income attributable to PAA rose to $1.361 billion from $1.094 billion. The filing attributes this mainly to contributions from the USD Rail Terminal and BP NGL acquisitions, incremental fee-based contributions from acquisition and expansion capital in the Transportation and Facilities segments, and favorable unit margins in Supply and Logistics driven by NGL marketing. Narrower crude oil differentials in 2013 partly offset these gains.
How much debt does PAA carry and how is it structured?
At December 31, 2013, consolidated debt was approximately $7.828 billion, comprising about $6.715 billion of long-term debt and $1.113 billion of short-term debt. The short-term portion includes commercial paper and hedged inventory borrowings. PAA reported that it was in compliance with its credit agreement and indenture covenants as of year-end.
What are PAA's main growth projects for 2014?
The 2014 expansion capital program totals about $1.7 billion, with a projected range of $1.6 billion to $1.8 billion. The largest items are Permian Basin area projects ($430 million), the Cactus Pipeline ($310 million), rail terminal projects ($185 million), and Fort Saskatchewan facility projects and NGL pipeline ($180 million). The filing notes that these projects are expected to be phased into service through 2014 and 2015.
Is the distribution expected to keep growing?
PAA raised its quarterly distribution to $0.6150 per unit, paid February 14, 2014, a year-over-year increase of approximately 9.3%. The distribution policy requires PAA to distribute all available cash within 45 days after each quarter. The general partner agreed to reduce its incentive distributions by $6.75 million for the February 2014 payment, with reductions of $5.5 million per quarter thereafter through November 2015. The filing does not guarantee future increases.
What are the key risks highlighted for investors?
The filing highlights commodity price volatility and changing crude oil market structure, which affect Supply and Logistics results. It also cites environmental and pipeline-integrity costs, growing regulatory scrutiny of crude oil rail transportation following recent derailments, and the risk of a capacity overbuild in key producing regions. Additional risks include reliance on capital markets for growth funding, credit ratings, and the potential for changes in tax treatment as a partnership.
06—Continue