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PLAINS ALL AMERICAN PIPELINE, L.P.
UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
Plains All American Pipeline, L.P. is a Delaware limited partnership formed in September of 1998 to acquire and operate the midstream crude oil business and assets of Plains Resources Inc. and its wholly owned subsidiaries. The following unaudited pro forma combined financial statements are presented to give effect to the transaction described below:
The acquisition of Shell Pipeline Company LP's ("SPLC") interest in certain entities. The principal assets of the entities include interests in the Capline Pipeline System, the Capwood Pipeline System and the Patoka Pipeline System (referred to in this report as "the SPLC acquisition"). The purchase price, including transaction and closing costs, was approximately $158.4 million. The acquisition closed and was effective on March 1, 2004. The acquisition is accounted for using the purchase method of accounting.
The unaudited pro forma combined balance sheet as of December 31, 2003 and the unaudited pro forma combined statement of operations for the year ended December 31, 2003 are based upon the following, respectively:
- (1)
- The historical consolidated balance sheet of Plains All American Pipeline, L.P. at December 31, 2003.
- (2)
- The historical consolidated statement of operations of Plains All American Pipeline, L.P. for the year ended December 31, 2003 and the historical combined statement of operations for the businesses acquired in the SPLC acquisition for the same period.
The unaudited pro forma combined financial statements are not necessarily indicative of the results of the actual or future operations or financial condition that would have been achieved had the SPLC acquisition occurred at the dates assumed (as noted below). The unaudited pro forma combined financial statements should be read in conjunction with the notes thereto and the historical audited consolidated financial statements of Plains All American Pipeline, L.P. for the year ended December 31, 2003 as well as those for the businesses acquired in the SPLC acquisition for the same period.
The following unaudited pro forma combined statement of operations for the year ended December 31, 2003 has been prepared as if the SPLC acquisition described above had taken place on January 1, 2003. The unaudited pro forma combined balance sheet at December 31, 2003 assumes the SPLC acquisition was consummated on that date.
PLAINS ALL AMERICAN PIPELINE, L.P. AND SUBSIDIARIES
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
December 31, 2003
(in thousands)
| | Plains All American Historical | Pro Forma SPLC Acquisition Adjustments | Plains All American Pro Forma | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| CURRENT ASSETS | |||||||||||
| Cash and cash equivalents | $ | 4,137 | $ | 158,000 (158,200 | (a) )(b) | $ | 3,937 | ||||
| Accounts receivable, net | 590,645 | — | 590,645 | ||||||||
| Inventory | 105,967 | — | 105,967 | ||||||||
| Other current assets | 32,225 | — | 32,225 | ||||||||
| Total current assets | 732,974 | (200 | ) | 732,774 | |||||||
| PROPERTY AND EQUIPMENT | 1,272,634 | 158,400 | (b) | 1,431,034 | |||||||
| Accumulated depreciation | (121,595 | ) | — | (121,595 | ) | ||||||
| 1,151,039 | 158,400 | 1,309,439 | |||||||||
| OTHER ASSETS | |||||||||||
| Pipeline linefill | 122,653 | — | 122,653 | ||||||||
| Other, net | 88,965 | — | 88,965 | ||||||||
| Total assets | $ | 2,095,631 | $ | 158,200 | $ | 2,253,831 | |||||
| CURRENT LIABILITIES | |||||||||||
| Accounts payable | $ | 603,460 | $ | — | $ | 603,460 | |||||
| Due to related parties | 26,981 | — | 26,981 | ||||||||
| Short-term debt | 127,259 | — | 127,259 | ||||||||
| Other current liabilities | 44,219 | 200 | (b) | 44,419 | |||||||
| Total current liabilities | 801,919 | 200 | 802,119 | ||||||||
| LONG-TERM LIABILITIES | |||||||||||
| Long-term debt under credit facilities | 70,000 | 158,000 | (a) | 228,000 | |||||||
| Senior notes, net of unamortized discount of $1,009 | 448,991 | — | 448,991 | ||||||||
| Other long-term liabilities and deferred credits | 27,994 | — | 27,994 | ||||||||
| Total liabilities | 1,348,904 | 158,200 | 1,507,104 | ||||||||
| COMMITMENTS AND CONTINGENCIES | |||||||||||
| PARTNERS' CAPITAL | |||||||||||
| Common unitholders (49,502,556 units outstanding) | 744,073 | — | 744,073 | ||||||||
| Class B common unitholder (1,307,109 units outstanding) | 18,046 | — | 18,046 | ||||||||
| Subordinated unitholders (7,522,214 units outstanding) | (39,913 | ) | — | (39,913 | ) | ||||||
| General partner | 24,521 | — | 24,521 | ||||||||
| Total partners' capital | 746,727 | — | 746,727 | ||||||||
| $ | 2,095,631 | $ | 158,200 | $ | 2,253,831 | ||||||
See notes to unaudited pro forma combined financial statements
PLAINS ALL AMERICAN PIPELINE, L.P. AND SUBSIDIARIES
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
For the Twelve Months Ended December 31, 2003
(in thousands, except per unit data)
| | Plains All American Historical | SPLC Acquisition Historical | Pro Forma SPLC Acquisition Adjustments | Plains All American Pro Forma | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| REVENUES | ||||||||||||||
| Crude oil and LPG sales | $ | 11,952,623 | $ | — | $ | — | $ | 11,952,623 | ||||||
| Pipeline margin activities | 505,287 | — | — | 505,287 | ||||||||||
| Pipeline tariffs and fees | 99,887 | 35,855 | — | 135,742 | ||||||||||
| Other | 32,052 | — | — | 32,052 | ||||||||||
| Total revenues | 12,589,849 | 35,855 | — | 12,625,704 | ||||||||||
| COSTS AND EXPENSES | ||||||||||||||
| Crude oil and LPG purchases and related costs | 11,727,355 | — | — | 11,727,355 | ||||||||||
| Pipeline margin activities purchases | 486,154 | — | — | 486,154 | ||||||||||
| Other purchases | 19,027 | — | — | 19,027 | ||||||||||
| Operating expenses (excluding LTIP charge) | 134,177 | 10,574 | — | 144,751 | ||||||||||
| LTIP charge—operations | 5,727 | — | — | 5,727 | ||||||||||
| General and administrative (excluding LTIP charge) | 49,969 | 1,275 | — | 51,244 | ||||||||||
| LTIP charge—general and administrative | 23,063 | — | — | 23,063 | ||||||||||
| Depreciation and amortization | 46,821 | 5,264 | (5,264 3,976 | )(c) (d) | 50,797 | |||||||||
| Total costs and expenses | 12,492,293 | 17,113 | (1,288 | ) | 12,508,118 | |||||||||
| Gains on sales of assets | 648 | — | — | 648 | ||||||||||
| OPERATING INCOME | 98,204 | 18,742 | 1,288 | 118,234 | ||||||||||
| OTHER INCOME/(EXPENSE) | ||||||||||||||
| Interest expense (net of capitalized interest of $524) | (35,226 | ) | — | (4,898 | )(e) | (40,124 | ) | |||||||
| Interest income and other, net | (3,530 | ) | — | — | (3,530 | ) | ||||||||
| NET INCOME | $ | 59,448 | $ | 18,742 | $ | (3,610 | ) | $ | 74,580 | |||||
| NET INCOME—LIMITED PARTNERS | $ | 53,473 | $ | 68,302 | ||||||||||
| NET INCOME—GENERAL PARTNER | $ | 5,975 | $ | 6,278 | ||||||||||
| BASIC NET INCOME PER LIMITED PARTNER UNIT | $ | 1.01 | $ | 1.30 | ||||||||||
| DILUTED NET INCOME PER LIMITED PARTNER UNIT | $ | 1.00 | $ | 1.28 | ||||||||||
| BASIC WEIGHTED AVERAGE UNITS OUTSTANDING | 52,743 | 52,743 | ||||||||||||
| DILUTED WEIGHTED AVERAGE UNITS OUTSTANDING | 53,400 | 53,400 | ||||||||||||
See notes to unaudited pro forma combined financial statements
PLAINS ALL AMERICAN PIPELINE, L.P. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
Note 1—Pro Forma Adjustments
The pro forma adjustments are as follows:
- a.
- Reflects the net proceeds of borrowings under the bank credit facility to fund the SPLC acquisition.
- b.
- Records the assets purchased in the SPLC acquisition, including the accrual of estimated transaction costs, based on the purchase method of accounting. The purchase price consists of approximately $158.4 million including transaction and closing costs (See Note 2).
- c.
- To reverse historical depreciation as recorded by SPLC.
- d.
- Reflects depreciation on the acquired assets based on the straight-line method of depreciation over an average useful life of 40 years.
- e.
- Reflects the adjustment to interest expense for the increase in long term debt of $158.0 million from a draw down on the credit facility using an average interest rate of 3.1% for the period ended December 31, 2003. The impact to interest expense of a1/8% change in interest rates would be approximately $0.2 million per year.
Note 2—Purchase Price Allocation
The SPLC acquisition presented in these pro forma statements has been accounted for using the purchase method of accounting and the purchase price has been allocated in accordance with Statement of Financial Accounting Standards No. 141, "Business Combinations". The purchase consists of the acquisition of Shell Pipeline Company LP's ("SPLC") interest in two entities. The principal assets of the entities include interests in certain businesses from Shell Pipeline Company, including its interests in the Capline Pipe Line System, the Capwood Pipe Line System and the Patoka Pipe Line System. No working capital was included in the acquisition. The purchase price of approximately $158.4 million includes transaction and closing costs. The acquisition closed and was effective on March 1, 2004. The total purchase price is preliminary as the ultimate amount of transaction costs are based on estimates at this time. We do not expect the final allocation to differ materially from the allocation presented below. The purchase price allocation is as follows (in thousands):
| Crude oil pipeline assets | $ | 152,146 | |
| Crude oil storage facilities | 5,145 | ||
| Land | 411 | ||
| Other property and equipment | 698 | ||
| Total | $ | 158,400 | |
PLAINS ALL AMERICAN PIPELINE, L.P. UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
PLAINS ALL AMERICAN PIPELINE, L.P. AND SUBSIDIARIES NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS