01—Abstract
Summary
Summary of the 10-K filed February 27, 2020. Cited figures are marked; the original filing is the authoritative source.
Plains All American Pipeline, L.P.
(PAA) reported net income of $2.180 billiona for 2019 on total revenues of $33.669 billion, roughly flat with net income of $2.216 billion in 2018. Operating income was $1.988 billion, down from $2.277 billion. The company's three segments are Transportation, Facilities and Supply and Logistics.
Segment Adjusted EBITDA rose to $1.722 billionb for Transportation (from $1.508 billion) and to $803 million for Supply and Logistics (from $462 million), while Facilities was $705 million (from $711 million). Consolidated Adjusted EBITDA was $3.237 billion, versus $2.684 billion in 2018, and Implied DCF was $2.376 billion. The partnership ended 2019 with approximately $2.5 billion of liquidity, $9.75 billion of face value consolidated debt and partners' capital of $13.195 billion.
It completed its Leverage Reduction Plan in April 2019 and lowered its targeted long-term debt-to-Adjusted EBITDA range to 3.0x to 3.5x. Management expects approximately $1.4 billionc of 2020 expansion capital, centered on Permian Basin takeaway and long-haul pipelines. In February 2020 the partnership acquired Felix Midstream for approximately $305 million and sold a 10% interest in Saddlehorn Pipeline for approximately $78 million.
Common distributions were $1.38d per unit in 2019 versus $1.20 in 2018, and the quarterly rate was $0.36 per unit. The filing flags risks including the Line 901 pipeline incident, for which the partnership estimates aggregate total costs of approximately $390 million and carries a remaining undiscounted gross liability of $83 million.
Other risks include Permian takeaway overbuild, the coronavirus-related drop in demand for crude oil and petroleum products in China, and the Canadian dollar exchange rate. Supply and Logistics results benefited in 2019 from favorable crude oil differentials, but management does not expect those margin opportunities to continue for the foreseeable future.
02—Key points
Key Highlights
- Net income of $2.180 billion for 2019 versus $2.216 billion in 2018; net income attributable to PAA of $2.171 billion.
- Total revenues of $33.669 billion in 2019 versus $34.055 billion in 2018; operating income of $1.988 billion versus $2.277 billion.
- Consolidated Adjusted EBITDA of $3.237 billion versus $2.684 billion; Implied DCF of $2.376 billion, and Implied DCF Excess of $1.174 billion over common distributions.
- Transportation Segment Adjusted EBITDA rose 14% to $1.722 billion, driven by higher Permian Basin volumes of 4,690 thousand barrels per day; Supply and Logistics Segment Adjusted EBITDA rose 74% to $803 million.
- Completed the Leverage Reduction Plan in April 2019 and lowered the targeted long-term debt-to-Adjusted EBITDA range to 3.0x-3.5x, with a targeted minimum distribution coverage of 130%.
- Expansion capital spend of $1.340 billion in 2019; 2020 expansion capital plan of approximately $1.4 billion; 2019 divestiture proceeds of $205 million.
- Approximately $2.5 billion of liquidity at December 31, 2019; total face value of consolidated debt of approximately $9.75 billion; common distribution of $0.36 per unit paid February 14, 2020.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2019, Plains All American Pipeline kept $0.06.
- Revenue$33.67B100.0%
- Cost of revenue−$29.45B87.5%
- Gross profit$4.22B12.5%
- Operating costs−$2.23B6.6%
- Operating income$1.99B5.9%
- Interest, other & tax$183.0M0.5%
- Net income$2.17B6.4%
Where FY2019 revenue went
$33.67B- Cost of revenue: $29.45B, 87% of revenue
- Operating income: $1.99B, 5.9% of revenue
- Operating costs: $2.23B, 6.6% of revenue
Kept 5.9% as operating incomeOperating income $1.99B · 5.9%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2019filed February 27, 2020Financial Statements
FY2019 against FY2018
| Line item | FY2019FY2018 | Change |
|---|---|---|
| Revenue | $33.67B$34.05B | −1.1% |
| Cost of Revenue | $29.45B$29.79B | −1.1% |
| Gross Profit | $4.22B$4.26B | −1.1% |
| Operating Expenses | $31.68B$31.78B | −0.3% |
| Operating Income | $1.99B$2.28B | −12.7% |
| Interest Expense | $425.00M$431.00M | −1.4% |
| Net Income | $2.17B$2.22B | −2.0% |
05—Questions
Frequently Asked Questions
Why did operating income decline in 2019 even though Segment Adjusted EBITDA increased?
Operating income fell to $1.988 billion from $2.277 billion, largely because of higher depreciation and amortization of $601 million (versus $520 million) and a net loss on asset sales and impairments of $28 million, compared with a net gain of $114 million in 2018. Segment Adjusted EBITDA excludes these non-cash items, so segment results improved even as GAAP operating income declined.
What drove the increase in Transportation segment results?
Transportation Segment Adjusted EBITDA increased $214 million to $1.722 billion. The filing attributes this mainly to higher Permian Basin volumes from increased production and recently completed expansion projects, including the Sunrise II pipeline and the Cactus II pipeline, which was placed into service in the third quarter of 2019.
How much is the Line 901 incident expected to cost?
The partnership estimates aggregate total costs of approximately $390 million for the Line 901 incident, including emergency response, clean-up, natural resource damage assessments, certain third-party claims and estimates for fines and penalties. A remaining undiscounted gross liability of $83 million was recorded at December 31, 2019, and approximately $62 million of insurance and other recovery receivables was recognized.
What are the company's main plans for capital and acquisitions in 2020?
The 2020 expansion capital plan totals approximately $1.4 billion, mostly for long-haul pipeline projects ($450 million), Permian Basin takeaway pipeline projects ($395 million) and complementary Permian Basin projects ($275 million). In February 2020 the partnership acquired Felix Midstream for approximately $305 million and sold a 10% interest in Saddlehorn Pipeline for approximately $78 million, retaining a 30% interest. It also agreed in January 2020 to sell certain Los Angeles Basin crude oil terminals for $195 million.
What is the outlook for the Supply and Logistics segment?
The filing states that 2019 results benefited from realizing favorable crude oil differentials, primarily in the Permian Basin and Canada, and from higher NGL margins. Management noted that it does not expect these opportunities for higher margins to continue for the foreseeable future, so Supply and Logistics results may be less favorable going forward.
06—Continue