Exhibit 99.3
PLAINS ALL AMERICAN PIPELINE, L.P.
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
Plains All American Pipeline, L.P. ("PAA") 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 consolidated financial
statements are presented to give effect to the transaction described below:
The acquisition of certain businesses from Shell Pipeline Company
("Shell"), including its interests in the Basin Pipeline System, the Rancho
Pipeline System and the Permian Basin Gathering System (the "Shell
Acquisition"). The purchase price of approximately $322.7 million is net of
interest earned on the deposit and the settlement of pre-existing accounts
receivable and inventory balances and purchase price adjustments as
provided for in the amended purchase and sale agreement, and includes other
transaction and closing costs. The acquisition closed on August 1, 2002
which was also the effective date. The acquisition will be accounted for
using the purchase method of accounting.
The unaudited pro forma consolidated balance sheet as of June 30, 2002 and
the unaudited pro forma statements of operations for the six months ended June
30, 2002 and the year ended December 31, 2001 are based upon the following,
respectively:
(1) The historical balance sheet of Plains All American Pipeline, L.P. at
June 30, 2002.
(2) The historical consolidated statement of operations of Plains All
American Pipeline, L.P. for the six months ended June 30, 2002 and the
historical combined statement of operations for the businesses acquired
in the Shell Acquisition for the same period.
(3) The historical consolidated statement of operations of Plains All
American Pipeline, L.P. for the year ended December 31, 2001 and the
historical combined statement of operations for the businesses acquired
in the Shell Acquisition for the same period.
The unaudited pro forma consolidated 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 transactions occurred
at the dates assumed (as noted below). The unaudited pro forma consolidated
financial statements should be read in conjunction with the notes thereto and
the historical audited financial statements of Plains All American Pipeline,
L.P. for the year ended December 31, 2001 and the unaudited interim financial
statements for Plains All American Pipeline, L.P. for the six months ended June
30, 2002 as well as those for the businesses acquired in the Shell Acquisition,
for the same periods.
The following unaudited pro forma consolidated statements of operations for
the six months ended June 30, 2002 and the year ended December 31, 2001 have
been prepared as if the transaction described above had taken place on January
1, 2001. The unaudited pro forma consolidated balance sheet at June 30, 2002
assumes the transaction was consummated on that date.
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PLAINS ALL AMERICAN PIPELINE, L.P. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
June 30, 2002
(in thousands)
Plains All Pro Forma Plains All
American Acquisition American
Historical Adjustments As Adjusted
---------- ----------- -----------
CURRENT ASSETS
Cash and cash equivalents............................... $ 5,792 $ 288,243 (a) $ 5,792
(288,243)(b)
Accounts receivable and other current assets............ 514,034 -- 514,034
Inventory............................................... 67,289 (9,100)(b) 58,189
---------- --------- ----------
Total current assets.................................... 587,115 (9,100) 578,015
PROPERTY AND EQUIPMENT.................................. 685,636 322,700 (b) 1,008,336
Less allowance for depreciation and amortization........ (60,320) -- (60,320)
---------- --------- ----------
625,316 322,700 948,016
---------- --------- ----------
OTHER ASSETS
Pipeline linefill....................................... 58,242 -- 58,242
Other................................................... 67,331 (15,750)(b) 51,581
---------- --------- ----------
$1,338,004 $ 297,850 $1,635,854
========== ========= ==========
CURRENT LIABILITIES
Accounts payable and other current liabilities.......... $ 476,675 $ 9,607 (b) $ 486,282
Due to affiliates....................................... 19,170 -- 19,170
Short-term debt......................................... 57,847 -- 57,847
---------- --------- ----------
Total current liabilities............................... 553,692 9,607 563,299
LONG-TERM LIABILITIES
Bank debt............................................... 381,591 288,243 (a) 669,834
Other long-term liabilities............................. 4,785 -- 4,785
---------- --------- ----------
Total liabilities....................................... 940,068 297,850 1,237,918
---------- --------- ----------
COMMITMENTS AND CONTINGENCIES
PARTNERS' CAPITAL
Common unitholders (31,915,939 units outstanding)....... 405,031 -- 405,031
Class B common unitholders (1,307,109 units outstanding) 19,389 -- 19,389
Subordinated unitholders (10,029,619 units outstanding). (40,005) -- (40,005)
General partner......................................... 13,521 -- 13,521
---------- --------- ----------
Total partners' capital................................. 397,936 -- 397,936
---------- --------- ----------
$1,338,004 $ 297,850 $1,635,854
========== ========= ==========
See notes to unaudited pro forma consolidated financial statements
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PLAINS ALL AMERICAN PIPELINE, L.P. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
For the Six Months Ended June 30, 2002
(in thousands, except per unit data)
Plains All Shell Pro Forma Plains All
American Acquisition Acquisition American
Historical Historical Adjustments As Adjusted
---------- ----------- ----------- -----------
REVENUES................................ $3,530,670 $25,838 $(2,005)(d) $3,554,503
COST OF SALES AND OPERATIONS............ (2,005)(d)
3,450,575 12,284 (1,383)(f) 3,459,471
---------- ------- ------- ----------
Gross Margin............................ 80,095 13,554 1,383 95,032
---------- ------- ------- ----------
EXPENSES
General and administrative.............. 21,877 9,907 (7,061)(e) 24,723
Depreciation and amortization........... (1,311)(g)
14,144 1,311 4,880 (h) 19,024
---------- ------- ------- ----------
Total Expenses.......................... 36,021 11,218 (3,492) 43,747
---------- ------- ------- ----------
OPERATING INCOME........................ 44,074 2,336 4,875 51,285
Interest expense........................ (12,807) -- (5,600)(c) (18,407)
Interest and other income............... (35) -- -- (35)
---------- ------- ------- ----------
INCOME (LOSS) FROM CONTINUING
OPERATIONS............................ $ 31,232 $ 2,336 $ (725) $ 32,843
========== ======= ======= ==========
INCOME FROM CONTINUING OPERATIONS--
LIMITED PARTNERS..................... $ 29,356 $ 30,935
========== ==========
INCOME FROM CONTINUING OPERATIONS--
GENERAL PARTNER...................... $ 1,876 $ 1,908
========== ==========
BASIC AND DILUTED INCOME FROM CONTINUING
OPERATIONS PER LIMITED PARTNER UNIT... $ 0.68 $ 0.72
========== ==========
WEIGHTED AVERAGE UNITS OUTSTANDING...... 43,253 43,253
========== ==========
See notes to unaudited pro forma consolidated financial statements
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PLAINS ALL AMERICAN PIPELINE, L.P. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
For the Twelve Months Ended December 31, 2001
(in thousands, except per unit data)
Plains All Shell Pro Forma Plains All
American Acquisition Acquisition American
Historical Historical Adjustments As Adjusted
---------- ----------- ----------- -----------
REVENUES........................... $6,868,215 $59,690 $ (2,266)(d) $6,925,639
COST OF SALES AND OPERATIONS....... (2,266)(d)
6,720,970 26,226 (2,765)(f) 6,742,165
INVENTORY VALUATION ADJUSTMENT..... 4,984 -- -- 4,984
---------- ------- -------- ----------
Gross Margin....................... 142,261 33,464 2,765 178,490
EXPENSES
General and administrative......... 46,586 16,571 (9,916)(e) 53,241
Depreciation and amortization...... (2,375)(g)
24,307 2,375 9,759 (h) 34,066
---------- ------- -------- ----------
Total Expenses.................. 70,893 18,946 (2,532) 87,307
---------- ------- -------- ----------
OPERATING INCOME................... 71,368 14,518 5,297 91,183
Interest expense................... (29,082) -- (17,865)(c) (46,947)
Gain on sale of assets............. 984 -- -- 984
Interest and other income.......... 401 -- -- 401
---------- ------- -------- ----------
INCOME (LOSS) FROM CONTINUING
OPERATIONS....................... $ 43,671 $14,518 $(12,568) $ 45,621
========== ======= ======== ==========
INCOME FROM CONTINUING OPERATIONS--
LIMITED PARTNERS................ $ 41,742 $ 43,653
========== ==========
INCOME FROM CONTINUING OPERATIONS--
GENERAL PARTNER................. $ 1,929 $ 1,968
========== ==========
BASIC AND DILUTED INCOME FROM
CONTINUING OPERATIONS PER LIMITED
PARTNER UNIT..................... $ 1.12 $ 1.16
========== ==========
WEIGHTED AVERAGE UNITS OUTSTANDING. 37,528 37,528
========== ==========
See notes to unaudited pro forma consolidated financial statements
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PLAINS ALL AMERICAN PIPELINE, L.P. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED 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 Shell Acquisition at closing.
b. Records the assets purchased in the Shell Acquisition based on the
purchase method of accounting. The purchase price was $322.7 million
and consisted of (i) approximately $304 million in cash of which $15.7
million was paid as a deposit in May 2002, (ii) an estimated $9.1
million related to the settlement of pre-existing inventory balances
and (iii) the accrual of approximately $9.6 million of other
transaction and closing costs (See Note 2).
c. Reflects the adjustment to interest expense for the increase in long
term debt of $304 million from a draw down on the credit facility using
historical interest rates of 5.88% and 3.68% for the periods ended
December 31, 2001 and June 30, 2002, respectively. The impact to
interest expense of a 1/8% change in interest rates would be
approximately $0.4 million per year.
d. Reflects the elimination of crude oil transportation revenues included
in Shell's historical financial statements and the offsetting expense
included in PAA's historical financial statements related to an
existing contract whereby PAA transported crude oil on the assets
acquired from Shell. On a pro forma basis, these transactions
constitute intercompany activities and thus are eliminated in
consolidation.
e. Reflects the adjustment to general and administrative expenses relating
to Shell's historical allocation of corporate overhead costs primarily
related to payroll costs associated with corporate office management
personnel including executives and other corporate office expenses.
These costs for PAA's operation of the assets are already included in
our historical results.
f. Reflects the reduction of operating expenses related to certain field
personnel which were not hired as part of the acquisition as well as
the decreases in salaries and benefits associated with the remaining
employees.
g. To reverse historical depreciation as recorded by Shell.
h. Reflects depreciation on the acquired assets based on the straight-line
method of depreciation over an average useful life of 30 years. The
increase over historical depreciation is due to the difference in
Shell's historical book value versus the purchase price at fair value.
Note 2--Purchase Price Allocation
The Shell 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 certain businesses from Shell Pipeline Company, including its
interests in the Basin
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PLAINS ALL AMERICAN PIPELINE, L.P. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED
FINANCIAL STATEMENTS--(Continued)
Pipeline System, the Rancho Pipeline System and the Permian Basin Gathering
System. The purchase price of approximately $322.7 million is net of interest
earned on the deposit and the settlement of pre-existing accounts receivable
and inventory balances and purchase price adjustments as provided for in the
amended purchase and sale agreement, and includes other transaction and closing
costs. The acquisition closed on August 1, 2002 which was also the effective
date. The total purchase price and its allocation are preliminary as the
resolution of certain claims and the ultimate amount of transaction costs are
based on estimates at this time. We do not expect the resolution of these items
to have a material impact on the allocation presented below. The purchase price
allocation, based on discounted cash flows which approximate fair value, is as
follows (in thousands):
Crude oil pipeline assets.... $248,900
Crude oil pipeline facilities 72,450
Land......................... 1,000
Other property and equipment. 350
--------
Total..................... $322,700
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