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IPAA Oil & Gas Investment Symposium New York, New York April 19, 2004

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Presentation on theme: "IPAA Oil & Gas Investment Symposium New York, New York April 19, 2004"— Presentation transcript:

1 IPAA Oil & Gas Investment Symposium New York, New York April 19, 2004

2 Forward-Looking Statements & Non-GAAP Financial Measures Disclosure
This presentation contains forward-looking statements, including, in particular, statements about Plains All American Pipeline, L.P.’s (“the Partnership” or “PAA”) plans, strategies and prospects. These have been based on the Partnership’s current assumptions, expectations and projections about future events. Although the Partnership believes that the expectations reflected in these forward-looking statements are reasonable, the Partnership can give no assurance that these expectations will prove to be correct or that savings or other benefits anticipated in the forward-looking statements will be achieved. Important factors, some of which may be beyond the Partnership’s control, that could cause actual results to differ materially from management’s expectations are disclosed in the Partnership’s filings with the Securities and Exchange Commission. This presentation contains non-GAAP financial measures. For a presentation of the most directly comparable GAAP measures and a reconciliation of the two, please visit our website at Click on the “Investor Relations” section on our homepage followed by the “Non-GAAP Reconciliations” link. In addition, we have attached an Appendix to this presentation including the reconciliation of EBITDA, which is used in this presentation, to net income.

3 Partnership Profile (NYSE: PAA)
Aggregate Size Assets: Pipelines (miles) 14,000+ Tankage (MMbbls.) Truck Fleet (units) +/- 500 Crude handled (MMbpd) Geographic footprint: USA (states) +/- 40 Canada (provinces) Employees +/- 2,000 Operational Metrics Annual Revenue (2003) $12.6 B Total Assets (12/31/03) $2.1 B Enterprise Value $3.0 B Equity Market Cap $2.1 B 2003 Fortune 500 Rank # Unitholders (approx.) ,000 EBITDA (midpoint) $198.0 MM Net Income (midpoint) $101.8 MM Book Cap. (12/31/03) $1,266 MM Debt-to-Book Cap (12/31/03) % 2004 Public Guidance (1) EBITDA and Net Income are the midpoint of PAA’s public guidance filed via 8-K on February 24, 2004 and exclude projected LTIP charges of $4.5 million in Such guidance includes the Capline acquisition which closed on 3/1/04, but not the Link acquisition which closed on 4/1/04.

4 PAA’s Role in the Crude Oil Distribution Chain
Plains All American’s Operations Gathering, Marketing, Terminalling, Storage and Pipelines Producers Refiners Pipeline Truck Pipeline Pipeline Gathering Injection Station Terminal / Storage / Exchange Location Barge

5 Principal Business Strategy Cohesive, Consistent & Fundamentally Sound
Our principal business strategy is to capitalize on the regional crude oil supply and demand imbalances that exist in the U.S. and Canada by combining the strategic location and unique capabilities of our transportation and terminalling assets with our extensive marketing and distribution expertise to generate sustainable earnings and cash flow Execution of strategy to be accomplished by: Increasing and optimizing throughput on our existing assets and realizing cost efficiencies Utilizing and expanding our Cushing Terminal Pursuing strategic and accretive acquisitions Optimizing and expanding our presence in Canada, the Gulf Coast and Gulf of Mexico On a smaller scale, we also engage in a similar business strategy with regard to LPGs.

6 Industry Overview PADD II Demand to Be Satisfied by Imports from Canada, Cushing & Gulf Coast
IV II I III

7 Capline Pipeline System
Industry Overview PADD II Demand to Be Satisfied by Imports from Canada, Cushing & Gulf Coast Supply Shortfall 2.8 MMbbls Refinery Inputs: 3.3 MMbbls Production: .46 MMbbls Source: Energy Information Administration PADD II Supply Shortfall (Millions of Barrels per Day) C A N A D A V IV II I III BP Pipeline PAA Basin Pipeline Link Pipeline Seaway Pipeline Shell (W. Tulsa) Pipeline Cush-Po Pipeline Mid-Continent Pipeline Osage Pipeline Ozark Pipeline Phillips Borger Pipeline PAA Red River Pipeline Mid-Continent (Sun) Pipeline STG Pipeline Capline Pipeline System

8 Strategically Located Asset Base (Excluding Link acquisition)
Rainbow Federated Peace Syncrude Hardisty N. Sask Edmonton Manito Kerrobert Rangeland Bow River Bodo/ Cactus Lake S. Sask Regina Wapella Milk River Wascana Conoco/Cenex Express Battleview Poplar IPL / Lakehead Billings Baker Butte St. Paul Casper Frontier Alto Storage Facility Chicago Guernsey Salt Lake City Platte Wood River To Lima & Toledo All American Pipeline Osage BP El Dorado Patoka Cush-Po Ozark Capwood SJV Gathering System Phillips Mid Valley Borger Cushing Permian Basin Gathering Phillips BP Seaway Red River Wichita Falls ArkLaTex Jal Mesa 3rd Party Pipelines PAA Terminals PAA Owned Pipelines Basin Exxon Capline Venice Term. WTG Longview Wink Corsicana Iraan to Midland Pipeline Midland Exxon St. James Iraan Houston EIFS Bay St. Elaine Gathering McCamey Cote Blanche Ingleside Terminal Atchafalaya Pipeline Bayou Sale Gathering Sys. Patterson Term . Burns Term .

9 2003 Performance Assessment
Goals Results 1. Deliver operating and financial performance in line with 2003 guidance 2. Preserve and enhance the strength of our balance sheet and credit profile 3. Increase our distribution to unitholders by 2% - 4%, excluding the impact of significant acquisitions 4. Make, on average, $200 - $300 million per year of accretive and strategic acquisitions Exceeded financial guidance for year EBITDA up 33% over 2002 Credit rating upgrade to BBB- New credit facility (savings of 100 bps) 5.625% senior notes issuance Extended avg. maturities to 9 years 41% debt to cap at 12/31/03 $597 MM liquidity at 12/31/03 4.7% distribution increase (2/04 vs. 2/03) Total return to investors of 44% Made 10 acquisitions for $160 million Signed $158 million Capline acquisition (Closed 3/1/04)

10 2004 Goals, Guidance & Performance Drivers

11 2004 Goals (as per 2/24/04 conference call)
1. Deliver operating and financial performance in line with our guidance. 2. Improve our credit rating and preserve the strength of our balance sheet. 3. Increase our distribution to unitholders by approximately 5%. 4. Position PAA for continued growth by executing our organic expansion projects and pursuing our target of averaging $200 to $300 million per year of accretive and strategic acquisitions.

12 except per unit amounts) Cash Flow from Operations
2004 Public Guidance (Released on Form 8-K on 2/24/04 – includes Capline & excludes Link) Low High $44,000 $47,000 9,400 9,200 34,600 37,800 13,400 13,200 $21,200 $24,600 Quarter Ended March 31, 2004 Low High $195,000 $201,000 39,350 38,850 155,650 162,150 57,300 56,900 $98,350 $105,250 Year Ended December 31, 2004 (Dollars in thousands, except per unit amounts) EBITDA Interest Expense Cash Flow from Operations DD&A Net Income PAA will be providing updated financial guidance incorporating the Link acquisition on its earnings conference call on April 28, 2004 Note: The guidance above excludes potential non-cash mark-to-market gains or losses related to SFAS 133 and projected Long-Term Incentive Plan charges of $1.9 million in Q1 and $4.5 million for the year.

13 2004 Capital Spending Plans (Excluding Link)
Organic growth projects $ 51 million Acquisition of Capline million Maintenance capital million Total projected capital for 2004 $221 million

14 Organic Growth Projects (Excluding Link)
Projected Cost Projects Related to 2003 Acquisitions Red River Pipeline $8.7 ArkLaTex Pipeline 7.5 (Dollars in millions) El Paso Assets 1.6 South Sask Pipeline 3.7 Alto Storage Cavern 1.0 Subtotal $22.5 2004 organic growth projects are split between post acquisition exploitation plans and new expansion opportunities Additional Expansion Projects Cushing Phase IV $10.0 Iatan to Colorado City 6.0 Basin Expansion 0.8 Other expansion 7.4 Subtotal 24.2 Other 4.5 $51.2 Grand Total

15 Capline Acquisition: Overview
Acquired entities owning an approximate 22% interest in the Capline Pipeline and an approximate 76% interest in the Capwood Pipeline from Shell for $158 million Capline 667-mile, 40-inch pipeline from St. James, LA to Patoka, IL Capacity: 1.14 million bpd total; 248,000 bpd net to PAA 10.4 million barrels of tankage 2 active dock facilities to handle tankers up to 600,000 barrels Direct access to GOM production and LOOP (LA Offshore Oil Port) Capwood 57-mile, 20-inch pipeline from Patoka, IL to Wood River, IL Capacity: 277,000 bpd total; 211,000 bpd net to PAA Receives crude from Capline, an ExxonMobil pipeline and has access to Canadian imports via Mustang Pipeline PAA to become operator

16 Capline Acquisition: Strategic Rationale
Complements existing asset base and business strategy High quality, well constructed assets Improves PAA’s position with regard to supply / demand imbalance in PADD II - access to over 2.7 million barrels of refinery capacity Improves overall quality of asset base and cash flow Non captive crude sources – access to foreign, GOM, and Canadian crude – all of which are forecast to increase over time Natural hedge; offsets domestic depletion affecting other areas of PAA’s operations – as domestic production decreases, imports will increase Opportunity to expand merchant activities with foreign crude imports Improves geographic diversification Increases relative size of fee based cash flow from pipeline segment Purchasing an underutilized asset at/near the bottom of its performance cycle Baseline cash flow forecast supports purchase price and accretion Meaningful opportunities to increase cash flow in the future

17 Capline is Complementary to Cushing (Excluding Link)
IPL – Canada to Chicago (not to scale) IPL Chicago Mustang To Lima & Toledo Wood River Patoka BP El Dorado Osage Capwood Ozark Cush-Po Borger Phillips Cushing Red River Mid Valley BP Permian Basin Gathering Seaway Phillips Wichita Falls C A N A D A V IV II I III Capline Exxon Mesa Basin Jal WTG Longview Wink Corsicana Midland Iraan to Midland Pipeline Exxon Iraan McCamey Houston Beaumont St. James 3rd Party Pipelines PAA Owned Pipelines

18 Execution of Business Strategy and New Investments to Drive PAA’s Growth in 2004 & Beyond (Excluding Link) 14% 5% Represents mid-point of guidance furnished on Form 8-K on 2/24/04 and excludes items impacting comparability. Capline acquisition included as of March 1st. See reconciliations at end of presentation.

19 Link Acquisition

20 Transaction Overview On April 1, 2004, PAA acquired the North American crude oil and pipeline business of Link Energy LLC for $330 million consisting of $273 million in cash and $57 million of assumed liabilities and other costs Additionally anticipate spending $24 million in first 6 to 12 months after closing for integration, one-time capital expenditures and regulatory compliance Link crude oil business consists of: Approx. 7,000 miles of active crude oil pipelines Over 10 million barrels of crude oil storage capacity Fleet of approximately 200 owned or leased trucks Approx. 2 million barrels of crude oil linefill and inventory Geographic break-down: Gulf Coast: miles of pipe & 4.6 MM Bbl. of storage Permian Basin: 3,100 miles of pipe & 3.4 MM Bbl. of storage Mid-Continent: 2,400 miles of pipe & 2.1 MM Bbl. of storage Rocky Mountains: miles of pipe & 0.2 MM Bbl. of storage

21 Strategic Rationale of Link Acquisition
Complements existing asset base and business strategy Significantly expands PAA footprint in Mid-Continent and Rockies Improves strategic positioning along Gulf Coast and in Permian Basin, particularly in New Mexico

22 Economic Impact of Link Acquisition
Estimate current annual EBITDA run-rate for Link assets of approximately $25 million Estimate $20 - $30 million of annual cost savings will be captured within the first 18 months after closing 50% - 60% of savings will be in forward-looking run-rate within six months of closing 75% within 12 months of closing 100% within 18 months of closing Purchasing an underutilized asset at/near the bottom of its performance cycle Based on year 2000 and mid-2001 run-rate, assets acquired generated EBITDA of $61 million Note: EBITDA reconciliations are available at end of presentation and on website at

23 Economic Impact of Link Acquisition
Financing plan Total purchase price and additional costs of $354 million Near-term financing requirements of $328 million 60% equity financing of transaction = approx. $197 million Closed $100 million private placement of Class C common units with group of institutional investors on April 15th Debt financing provided by new $200 million 364-day facility with one-year term out option Will monitor market to term out with long-term debt Once cost savings are fully realized, PAA estimates that the transaction will be accretive to its distribution capacity by $0.15 to $0.30 per unit, assuming Base annual EBITDA run-rate of $25 million Annual cost savings of $20 million to $30 million Additional upside possible through volume recovery, commercial synergies and margin enhancements

24 Financial Overview What are our Performance Drivers
Financial Overview What are our Performance Drivers? What is our Financial Growth Strategy? How are we currently positioned for future growth?

25 Performance Drivers For PAA’s Two Segments
Pipeline Operations Throughput volumes & tariffs/fees per barrel Variable operating costs Gathering, Marketing, Terminalling & Storage Operations Lease volumes gathered & margin per barrel Level of margin influenced by relative strength/weakness of forward crude oil curve (Backwardated market = stronger margin; Contango market = weaker margin) Absolute level of crude price is not relevant and revenue is not a performance driver Bulk volumes purchased/exchanged at interchange locations (designed to enhance margins, by avoiding shipment costs, optimizing quality, etc.) Quality and grade differentials LPG volumes and margin per barrel (seasonal attributes) Lock in margin initially; use logistical advantage to increase margins Tankage available to PAA for proprietary usage and 3rd party rentals Proprietary usage counter-balances relative strength or weakness in lease gathering margins (Backwardated market = low storage usage; Contango market = high storage usage) 3rd party leasing generates rental and throughput fee income

26 Performance Drivers For PAA’s Two Segments (Continued)
NYMEX Crude Oil Prices Source: Bloomberg Financial Backwardation Contango Gathering & Marketing Pipeline Operations Storage & Terminalling Contango Backwardation

27 Financial Strategy, Credit Rating Targets & Liquidity
The Partnership’s target credit profile consists of: An average Debt / Book Capitalization ratio < 60% An average Debt / EBITDA ratio < 3.5x An average EBITDA / Interest ratio > 3.3x Fund growth with 50% equity and 50% debt Committed to funding Link transaction with 60% equity Current Corporate/Senior Implied ratings: BBB- negative, Ba1 – Under Review Objective is to achieve and maintain mid to high “triple B/Baa” credit ratings Pro forma for Capline and Link at 12/31/03, approx $650 million of liquidity on committed credit facilities

28 Balance Sheet Strength
As of December 31, 2003 (Dollars in Millions) Actual $70.0 199.7 249.3 519.0 746.7 $1,265.7 41.0% 0.0 3.3x 5.1x Capline $142.0 0.0 142.0 Link $27.0 227.0 101.0 $328.0 200.0 Subtotal $212.0 199.7 249.3 661.0 746.7 $1,407.7 47.0% (1) (2) Pro Forma $239.0 199.7 249.3 888.0 847.7 $1,735.7 200.0 51.2% 3.5x >4.0x Long-term debt Revolving credit facilities Link acquisition facility 7.750% Senior notes due 2012 5.625% Senior notes due 2013 Total long-term debt Partners' capital Total book capitalization Long-term debt / book capital Long-term debt / EBITDA (3) EBITDA / Interest (3) The $158 million Capline acquisition closed on March 1, A $16 million deposit was made in 2003, with the remainder borrowed in The equity component of the transaction was raised in December 2003. The Link transaction closed on April 1, On April 15, 2004, PAA closed the private placement of Series C Common Units, the net proceeds of which were used to retire debt incurred to fund the Link acquisition. For Subtotal column: Based on mid-point of 2004 Public Guidance per 8-K dated February 24, 2004, which included Capline. EBITDA excludes items affecting comparability and totals $198.0 million. Mid-point interest expense totals $39.1 million. For Pro Forma column, assumes mid-point of 2004 guidance normalized for full year of Capline, plus $50 million run-rate EBITDA for Link

29 Total Return to Shareholders
Pipeline MLP index includes: MMP, GTM, SXL, PPX, KPP, TPP, KMP, EPD, TCLP, VLI, EEP, BPL & NBP Source: Bloomberg Financial

30 Total Return to Shareholders
Pipeline MLP index includes: TPP, KMP, VLI, TCLP, BPL, KPP, MMP, EEP, GTM, EPD, NBP Source: Bloomberg Financial

31 PAA Historical Distribution Growth
$1.80 $1.85 $1.85 $1.85 $1.90 $2.00 $2.05 $2.05 $2.10 $2.15 $2.15 $2.15 $2.20 $2.20 $2.20 $2.25 Annualized Rate

32 PAA Investment Thesis Proven business strategy and management team
Several members of senior management have worked together as a team for ~ 15 to 20 years Management owns 4% of GP and approx 400,000 LP units Solid cash flow and asset base Stable cash flow with low maintenance capital requirements Geographically diverse Counter-cyclical balanced Strong track record of increasing cash flow and distributions Strong balance sheet and coverage ratios Business builder with firm grasp of industry fundamentals and changing dynamics

33 NYSE: PAA Except for the historical information contained herein, the matters discussed in this presentation are forward-looking statements that include risks and uncertainties. These risks and uncertainties include, among other things, market conditions, governmental regulations and other factors discussed in Plains All American Pipeline, L.P.’s filings with the Securities and Exchange Commission.

34 Reconciliation of Non-GAAP Financial Measures

35 Reconciliation of Non-GAAP Measures Credit Statistics
Calculation of Credit Ratio (December 31, 2003 Actual) Long-Term Debt / Book Capitalization = $519.0 / $1, = 41.0% Calculation of Credit Ratios (December 31, 2003 pro forma for Capline acquisition) Long-Term Debt / Book Capitalization = $661.0 / $1, = 47.0% Long-Term Debt / EBITDA = $661.0 / $ = 3.3x EBITDA / Interest Expense = $198.0 / $39.1 = 5.1x Calculation of Credit Ratio (December 31, 2003 pro forma for Capline & Link) Long-Term Debt / Book Capitalization = $888.0 / $1, = 51.2%

36 Reconciliation of Non-GAAP Measures Items Impacting Comparability
Guidance (1) Actual 2004 1Q 2004 2003 1Q 2003 LTIP charge $ (4.5) $ (1.9) $ (28.8) $ - Loss on refinancing of debt - - (3.3) - SFAS 133 noncash mark-to- market adjustment - - 0.4 0.9 Total $ (4.5) $ (1.9) $ (31.7) $ 0.9 As contained in the Form 8-K furnished on February 24, 2004.

37 Reconciliation of Non-GAAP Measures Reconciliation of EBITDA to Net Income
Guidance (1) Actual 2004 1Q 2004 2003 1Q 2003 Net income $ 97.3 $ 21.0 $ 59.5 $ 24.4 Interest expense 39.1 9.3 35.2 9.2 EBIT $ 136.4 $ 30.3 $ 94.7 $ 33.6 Depreciation & amortization 57.1 13.3 46.8 10.8 Reported / Projected EBITDA $ 193.5 $ 43.6 $ 141.5 $ 44.4 Items Impacting Comparability 4.5 1.9 31.7 (0.9) EBITDA Excluding Items Impacting Comparability $ 198.0 $ 45.5 $ 173.2 $ 43.5 (1) As contained in the Form 8-K furnished on February 24, 2004.

38 Reconciliation of Non-GAAP Measures Reconciliation of EBITDA to Cash Flow from Operating Activities
Guidance (1) Actual 2004 1Q 2004 2003 1Q 2003 Net cash provided by (used in) operating activities $ - $ - $ 68.5 $ 91.4 Net change in assets and liabilities, net of acquisitions - - 62.4 (57.1) Other items not affecting cash flows from operating activities: Gain on sale of assets - - 0.6 - Allowance for doubtful accounts - - (0.4) - Change in derivative fair value - - 0.4 0.9 Loss on refinancing of debt - - (3.3) - Net noncash portion of LTIP charge - - (28.1) - Net cash paid for termination of interest rate hedging instruments - - 6.2 - Other noncash items - - - - Interest expense - - 35.2 9.2 Reported / Projected EBITDA $ 193.5 $ 43.6 $ 141.5 $ 44.4 Items Impacting Comparability 4.5 1.9 31.7 (0.9) EBITDA Excluding Items Impacting Comparability $ 198.0 $ 45.5 $ 173.2 $ 43.5 It is impractical to reconcile EBITDA to CFFOA for projected periods.

39 Reconciliation of Non-GAAP Measures Reconciliation of Link EBITDA for Year 2000 to Net Income
Net Income reconciliation 2000 Net Income (loss) from continuing operations $ 13.8 Interest expense 28.8 Depreciation and amortization 33.9 EBITDA $ 76.5 Adjustments for items impacting comparability: One time items (1) (6.0) Pro forma adjustments for assets sold (8.8) Capital vs. expense reclass (1.0) EBITDA excluding items impacting comparability $ 60.7 Includes reductions of: 1) approximately $2.5 million related to an insurance recovery and 2) an $8.4 million gain on inventory sale, offset by additions of: 1) approximately $2.6 million related to an inventory write-off, 2) approximately $1.5 million related to NGL discontinued operations and 3) approximately $0.8 million of severance costs and other


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