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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 Partnerships current assumptions, expectations and projections about future events. 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 Partnerships 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 Partnerships control, that could cause actual results to differ materially from managements expectations are disclosed in the Partnerships filings with the Securities and Exchange Commission. 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 Partnerships control, that could cause actual results to differ materially from managements expectations are disclosed in the Partnerships 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. 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) Annual Revenue (2003) $12.6 B Annual Revenue (2003) $12.6 B Total Assets (12/31/03) $2.1 B Total Assets (12/31/03) $2.1 B Enterprise Value $3.0 B Enterprise Value $3.0 B Equity Market Cap. $2.1 B Equity Market Cap. $2.1 B 2003 Fortune 500 Rank Fortune 500 Rank 155 # Unitholders (approx.) 30,000 # Unitholders (approx.) 30,000 Aggregate Size EBITDA (midpoint) $198.0 MM EBITDA (midpoint) $198.0 MM Net Income (midpoint) $101.8 MM Net Income (midpoint) $101.8 MM Book Cap. (12/31/03) $1,266 MM Book Cap. (12/31/03) $1,266 MM Debt-to-Book Cap (12/31/03) 41% Debt-to-Book Cap (12/31/03) 41% 2004 Public Guidance (1) Assets: Assets: Pipelines (miles) 14,000+ Pipelines (miles) 14,000+ Tankage (MMbbls.) 36.6 Tankage (MMbbls.) 36.6 Truck Fleet (units) +/- 500 Truck Fleet (units) +/- 500 Crude handled (MMbpd) 2.2 Crude handled (MMbpd) 2.2 Geographic footprint: Geographic footprint: USA (states) +/- 40 USA (states) +/- 40 Canada (provinces) 5 Canada (provinces) 5 Employees+/- 2,000 Employees+/- 2,000 Operational Metrics (1)EBITDA and Net Income are the midpoint of PAAs 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 PAAs Role in the Crude Oil Distribution Chain Plains All Americans Operations Gathering, Marketing, Terminalling, Storage and Pipelines ProducersRefiners Truck Terminal / Storage / Exchange Location Barge Pipeline Pipeline GatheringInjection Station Pipeline

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 F 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

7 BP Pipeline PAA Basin Pipeline Link Pipeline Seaway Pipeline BP 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 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)

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

9 Performance Assessment GoalsResults Exceeded financial guidance for year EBITDA up 33% over 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 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 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 Public Guidance (Released on Form 8-K on 2/24/04 – includes Capline & excludes Link) EBITDA Interest Expense Cash Flow from Operations DD&A Net Income (Dollars in thousands, except per unit amounts) 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. LowHigh $44,000$47,000 9,4009,200 34,60037,800 13,40013,200 $21,200$24,600 Quarter Ended March 31, 2004 LowHigh $195,000$201,000 39,35038, ,650162,150 57,30056,900 $98,350$105,250 Year Ended December 31, 2004 PAA will be providing updated financial guidance incorporating the Link acquisition on its earnings conference call on April 28, 2004

13 Capital Spending Plans (Excluding Link) Organic growth projects$ 51 million Acquisition of Capline 158 million Maintenance capital 12 million Total projected capital for 2004$221 million

14 Organic Growth Projects Organic Growth Projects (Excluding Link) 2004 organic growth projects are split between post acquisition exploitation plans and new expansion opportunities Projected Cost Projects Related to 2003 Acquisitions Red River Pipeline$8.7 ArkLaTex Pipeline7.5 (Dollars in millions) El Paso Assets1.6 South Sask Pipeline3.7 Alto Storage Cavern1.0 Subtotal$22.5 Additional Expansion Projects Cushing Phase IV$10.0 Iatan to Colorado City6.0 Basin Expansion0.8 Other expansion7.4 Subtotal24.2 Other4.5 $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 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 667-mile, 40-inch pipeline from St. James, LA to Patoka, IL Capacity: 1.14 million bpd total; 248,000 bpd net to PAA Capacity: 1.14 million bpd total; 248,000 bpd net to PAA 10.4 million barrels of tankage 10.4 million barrels of tankage 2 active dock facilities to handle tankers up to 600,000 barrels 2 active dock facilities to handle tankers up to 600,000 barrels Direct access to GOM production and LOOP (LA Offshore Oil Port) Direct access to GOM production and LOOP (LA Offshore Oil Port) Capwood 57-mile, 20-inch pipeline from Patoka, IL to Wood River, IL 57-mile, 20-inch pipeline from Patoka, IL to Wood River, IL Capacity: 277,000 bpd total; 211,000 bpd net to PAA 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 Receives crude from Capline, an ExxonMobil pipeline and has access to Canadian imports via Mustang Pipeline PAA to become operator PAA to become operator

16 Capline Acquisition: Strategic Rationale Complements existing asset base and business strategy High quality, well constructed assets Improves PAAs 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 PAAs 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) 3 rd Party Pipelines PAA Owned Pipelines Jal Midland Wink Cushing McCamey Houston Basin Chicago Beaumont Corsicana Exxon Seaway Wood River Ozark BP Longview WTG Mid Valley To Lima & Toledo St. James Patoka Capline El Dorado Osage Cush-Po Borger Phillips BP Permian Basin Gathering Wichita Falls Red River Mesa Iraan Iraan to Midland Pipeline IPL Mustang IPL – Canada to Chicago (not to scale) Capwood

18 Execution of Business Strategy and New Investments to Drive PAAs Growth in 2004 & Beyond (Excluding Link) (1)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 1 st. See reconciliations at end of presentation. 5% 14%

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: 900 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: 600 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? What is our Financial Growth Strategy? How are we currently positioned for future growth?

25 Performance Drivers For PAAs 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 Variable operating costs 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 3 rd party rentals Proprietary usage counter-balances relative strength or weakness in lease gathering margins (Backwardated market = low storage usage; Contango market = high storage usage) 3 rd party leasing generates rental and throughput fee income

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

27 Financial Strategy, Credit Rating Targets & Liquidity The Partnerships 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 (Dollars in Millions) Long-term debt Revolving credit facilities 7.750% Senior notes due % 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) As of December 31, 2003 (1)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 (2)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. (3)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 Link acquisition facility Actual $ $1, % x 5.1x Capline $ $ Link $ $ Subtotal $ $1, % (1)(2) Pro Forma $ $1, % 3.5x >4.0x

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

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

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

32 PAA Investment Thesis F Proven business strategy and management team Several members of senior management have worked together as a team for ~ 15 to 20 years 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 Management owns 4% of GP and approx 400,000 LP units F Solid cash flow and asset base Stable cash flow with low maintenance capital requirements Stable cash flow with low maintenance capital requirements Geographically diverse Geographically diverse Counter-cyclical balanced Counter-cyclical balanced F Strong track record of increasing cash flow and distributions F Strong balance sheet and coverage ratios F 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 / $1,265.7 = 41.0% Calculation of Credit Ratios (December 31, 2003 pro forma for Capline acquisition) Long-Term Debt / Book Capitalization= $661.0 / $1,407.7 = 47.0% Long-Term Debt / EBITDA= $661.0 / $198.0 = 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 / $1,735.7 = 51.2%

36 Reconciliation of Non-GAAP Measures Items Impacting Comparability 20041Q LTIP charge (4.5)$ (1.9)$ (28.8)$ Loss on refinancing of debt - - (3.3) SFAS 133 noncash mark-to- market adjustment Total(4.5)$ (1.9)$ (31.7)$ Guidance (1)Actual (1)As contained in the Form 8-K furnished on February 24, Q $ $

37 Reconciliation of Non-GAAP Measures Reconciliation of EBITDA to Net Income (1) As contained in the Form 8-K furnished on February 24, Q 2004 Net income 97.3$ 21.0$ Interest expense EBIT 136.4$ 30.3$ Depreciation & amortization Reported / Projected EBITDA193.5$ 43.6$ Items Impacting Comparability EBITDA Excluding Items Impacting Comparability 198.0$ 45.5$ Guidance (1) $ $ $ $ Actual 1Q $ $ $ (0.9) 43.5$

38 Reconciliation of Non-GAAP Measures Reconciliation of EBITDA to Cash Flow from Operating Activities (1)It is impractical to reconcile EBITDA to CFFOA for projected periods Q Net cash provided by (used in) operating activities -$ -$ 68.5$ Net change in assets and liabilities, net of acquisitions Other items not affecting cash flows from operating activities: Gain on sale of assets Allowance for doubtful accounts - - (0.4) Change in derivative fair value 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 Other noncash items Interest expense Reported / Projected EBITDA193.5$ 43.6$ 141.5$ Items Impacting Comparability EBITDA Excluding Items Impacting Comparability 198.0$ 45.5$ 173.2$ Guidance (1)Actual 1Q $ (57.1) $ (0.9) 43.5$ -

39 Reconciliation of Non-GAAP Measures Reconciliation of Link EBITDA for Year 2000 to Net Income (1)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 $0.8 million of severance costs and other Net Income reconciliation2000 Net Income (loss) from continuing operations13.8$ Interest expense28.8 Depreciation and amortization33.9 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$


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