Exhibit 99.1
Pacific Energy Partners, L.P. Announces Fourth Quarter
2003 Financial Results
LONG BEACH, Calif.--(BUSINESS WIRE)--Jan. 27, 2004--Pacific Energy
Partners, L.P. (NYSE:PPX) announced net income for the three months
ended December 31, 2003, of $7.6 million, or $0.30 per basic and
diluted limited partner unit, compared to $6.4 million, or $0.30 per
basic and diluted limited partner unit, in the corresponding period of
2002. The results of operations for the fourth quarter of 2003 reflect
the operating results of the Pacific Terminals storage and terminaling
system assets, which were acquired on July 31, 2003, as well as
improved financial performance of our Rocky Mountain pipelines. The
income generated by Pacific Terminals was partially offset by lower
volumes and revenue from our West Coast pipelines.
For the twelve months ended December 31, 2003, net income was
$26.2 million, or $1.15 per basic limited partner unit ($1.14 per
diluted limited partner unit), compared to $33.6 million in the
corresponding period of 2002. The Partnership completed its initial
public offering in July 2002; therefore there is no comparable per
unit calculation for 2002. The additional income generated by the
Pacific Terminals storage and terminaling system assets and the Rocky
Mountain pipeline assets acquired March 1, 2002 was more than offset
by a combination of lower West Coast pipeline volumes, and increased
expenses. The increased expenses include increased depreciation
expense resulting from the acquisitions completed in 2002 and 2003,
increased general and administrative expense reflecting our growth and
becoming a public company in July 2002, and increased interest expense
associated with our post-IPO capital structure.
On January 20, 2004, the Partnership declared a quarterly cash
distribution for the fourth quarter of 2003 of $0.4875 per unit. The
distribution will be paid on February 13, 2003, to unitholders of
record as of January 30, 2004. Distributable cash flow for the three
months ended December 31, 2003 was $12.6 million; weighted average
units outstanding were 24.9 million.
"We are very pleased with our first full year as a public company,
including the acquisition and successful integration of the Pacific
Terminals storage and terminaling system assets. These assets, which
were acquired in July 2003, have made a significant contribution to
our revenue and income in the short time since we completed the
acquisition," said Irvin Toole, Jr., President and CEO. "In December
2003, we completed the refurbishment of a 450,000 barrel tank,
increasing Pacific Terminals' leasable storage capacity to 6.7 million
barrels, and we continue to work on other improvements including the
refurbishment of a 76,000 barrel tank that will further increase our
leasable capacity."
Mr. Toole added, "We are also undertaking a $3 million expansion
of our pipelines serving Salt Lake City by establishing a new delivery
connection from Frontier Pipeline to the partnership's Salt Lake City
Core System. This connecting facility will increase delivery capacity
to Salt Lake City refineries by approximately 9,000 barrels per day.
Existing pipelines into Salt Lake City are currently prorated, or
limited by capacity, during the summer season. We are committed to
keeping pace with growing demand for crude oil in this region and
believe this new connection will be placed in service in May 2004."
Mr. Toole continued, "We expect net income for 2004 to be in the
range of $1.30 to $1.40 per limited partner unit, and we are
forecasting net income for the first quarter of 2004 to be in the
range of $0.26 to $0.30 per unit. Revenue is typically lower in the
first quarter due to reduced throughput on our West Coast and Rocky
Mountain pipelines. The reduced throughput is a result of normal
refinery maintenance at the Los Angeles Basin refineries and lower
winter season refining runs at Rocky Mountain area refineries. In
addition, as previously reported, Shell Oil Company announced that it
will close its Bakersfield, California refinery by October 1, 2004.
When the refinery shuts down, the crude oil it currently refines is
expected to be redistributed to refineries in the Los Angeles Basin as
well as those in Northern California. Although there is no assurance
as to how the volumes will be redistributed or the timing of the
Bakersfield refinery shutdown, based on historical refinery crude oil
demand and patterns of distribution, we believe that this closure will
result in a net increase in volumes shipped on the Partnership's
pipelines beginning in the fourth quarter of 2004."
OPERATING RESULTS BY SEGMENT
WEST COAST OPERATIONS
Operating income was $11.9 million for the three months ended
December 31, 2003 compared to $9.1 million in the corresponding period
in 2002. This 31% increase was primarily due to the income earned by
Pacific Terminals, which acquired the EPTC storage and terminaling
assets on July 31, 2003, but was partially offset by lower revenues
due to reduced pipeline volumes. Pipeline volumes for the three months
ended December 31, 2003 were nine percent lower compared to the
corresponding period in 2002 due to increased light crude oil refinery
runs at the Bakersfield area refineries, maintenance downtime on
certain outer continental shelf ("OCS") production facilities, and
expected OCS and San Joaquin Valley ("SJV") production declines, all
of which combined to reduce the volume of crude oil available for
delivery to refineries in the Los Angeles Basin. Refinery maintenance
downtime also reduced pipeline volumes.
For the twelve months ended December 31, 2003, West Coast
operating income was $42.7 million compared to $38.3 million in the
corresponding period in 2002. Five months of income from our Pacific
Terminals storage and terminaling assets contributed to this increase
in operating income. Lower pipeline operating expenses also
contributed to the improvement; however, volumes on the West Coast
pipelines were seven percent lower for the year as a result of the
reasons discussed above in addition to refinery maintenance during the
early part of the year.
ROCKY MOUNTAIN OPERATIONS
Operating income was $3.5 million for the three months ended
December 31, 2003, compared to $4.4 million in the corresponding
period in 2002. During the fourth quarter of 2003, Frontier Pipeline
Company, which is 22.22% owned by a subsidiary of the Partnership,
settled two tariff rate related matters, reducing the Partnership's
share of Frontier's income by $0.4 million. Refinery maintenance in
the fourth quarter of 2003 impacted crude runs in the Salt Lake City
area and resulted in lower volumes transported on AREPI and Frontier,
but this impact was offset by increased Western Corridor volumes.
Major maintenance expenses were greater in 2003's fourth quarter.
For the twelve months ended December 31, 2003, operating income
was $14.2 million compared to $13.5 million in the corresponding
period in 2002. The 2002 period included only ten months of results
for the Western Corridor and Salt Lake City Core systems, which were
acquired on March 1, 2002. In addition, the 2002 period included
significant transition costs that were partly offset in 2003 by higher
major maintenance expense. Refinery maintenance, particularly in the
first part of 2003, resulted in reduced throughput to Salt Lake City
through our various systems.
CAPITAL EXPENDITURES
Capital expenditures were $10.8 million for the twelve months
ended December 31, 2003, of which $2.1 million was for sustaining
capital projects. Profit generating capital expenditures totaled $8.3
million, including $5.3 million for the Pier 400 project. Pier 400 is
a deep-water petroleum import terminal at the Port of Los Angeles that
the Partnership is in the early stages of developing. Transition
capital expenditures, principally for the Pacific Terminals storage
and terminaling system assets, were $0.4 million. During 2004, we
expect capital expenditures to total approximately $16 million,
including up to $5 million for Pier 400, $7 million for other profit
generating capital projects, $1 million for transition capital
projects and $3 million for sustaining capital projects.
We will host a conference call at 2:00 p.m. EST on Wednesday,
January 28, 2004, to discuss the results of the fourth quarter and
full year 2003, as well as our outlook for 2004. Please join us at
www.PacificEnergyPartners.com for the live broadcast. The call, with
questions and answers, will continue to be available on our web site
following the live discussion.
Pacific Energy Partners, L.P. is a Delaware limited partnership
headquartered in Long Beach, California. Pacific Energy Partners is
engaged principally in the business of gathering, transporting,
storing and distributing crude oil and other related products in
California and the Rocky Mountain region. Pacific Energy Partners
generates revenues primarily by charging tariff rates for transporting
crude oil on its pipelines and by leasing capacity in its storage
facilities. Pacific Energy Partners also buys, blends and sells crude
oil, activities that are complimentary to its pipeline transportation
and storage business.
This news release may include "forward-looking" statements within
the meaning of Section 27A of the Securities Act of 1933, as amended,
and Section 21E of the Securities Exchange Act of 1934, as amended.
All statements other than statements of historical fact included or
incorporated herein may constitute forward-looking statements.
Although the Partnership believes that the forward-looking statements
are reasonable, it can give no assurance that such expectations will
prove to be correct. The forward-looking statements involve risks and
uncertainties that affect the Partnership's operations and financial
performance. Among the factors that could cause results to differ
materially are those risks discussed in the Partnership's filings with
the Securities and Exchange Commission, including our Annual Report on
Form 10-K for the year ended December 31, 2002 and the Registration
Statement on Form S-3 filed August 1, 2003.
PACIFIC ENERGY PARTNERS, L.P.
Successor to Pacific Energy (Predecessor)
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(In thousands)
For the Three Months Year Ended
Ended December 31, December 31,
2003 2002 2003 2002(1)
---- ---- ---- ----
Operating revenues:
Pipeline transportation
revenue $25,559 $26,852 $102,279 $103,090
Storage and terminaling
revenue 7,674 -- 12,243 --
Crude oil sales, net of
purchases 4,777 4,953 21,293 21,104
Net revenues 38,010 31,805 135,815 124,194
Expenses:
Operating 17,021 14,545 60,649 55,184
Transition costs -- (42) 397 2,633
General and administrative 3,421 2,991 13,705 7,515
Depreciation and amortization 5,431 4,208 18,865 15,919
Total expenses 25,873 21,702 93,616 81,251
Share of net income (loss)
of Frontier (145) 381 996 1,347
Operating income 11,992 10,484 43,195 44,290
Net interest expense (4,531) (4,198) (17,331) (11,249)
Other income 93 118 323 533
Net income $7,554 $6,404 $26,187 $33,574
Weighted average units outstanding:
Basic 24,874 20,930 22,328
Diluted 25,095 20,930 22,540
Calculation of unitholders' interest in net income
for the three months ended December 31, 2003 and 2002
and for the year ended December 31, 2003:
Net income $7,554 $6,404 $26,187
Less: General Partner's
interest (151) (128) (524)
Unitholders' interest in
net income $7,403 $6,276 $25,663
Basic net income per unit $0.30 $0.30 $1.15
Diluted net income per unit $0.30 $0.30 $1.14
(1) On July 26, 2002, Pacific Energy Partners, L.P. completed an
initial public offering of common units. Net income for the period
January 1, through July 25, 2002 (period prior to closing of
initial public offering) was $21,757. Net income applicable to
July 26, through December 31, 2002 was $11,817 of which $236
relates to the general partner interest and $11,581 relates to the
limited partner interest. Net income per limited partner unit for
the period July 26, through December 31, 2002 was $0.55 based on
weighted average limited partner units outstanding of 20,930.
PACIFIC ENERGY PARTNERS, L.P.
Successor to Pacific Energy (Predecessor)
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
AND OPERATING HIGHLIGHTS BY SEGMENT
Three Months Ended December 31, 2003 and 2002
(Unaudited)
(In thousands)
Intersegment
Rocky and
West Coast Mountain Intrasegment
Operations Operations Eliminations Total
(1)
Three Months Ended Dec. 31, 2003:
Segment revenue:
Pipeline transportation
revenue $16,723 $10,571 $(1,735) $25,559
Storage and terminaling
revenue 7,674 -- 7,674
Crude oil sales,
net of purchases 4,777 -- 4,777
Net revenue 29,174 10,571 38,010
Segment expenses:
Operating expense 13,488 5,268 (1,735) 17,021
Transition costs -- -- --
Depreciation and amortization 3,790 1,641 5,431
Total expenses 17,278 6,909 22,452
Share of net income
(loss) of Frontier -- (145) (145)
Operating income $11,896 $3,517 $15,413
Operating Data (barrels per day, in thousands)
Line 2000 and Line 63
pipeline volume 142.1
Salt Lake City Core system volume 64.3
Western Corridor system volume 19.6
AREPI pipeline volume 42.4
Frontier pipeline volume 42.5
Three Months Ended December 31, 2002:
Segment revenue:
Pipeline transportation
revenue $17,511 $10,868 $(1,527) $26,852
Storage and terminaling
revenue -- -- --
Crude oil sales,
net of purchases 4,953 -- 4,953
Net revenue 22,464 10,868 31,805
Segment expenses:
Operating expense 10,526 5,546 (1,527) 14,545
Transition costs 15 (57) (42)
Depreciation and amortization 2,843 1,365 4,208
Total expenses 13,384 6,854 18,711
Share of net income
(loss) of Frontier -- 381 381
Operating income $9,080 $4,395 $13,475
Operating Data (barrels per day, in thousands)
Line 2000 and Line 63
pipeline volume 155.9
Salt Lake City Core system volume 66.4
Western Corridor system volume 13.5
AREPI pipeline volume 45.1
Frontier pipeline volume 45.3
(1) Eliminations are required to account for revenue on services
provided by one subsidiary to another.
PACIFIC ENERGY PARTNERS, L.P.
Successor to Pacific Energy (Predecessor)
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
AND OPERATING HIGHLIGHTS BY SEGMENT
Year Ended December 31, 2003 and 2002
(Unaudited)
(In thousands)
Intersegment
Rocky and
West Coast Mountain Intrasegment
Operations Operations Eliminations Total
(1)
Year Ended December 31, 2003:
Segment revenue:
Pipeline transportation
revenue $68,414 $41,298 $(7,433) $102,279
Storage and terminaling
revenue 12,243 -- 12,243
Crude oil sales, net
of purchases 21,293 -- 21,293
Net revenue 101,950 41,298 135,815
Segment expenses:
Operating expense 46,287 21,795 (7,433) 60,649
Transition costs -- 397 397
Depreciation and amortization 12,999 5,866 18,865
Total expenses 59,286 28,058 79,911
Share of net income
of Frontier -- 996 996
Operating income $42,664 $14,236 $56,900
Operating Data (barrels per day, in thousands)
Line 2000 and Line 63
pipeline volume 151.0
Salt Lake City Core system volume(2) 65.7
Western Corridor system volume(2) 16.7
AREPI pipeline volume 41.8
Frontier pipeline volume 41.7
Year Ended December 31, 2002:
Segment revenue:
Pipeline transportation
revenue $71,126 $37,960 $(5,996) $103,090
Storage and terminaling
revenue -- -- --
Crude oil sales, net
of purchases 21,104 -- 21,104
Net revenue 92,230 37,960 124,194
Segment expenses:
Operating expense 42,536 18,644 (5,996) 55,184
Transition costs 141 2,492 2,633
Depreciation and amortization 11,230 4,689 15,919
Total expenses 53,907 25,825 73,736
Share of net income
of Frontier -- 1,347 1,347
Operating income $38,323 $13,482 $51,805
Operating Data (barrels per day, in thousands)
Line 2000 and Line 63
pipeline volume 162.8
Salt Lake City Core system volume(2) 70.0
Western Corridor system volume(2) 15.0
AREPI pipeline volume 45.6
Frontier pipeline volume 44.4
(1) Eliminations are required to account for revenue on services
provided by one subsidiary to another.
(2) Volumes for 2002 represent ten months from the acquisition
date of March 1, 2002.
PACIFIC ENERGY PARTNERS, L.P.
Successor to Pacific Energy (Predecessor)
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
December 31, December 31,
2003 2002
(Unaudited)
----------- -----------
Assets
Current assets $68,796 $66,071
Property and equipment, net 567,954 404,842
Investment in Frontier Pipeline Company 8,044 9,175
Other assets 6,567 6,950
Total assets $651,361 $487,038
Liabilities and Partners' Capital
Current liabilities $49,991 $41,571
Long-term debt 298,000 225,000
Other long term liabilities 7,145 5,200
Undistributed employee long-term incentive plan 738 72
Accumulated other comprehensive loss (5,608) (7,375)
Partners' capital 301,095 222,570
Total liabilities and partners' capital $651,361 $487,038
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
For the Three Months Year Ended
Ended December 31, December 31,
2003 2002 2003 2002
---- ---- ---- ----
Cash flows from operating
activities:
Net income $7,554 $6,404 $26,187 $33,574
Depreciation, amortization,
non-cash employee compensation
under long-term incentive
plan and share of net
income (loss) of Frontier 6,102 4,152 21,096 15,115
Working capital adjustments (4,675) 6,522 (4,901) (2,896)
Net cash provided by
operating activities 8,981 17,078 42,382 45,793
Cash flows from investing
activities:
Acquisition of pipeline
and storage assets (9,801) (473) (169,740) (95,669)
Net additions to
property and equipment
and other (8,409) (1,688) (10,592) (5,642)
Net cash used in
investing activities (18,210) (2,161) (180,332) (101,311)
Cash flows from financing
activities:
Proceeds from issuance
of common units, net -- 498 131,716 151,139
Capital contribution
from the general partner -- -- 1,955 --
Redemption of common units -- -- (40,780) --
Net proceeds
(repayments) of debt 14,000 (5,300) 73,000 38,367
Capital contributions
of members -- -- -- 8,770
Distributions to
partners and members (12,458) (7,193) (42,115) (23,193)
Distributions to general
partner in connection
with the initial
public offering -- -- -- (105,081)
Due from related party -- -- -- (122)
Net cash provided by
(used in) financing
activities 1,542 (11,995) 123,776 69,880
Net increase (decrease) in cash
and cash equivalents (7,687) 2,922 (14,174) 14,362
Cash and cash equivalents,
beginning of period 17,386 20,951 23,873 9,511
Cash and cash equivalents, end
of period $9,699 $23,873 $9,699 $23,873
PACIFIC ENERGY PARTNERS, L.P.
Successor to Pacific Energy (Predecessor)
RECONCILIATION OF OPERATING INCOME BY SEGMENT TO CONDENSED
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(In thousands)
For the Three Months Year Ended
Ended December 31, December 31,
2003 2002 2003 2002
---- ---- ---- ----
Operating income by segment:
West Coast $11,896 $9,080 $42,664 $38,323
Rocky Mountain 3,517 4,395 14,236 13,482
15,413 13,475 56,900 51,805
General expenses and other
income/(expense):(1)
General and administrative
expense (3,421) (2,991) (13,705) (7,515)
Net interest expense (4,531) (4,198) (17,331) (11,249)
Other income 93 118 323 533
Net income $7,554 $6,404 $26,187 $33,574
CALCULATION OF DISTRIBUTABLE CASH FLOW(2)
(Unaudited)
(In thousands)
For the Three Months Year Ended
Ended December 31, December 31,
2003 2002 2003(3)
---- ---- ----
Net income $7,554 $6,404 $26,187
Plus: depreciation and amortization 5,431 4,208 18,865
Plus: amortization of debt issue costs 284 253 1,029
Plus: non-cash employee compensation
under long-term incentive plan 194 72 2,199
Less: sustaining capital expenditures (867) (753) (2,149)
Distributable Cash Flow 12,596 10,184 46,131
Less: General Partner's interest (252) (202) (923)
Unitholders' interest
in Distributable Cash Flow $12,344 $9,982 $45,208
(1) General and administrative expenses, net interest expense and
other income are not allocated among the West Coast and Rocky
Mountain operations.
(2) Distributable Cash Flow provides additional information for
evaluating our ability to make the minimum quarterly distribution
and is presented solely as a supplemental measure. You should not
consider Distributable Cash Flow as an alternative to net income,
income before taxes, cash flow from operations, or any other
measure of financial performance presented in accordance with
accounting principles generally accepted in the United States. Our
Distributable Cash Flow may not be comparable to similarly titled
measures of other entities. Additional information regarding
distributable cash flow is included in our current report on Form
8-K filed on January 28, 2004.
(3) On July 26, 2002, Pacific Energy Partners, L.P. completed an
initial public offering of common units. Accordingly,
distributable cash flow is not presented for the year ended
December 31, 2002.
CONTACT: Pacific Energy Partners, L.P.
Thomas L. Lambert, 562-728-2871
Fax: 562-728-2881