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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) - July 24, 2002
Plains All American Pipeline, L.P.
(Name of Registrant as specified in its charter)
DELAWARE 0-9808 76-0582150
(State or other jurisdiction (Commission File Number) (I.R.S. Employer
of incorporation or organization) Identification No.)
333 Clay Street, Suite 1600
Houston, Texas 77002
(713) 646-4100
(Address, including zip code, and telephone number,
including area code, of Registrant's principal executive offices)
N/A
(Former name or former address, if changed since last report.)
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Item 9. Regulation FD Disclosure
In accordance with General Instruction B.2. of Form 8-K, the information
presented under this Item 9 shall not be deemed "filed" for purposes of Section
18 of the Securities Act of 1934, as amended, nor shall it be deemed
incorporated by reference in any filing under the Securities Act of 1933, as
amended, except as shall be expressly set forth by specific reference in such a
filing.
Disclosure of Third and Fourth Quarter 2002 Estimates; Update of Year 2002
Estimates
The following table reflects our actual results for the first six months of
2002 and current estimates of results for the third and fourth quarters of 2002
as well as for the full year 2002. These estimates are based on assumptions and
estimates that management believes are reasonable based on currently available
information; however, management's assumptions and our future performance are
both subject to a wide range of business risks and uncertainties and we can not
assure you that these goals and estimates can or will be met. Any number of
factors could cause our actual results to differ materially from those in the
following table. The estimates set forth below are given as of the date hereof
based only on information known to us as of July 23, 2002.
Operating And Financial Guidance
(in thousands except per unit data)
YTD Quarter Ended Quarter Ended Year Ended
--------------- ---------------------- --------------------- ---------------------
June 30, 2002 September 30, 2002 December 31, 2002 December 31, 2002
--------------- ---------------------- --------------------- ---------------------
Actuals Low High Low High Low High
--------------- -------- ----------- --------- --------- -------- ----------
Gross Margin:
Pipeline $ 37,285 $ 22,500 $ 23,500 $ 24,700 $ 26,000 $ 84,485 $ 86,785
Mktg, Gath, Term, & Stor 44,532 22,000 22,700 24,100 25,500 90,632 92,732
-------- -------- -------- -------- -------- -------- --------
Total Gross Margin 81,817 44,500 46,200 48,800 51,500 175,117 179,517
G&A / Other Expenses 21,912 11,500 11,200 11,800 11,500 45,212 44,612
-------- -------- -------- -------- -------- -------- --------
EBITDA $ 59,905 $ 33,000 $ 35,000 $ 37,000 $ 40,000 $129,905 $134,905
Depreciation & Amortization 14,144 8,600 8,600 9,400 9,400 32,144 32,144
-------- -------- -------- -------- -------- -------- --------
EBIT 45,761 24,400 26,400 27,600 30,600 97,761 102,761
Interest Expense 12,807 8,800 8,500 9,600 9,300 31,207 30,607
-------- -------- -------- -------- -------- -------- --------
Adjusted Income $ 32,954 $ 15,600 $ 17,900 $ 18,000 $ 21,300 $ 66,554 $ 72,154
======== ======== ======== ======== ======== ======== ========
Adjusted Income
to Limited Partners 31,059 14,409 16,663 16,761 19,995 62,229 67,717
Units Outstanding 43,253 43,253 43,253 43,253 43,253 43,253 43,253
Adjusted Income per Unit $ 0.72 $ 0.33 $ 0.39 $ 0.39 $ 0.46 $ 1.44 $ 1.57
Notes and Assumptions:
1. The estimates assume the closing on August 1, 2002 of the acquisition of
interests from Shell as disclosed in our report on Form 8-K filed on May 6,
2002 (the "Shell West Texas Assets"), and include our estimates of results
from the interests acquired effective as of the date of closing.
2. EBITDA means Earnings Before Interest, Taxes, Depreciation, Amortization
and other non-cash items. EBIT means EBITDA less Depreciation and
Amortization. Adjusted income means net income before unusual or
non-recurring items and the impact of SFAS 133, "Accounting for Derivative
Instruments and Hedging Activities." The historical results presented in
the table do not include the impact of any unusual or non-recurring items
or SFAS 133. The effect of these excluded items would be to reduce adjusted
income, EBITDA and EBIT by approximately $1.7 million, and would reduce
adjusted income per unit by $0.04. The forecast presented in the table does
not include any assumptions or projections with respect to any potential
gains or losses related to SFAS 133 or EITF 98-10. The potential gains or
losses related to SFAS 133 or EITF 98-10 could materially change reported
net income.
3. Pipeline Gross Margin. Pipeline volume and tariff estimates are based on
historical operating performance and our outlook for future performance.
Actual results could vary materially depending on volumes that are shipped.
Average pipeline volumes are estimated to be approximately 765,000 barrels
per day for the third quarter of 2002, including volumes from the Shell
West Texas Assets for two-thirds of the quarter (as a result of the August
1 effective date), with Outer Continental Shelf (OCS) volumes estimated to
make up approximately 8% of these volumes, or approximately 65,000 barrels
per day. Average pipeline volumes are estimated to be approximately 915,000
barrels per day for the fourth quarter of 2002 with Outer Continental Shelf
(OCS) volumes estimated to make up approximately 7% of these volumes, or
approximately 65,000 barrels per day. Revenues are forecast using these
volume assumptions, current tariffs and estimates of operating expenses,
each of which management believes are reasonable. A 5,000 barrel per day
variance in OCS volumes, an approximate 8% volume reduction, would have an
approximate $800,000 effect on EBITDA for the third quarter and an
approximate $3.2 million effect on an annualized basis. An average 25,000
barrel per day variance in the Basin Pipeline System, the primary asset to
be acquired from Shell, equivalent to an approximate 10% volume reduction
on that pipeline system, would have an approximate $550,000 effect on
EBITDA for the third quarter and an approximate $3.3 million effect on an
annualized basis.
4. Marketing and Transportation, Terminalling and Storage Gross Margin.
Forecast volumes for Gathering & Marketing are approximately 475,000
barrels per day for the remainder of the year, consistent with our current
volumes. Gross margin is forecast using these volume assumptions and
estimates of operating expenses, each of which management believes are
reasonable.
5. General and Administrative Expense. G&A expense is forecast to be between
$11.2 million and $11.5 million for the third quarter of 2002 and between
$11.5 million and $11.8 million for the
fourth quarter of 2002. Excluding acquisition related increases, the second
half of 2002 includes approximately $1.2 million of consultant and
contractor related expenses attributable to accounting system enhancements
and increased resources associated with an ongoing project to reprocess,
validate and collect certain prior year accounts receivable, which we
expect to complete over the next six months. We anticipate that annual
general and administrative costs in 2003 will be reduced by approximately
$1.2 to $1.5 million as we eliminate processing and consulting costs
associated with this project.
6. Interest Expense. Third quarter interest expense is forecast to be between
$8.5 million and $8.8 million assuming an average debt balance of
approximately $575 million and an average interest rate of approximately
6.0%, including our current interest rate hedges and commitment fees.
Fourth quarter interest expense is forecast to be between $9.3 million and
$9.6 million assuming an average debt balance in the fourth quarter of 2002
of approximately $675 million and an average interest rate of approximately
5.7%, including our current interest rate hedges and commitment fees. The
forecast is based on estimated cash flow, current distribution rates,
planned capital projects, planned sales of surplus equipment, and forecast
levels of inventory and other working capital sources and uses, each of
which management believes is reasonable. The forecast does not include the
effects of any changes to the capital structure, including debt
refinancings or equity issuances, which may occur prior to year end.
7. Depreciation & Amortization. Depreciation and amortization is forecast
based on our existing assets, our initial assessment of the estimated
useful lives of the Shell West Texas Assets and forecast capital
expenditures. Depreciation is computed using the straight-line method over
estimated useful lives which range from 5 years for office property and
equipment to 40 years for certain crude oil terminals and facilities. Crude
oil pipelines are depreciated over 30 years.
8. Units Outstanding. Our forecast is based on the 43,252,748 units that are
currently outstanding.
9. Adjusted Income per Unit. Adjusted income per limited partner unit is
calculated by dividing the adjusted income allocated to limited partners by
the weighted average units outstanding during the period. As noted in
number 11 below, the adjusted income allocated to limited partners is
impacted by the amount of the incentive distribution paid to the general
partner.
10. Potential Effect of Changes in Capital Structure. Interest expense,
adjusted income and adjusted income per unit estimates are based on our
capital structure as of July 23, 2002. In keeping with our established
financial growth strategy of financing acquisitions using a balance of
equity and debt, we anticipate that we will issue equity in order to reduce
debt associated with the acquisition of the Shell West Texas Assets.
Depending on the terms, any such equity issuance may dilute the adjusted
income per unit forecasts included in the foregoing table. In addition, we
have recently amended our credit facility to permit the issuance of up to
$400 million of senior unsecured notes. We intend to monitor debt capital
market conditions and may in the future issue senior unsecured notes, which
may bear interest costs greater than the amount included in the foregoing
guidance. Accordingly, the foregoing financial results and per unit
estimates will change, depending on the timing and the terms of any debt or
equity we actually issue.
Additionally, the contemplated financing transactions may result in our
retiring some of our outstanding debt, which could result in an
extraordinary charge to earnings of such unamortized debt issuance costs.
We have not included any such potential charge in our forecast.
11. Adjusted Income to Limited Partners. The forecast is based on our current
annual distribution of $2.15 per unit. The amount of adjusted income
allocated to our limited partnership interests is 98% of the total
partnership adjusted income less the amount of our general partner's
incentive distribution. Based on a $2.15 annual distribution level and the
current units outstanding, our general partner's incentive distribution is
forecast to be approximately $3.5 million annually. The amount of the
incentive distribution changes based on the number of units outstanding and
the level of the distribution on the units.
12. Capital Expenditures. Total capital expenditures are estimated to be $5.0
million for the third quarter of 2002 and $5.0 million for the fourth
quarter of 2002. Of these amounts, expansion capital is estimated to be
$3.3 million during the third quarter and $3.2 million during the fourth
quarter. The expansion capital estimates are primarily attributable to the
Phase III expansion at our Cushing Terminal. Maintenance capital is
estimated to be $1.7 million for the third quarter and $1.8 million for the
fourth quarter.
13. Although acquisitions comprise a key element of our growth strategy, these
results and estimates do not include any assumptions or forecasts for any
acquisitions that may be made after the date hereof other than with respect
to the Shell West Texas Assets.
Preliminary Estimates for Year 2003
For 2003, we anticipate our EBITDA will range from $155 million to $162
million. This overall guidance is based on continued operating and financial
performance of our existing assets under normalized market conditions, inclusion
of the Shell West Texas Assets and placing our Phase III expansion of the
Cushing Terminal in service on January 1, 2003. The guidance also incorporates
successfully integrating throughout the year the realization of cost savings and
revenue synergies identified in our acquisition analysis for the Shell West
Texas Assets. Based on this outlook and taking into account anticipated
depreciation and amortization expense, we anticipate EBIT will range from $117
million to $124 million.
As noted in item number 10 above, our current capital structure is expected
to change as a result of issuing equity to fund the Shell acquisition and from
the possible issuance of senior unsecured notes. These financing transactions
may have a dilutive effect on adjusted income per unit. Additionally, the
contemplated financing transactions may result in our retiring some of our
outstanding debt, which could result in an extraordinary charge to earnings of
such unamortized debt issuance costs. We have not included any such potential
charge in our forecast.
Forward-Looking Statements And Associated Risks
All statements, other than statements of historical fact, included in this
report are forward-looking statements, including, but not limited to, statements
identified by the words "anticipate," "believe," "estimate," "expect," "plan,"
"intend" and "forecast" and similar expressions and statements regarding our
business strategy, plans and objectives of our management for future operations.
These statements reflect our current views with respect to future events, based
on what we believe are reasonable assumptions. Certain factors could cause
actual results to differ materially from results anticipated in the
forward-looking statements. These factors include, but are not limited to:
o abrupt or severe production declines or production interruptions in outer
continental shelf crude oil production located offshore California and
transported on the All American Pipeline;
o declines in volumes shipped on the Basin and our other pipelines by third
party shippers;
o successful consummation of anticipated acquisitions;
o the availability of adequate supplies of and demand for crude oil in the
areas in which we operate;
o the effects of competition;
o the success of our risk management activities;
o the impact of crude oil price fluctuations;
o successful integration and future performance of acquired assets;
o successful third-party drilling efforts and completion of announced
oil-sands projects;
o continued creditworthiness of our counterparties
o our levels of indebtedness and our ability to receive credit on
satisfactory terms;
o shortages or cost increases of power supplies, materials or labor;
o weather interference with business operations or project construction;
o the impact of current and future laws and governmental regulations;
o the currency exchange rate of the Canadian dollar;
o environmental liabilities that are not covered by an indemnity or
insurance;
o fluctuations in the debt and equity markets; and
o general economic, market or business conditions.
We undertake no obligation to publicly update or revise any forward-looking
statements. Further information on risks and uncertainties is available in our
filings with the Securities and Exchange Commission, which are incorporated by
reference herein.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
PLAINS ALL AMERICAN PIPELINE, L.P.
Date: July 24, 2002 By: Plains AAP, L.P., its general partner
By: Plains All American GP LLC,
its general partner
By: /s/ Phil Kramer
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Name: Phil Kramer
Title: Executive Vice President and Chief
Financial Officer