Exhibit 99.1
PLAINS ALL AMERICAN PIPELINE, L.P.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
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 statements of
operations are presented to give effect to the transactions described below:
(1) The acquisition of certain businesses from Shell Pipeline Company
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
consisted of (i) $304 million in cash, which was borrowed under the
revolving credit facility, (ii) approximately $9.1 million related to
the settlement of pre-existing accounts receivable and inventory
balances, and (iii) approximately $9.6 million of estimated
transaction and closing costs. The acquisition closed and was
effective on August 1, 2002. The acquisition was accounted for using
the purchase method of accounting.
(2) The issuance and sale in August 2002 of 6,325,000 common units and the
application of the proceeds therefrom.
(3) The issuance and sale in September 2002 of an aggregate principal
amount of $200,000,000 of senior notes and the application of the
proceeds therefrom.
An unaudited pro forma balance sheet has not been presented since the above
transactions are reflected in the historical unaudited consolidated balance
sheet as of September 30, 2002 included in PAA's Quarterly Report on Form 10-Q.
The accompanying unaudited pro forma consolidated statements of operations for
the nine months ended September 30, 2002 and the year ended December 31, 2001
are based upon the following, respectively:
(1) The unaudited historical consolidated statement of operations of PAA
for the nine months ended September 30, 2002 and the unaudited
historical combined statement of operations for the businesses
acquired in the Shell Acquisition for the seven months ended July 31,
2002.
(2) The historical consolidated statement of operations of PAA 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 statements of operations for the year
ended December 31, 2001, and the for the nine months ended September 30, 2002,
were prepared as if the transactions described above had taken place at the
beginning of the period presented.
These statements are not necessarily indicative of the results of the
actual operations that would have been achieved had the transactions occurred at
the dates assumed nor are they necessarily indicative of the future results of
operations of the businesses. The unaudited pro forma consolidated statements of
operations should be read in conjunction with the notes thereto and the
historical consolidated financial statements of PAA included in PAA's Annual
Report on Form 10-K for the year ended December 31, 2001, and the unaudited
interim consolidated financial statements for PAA included in PAA's Quarterly
Report on Form 10-Q for the nine months ended September 30, 2002 as well as the
combined financial statements of the businesses acquired in the Shell
acquisition, as of December 31, 2001, and for the year then ended and for the
six months ended June 30, 2002 included in PAA's Form 8-K filed August 9, 2002.
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)
Pro Forma Pro Forma Plains All
Plains All Pro Forma Equity Notes American
American Shell Acquisition Offering Offering Pro Forma As
Historical Acquisition Adjustments Total Adjustments Adjustments Adjusted
---------- ----------- ----------- ---------- ----------- ----------- ------------
REVENUES $6,868,215 $59,690 $ (2,266)(a) $6,925,639 $ -- $ -- $6,925,639
COST OF SALES AND
OPERATIONS 6,720,970 26,226 (2,266)(a) 6,742,165 -- -- 6,742,165
(2,765)(b)
Inventory Valuation
Adjustment 4,984 -- -- 4,984 -- -- 4,984
---------- ------- -------- ---------- ------ ------- ----------
Gross Margin 142,261 33,464 2,765 178,490 -- -- 178,490
---------- ------- -------- ---------- ------ ------- ----------
EXPENSES
General and
administrative 46,586 16,571 (9,916)(c) 53,241 -- -- 53,241
Depreciation and
amortization 24,307 2,375 (2,375)(d) 34,066 -- 300(h) 34,366
9,759 (e)
---------- ------- -------- ---------- ------ ------- ----------
Total Expenses 70,893 18,946 (2,532) 87,307 -- 300 87,607
---------- ------- -------- ---------- ------ ------- ----------
OPERATING INCOME 71,368 14,518 5,297 91,183 (300) 90,883
Interest expense (29,082) -- (17,865)(f) (46,947) 8,524(g) (4,026)(i) (42,449)
Gain on sale of assets 984 -- -- 984 -- -- 984
Interest and other
income 401 -- -- 401 -- -- 401
---------- ------- -------- ---------- ------ ------- ----------
INCOME (LOSS) FROM
CONTINUING
OPERATIONS $ 43,671 $14,518 $(12,568) $ 45,621 $8,524 $(4,326) $ 49,819
========== ======= ======== ========== ====== ======= ==========
INCOME (LOSS) FROM
CONTINUING OPERATIONS
--LIMITED PARTNERS $ 41,742 $ 43,653 $8,204 $(4,239) $ 47,618
========== ========== ====== ======= ==========
INCOME (LOSS) FROM
CONTINUING OPERATIONS
--GENERAL PARTNERS $ 1,929 $ 1,968 $ 320 $ (87) $ 2,201
========== ========== ====== ======= ==========
BASIC AND DILUTED
INCOME FROM
CONTINUING OPERATIONS
PER LIMITED PARTNER
UNIT $ 1.12 $ 1.16 $ 1.09
========== ========== ==========
WEIGHTED AVERAGE UNITS
OUTSTANDING 37,528 37,528 6,325(g) 43,853
========== ========== ====== ==========
The accompanying notes are an integral part of these pro forma consolidated
statements of operations.
PLAINS ALL AMERICAN PIPELINE, L.P. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
For the Nine Months Ended September 30, 2002
(in thousands, except per unit data)
Pro Forma Pro Forma Plains All
Plains All Pro Forma Equity Notes American
American Shell Acquisition Offering Offering Pro Forma
Historical Acquisition Adjustments Total Adjustments Adjustments As Adjusted
----------- ----------- ----------- ----- ----------- ----------- -----------
REVENUES $ 5,874,759 $ 28,479 $ (2,354)(a) $ 5,900,884 $ -- $ -- $ 5,900,884
COST OF SALES
AND OPERATIONS 5,750,398 15,076 (2,354)(a) 5,761,506 -- -- 5,761,506
(1,614)(b)
----------- ----------- ----------- ----------- ----------- ----------- -----------
Gross Margin 124,361 13,403 1,614 139,378 -- -- 139,378
----------- ----------- ----------- ----------- ----------- ----------- -----------
EXPENSES
General and
administrative 33,389 11,792 (8,328)(c) 36,853 -- -- 36,853
Depreciation and
amortization 23,125 1,531 (1,531)(d) 28,819 -- 250(h) 29,069
5,694 (e)
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total Expenses 56,514 13,323 (4,165) 65,672 -- 250 65,922
----------- ----------- ----------- ----------- ----------- ----------- -----------
OPERATING INCOME 67,847 80 5,779 73,706 -- (250) 73,456
Interest expense (20,175) -- (6,500)(f) (26,675) 3,567(g) (6,220)(i) (29,328)
Interest and other
income (expense) (123) -- -- (123) -- -- (123)
----------- ----------- ----------- ----------- ----------- ----------- -----------
INCOME (LOSS) FROM
CONTINUING OPERATIONS $ 47,549 $ 80 $ (721) $ 46,908 $ 3,567 $ (6,470) $ 44,005
=========== =========== =========== =========== =========== =========== ===========
INCOME (LOSS) FROM
CONTINUING
OPERATIONS-LIMITED
PARTNERS $ 44,515 $ 43,887 $ 3,185 $ (6,341) $ 40,731
=========== =========== =========== =========== ===========
INCOME (LOSS) FROM
CONTINUING
OPERATIONS-
GENERAL PARTNER $ 3,034 $ 3,021 $ 382 $ (129) $ 3,274
=========== =========== =========== =========== ===========
BASIC AND DILUTED
INCOME FROM
CONTINUING
OPERATIONS PER
LIMITED PARTNER UNIT $ 1.01 $ 0.99 $ 0.82
=========== =========== ===========
WEIGHTED AVERAGE
UNITS OUTSTANDING 44,188 44,188 5,390(g) 49,578
=========== =========== =========== ===========
The accompanying notes are an integral part of these pro forma
consolidated statements of operations.
PLAINS ALL AMERICAN PIPELINE, L.P. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
Note 1--Pro Forma Adjustments
The pro forma adjustments are as follows:
(a) Reflects the elimination of crude oil transportation revenues included
in Shell's historical financial statements and the offsetting expense
included in our historical financial statements related to an existing
contract whereby we 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.
(b) Reflects the reduction of operating expenses related to certain field
personnel who were not hired as part of the acquisition, as well as
the decreases in salaries and benefits associated with the remaining
employees.
(c) 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 our operation of the assets are already
included in our historical results.
(d) To reverse historical depreciation as recorded by Shell.
(e) 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.
(f) Reflects the adjustment to interest expense for the increase in long-
term debt associated with the Shell Acquisition of $304 million from a
draw down on the credit facility using the historical interest rates
of 5.88% and 3.67% for the periods ended December 31, 2001 and
September 30, 2002, respectively. The interest rate used to calculate
the adjustment in the September 30, 2002 statement of operations is
the historical interest rate for the seven months ended July 31, 2002.
Subsequent to that date the transaction is reflected in the historical
unaudited consolidated statement of operations of PAA. The impact to
interest expense of a 1/8% change in interest rates would be
approximately $0.4 million per year.
(g) Reflects the adjustment to interest expense resulting from the net
decrease in long term debt of approximately $145 million resulting
from the repayment of the revolving credit facility with the proceeds
of the issuance and sale of 6,325,000 common units using the
historical interest rates of 5.88% and 3.69% for the periods ended
December 31, 2001, and September 30, 2002, respectively. The interest
rate used to calculate the adjustment in the September 30, 2002
statement of operations is the historical interest rate for the eight
months ended August 31, 2002. Subsequent to that date the transaction
is reflected in the historical unaudited consolidated statement of
operations of PAA.
(h) Reflects the amortization of debt issue costs of approximately $3
million using the straight line method over the life of the notes,
which approximates the effective interest rate method.
(i) Reflects the net adjustment to interest expense resulting from the
sale of the notes with an effective yield of 7.78% (including the
amortization of the debt discount using the effective interest rate
method), and the use of those proceeds of approximately $196 million
to repay indebtedness outstanding under our revolving credit facility
using the historical interest rates of 5.88% and 3.70% for the periods
ended December 31, 2001 and September 30, 2002, respectively.
PLAINS ALL AMERICAN PIPELINE, L.P. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS--(Continued)
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
interests in the Basin Pipeline System, the Rancho Pipeline System and the
Permian Basin Gathering System. The purchase price of approximately $322.7
million consisted of (i) $304 million in cash, which was borrowed under the
revolving credit facility, (ii) approximately $9.1 million related to the
settlement of pre-existing accounts receivable and inventory balances, and (iii)
approximately $9.6 million of estimated transaction and closing costs. The
acquisition closed and was effective on August 1, 2002. 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
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Total $322,700
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