Exhibit 99.1
Pacific Energy Partners, L.P. Reports Record Recurring Earnings
for Second Quarter 2004; Recurring Earnings Per Unit up 54 Percent
LONG BEACH, Calif.--(BUSINESS WIRE)--July 28, 2004--Pacific Energy
Partners, L.P. (NYSE:PPX) announced recurring net income for the three
months ended June 30, 2004, of $12.0 million, or $0.40 per diluted
limited partner unit compared to $5.6 million, or $0.26 per diluted
limited partner unit in the second quarter of 2003. Recurring net
income for the second quarter of 2004 excludes a $2.9 million
non-recurring financing expense. Of that expense, $2.3 million was a
non-cash write-down of previously deferred financing costs and $0.6
million was a cash payment to terminate interest swap agreements, both
associated with our recent bond offering and repayment of our term
loan. Including the non-recurring financing expense, net income for
the three months ended June 30, 2004 was $9.1 million, or $0.30 per
diluted limited partner unit.
The record results of the current quarter reflect the benefit of
the Pacific Terminals storage and distribution system, higher margins
in the gathering and blending operations by Pacific Marketing and
Transportation ("PMT"), and higher volumes and revenue on our Rocky
Mountain pipelines, partially offset by lower volumes and revenue on
our West Coast pipelines.
On July 19, 2004, the Partnership announced a cash distribution of
$0.4875 per unit for the second quarter of 2004, unchanged from the
prior quarter, but 5.4 percent higher than in the second quarter of
2003. The distribution will be paid on August 13, 2004, to record
holders as of July 30, 2004. Distributable cash flow available to the
limited partners' interest for the second quarter of 2004 was $17.6
million. On a weighted average and diluted basis, there were
29,632,000 limited partner units outstanding during the second quarter
of 2004, approximately 40 percent more units outstanding than in the
second quarter of 2003, due to the equity financings associated with
the Pacific Terminals, Rangeland and Mid Alberta Pipeline ("MAPL")
acquisitions.
"Our second quarter earnings continue to show the strength of the
Pacific Terminals acquisition. That coupled with the higher gathering
and blending margins achieved by PMT, has more than offset the effect
of lower West Coast pipeline volumes. The West Coast volume decline
was primarily due to high levels of maintenance at Los Angeles Basin
refineries, which extended well into the second quarter," stated Irvin
Toole, Jr., President and CEO. "In addition, our recent acquisition of
the Rangeland Pipeline system contributed to our growth in the Rocky
Mountain region. We expect both Rangeland and MAPL to provide added
value as our integration effort proceeds."
Mr. Toole continued, "We expect recurring net income per unit for
2004 to be in the range of $1.35 to $1.45 per limited partner unit, an
increase from our prior guidance of $1.30 to $1.40 per unit, and are
forecasting net income for the third quarter of 2004 of $0.28 to $0.32
per unit, reflecting high levels of pipeline maintenance during the
summer months."
OPERATING RESULTS BY SEGMENT
WEST COAST OPERATIONS
Operating income was $14.1 million for the three months ended June
30, 2004 compared to $9.3 million in the corresponding period in 2003.
This increase of 52 percent was primarily due to the income earned by
Pacific Terminals, which we acquired on July 31, 2003, as well as PMT
having unusually high gathering and blending margins. Pipeline volumes
for the three months ended June 30, 2004 were 11 percent lower
compared to the corresponding period in 2003 primarily due to extended
maintenance downtime at the Los Angeles Basin refineries, as well as
reduced California Outer Continental Shelf ("OCS") volumes due to
on-going production decline.
On May 1, 2004, tariffs were increased by $0.08 per barrel on Line
2000, which averaged 75,000 barrels per day for the quarter. In July
2004, we completed the refurbishment of a 72,000 barrel tank at our
Long Beach Terminal. This is the second tank we have reactivated,
increasing the aggregate storage capacity of Pacific Terminals by
525,000 barrels since December 2003. We expect to make additional
investments to increase our storage capacity as market demand
continues to grow.
ROCKY MOUNTAIN OPERATIONS
Operating income was $5.7 million for the three months ended June
30, 2004, compared to $3.3 million in the corresponding period in
2003. The increase of 73 percent was the result of higher pipeline
volumes to the Salt Lake City refineries and to Billings, as well as
the contribution of the Rangeland Pipeline system, which we acquired
on May 11, 2004.
On June 30, 2004, we completed the acquisition of MAPL. With the
acquisition of Rangeland and MAPL, we are implementing our strategy of
providing a new pipeline corridor from Alberta, Canada to the Rocky
Mountain refineries. The 9,000 barrel per day expansion of pipeline
capacity to Salt Lake City became operational during the second
quarter and is expected to reach full utilization during the third
quarter 2004.
BOND OFFERING COMPLETED
In June 2004, we completed an offering of $250 million of 7 1/8%
Senior Notes with a maturity date of June 2014. With the proceeds of
the offering, we repaid our $225 million term loan, thereby extending
the maturity date of our debt from 2009 to 2014. The primary objective
of the bond offering was to increase our financial flexibility for
future growth. Of the $250 million issued, we have converted $80
million from a fixed rate to floating rate. The impact of the offering
to recurring net income and cash flow is essentially neutral.
CAPITAL EXPENDITURES
Capital expenditures were $5.5 million for the three months ended
June 30, 2004, of which $4.6 million was related to expansion, $0.7
million was related to the transition of the Rangeland and Pacific
Terminals systems, and $0.2 million was for sustaining capital
projects. We have forecast total capital expenditures of $16.5 million
in 2004, including $10 million for expansion projects, $3 million for
transition capital projects and $3.5 million for sustaining capital
projects.
We will host a conference call at 2:00 p.m. EDT (11:00 a.m. PDT)
on Thursday, July 29, 2004, to discuss the results of the second
quarter of 2004. Please join us at www.PacificEnergy.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 master limited partnership
headquartered in Long Beach, California. Pacific Energy 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, including Alberta, Canada. Pacific Energy
generates revenues primarily by transporting crude oil on its
pipelines and by leasing capacity in its storage facilities. Pacific
Energy also buys, blends and sells crude oil, activities that are
complementary to its pipeline transportation business.
This news release includes "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 expectations reflected in
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, 2003.
PACIFIC ENERGY PARTNERS, L.P.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(Amounts in thousands, except per unit amounts)
Three Months Six Months
Ended June 30, Ended June 30,
----------------------------------
2004 2003 2004 2003
----------------------------------
Operating revenues:
Pipeline transportation revenue $26,992 $25,758 $51,719 $51,078
Storage and terminaling revenue 9,259 -- 19,382 --
Pipeline buy/sell
transportation revenue 3,690 -- 3,690 --
Crude oil sales, net of purchases 6,056 4,979 10,868 10,609
Net revenues 45,997 30,737 85,659 61,687
Expenses:
Operating 20,683 14,344 39,600 26,992
Transition costs 184 -- 184 397
General and administrative 3,636 3,002 7,490 6,984
Depreciation and amortization 5,713 4,205 10,955 8,386
Total expenses 30,216 21,551 58,229 42,759
Share of net income of Frontier 391 386 784 727
Operating income 16,172 9,572 28,214 19,655
Net interest expense (4,383) (4,102) (8,509) (8,148)
Write-off of deferred financing
cost and interest rate swap
termination expense (2,901) -- (2,901) --
Other income 226 156 387 247
Income before foreign taxes 9,114 5,626 17,191 11,754
Foreign income tax benefit (expense):
Current (32) -- (32) --
Deferred 46 -- 46 --
14 -- 14 --
Net income $9,128 $5,626 $17,205 $11,754
Weighted average units outstanding:
Basic 29,479 20,930 27,239 20,930
Diluted 29,632 21,086 27,402 21,065
Calculation of unitholders' interest in net income
for the three and six months ended June 30, 2004 and 2003:
- ----------------------------------------------------------------------
Net income $9,128 $5,626 $17,205 $11,754
Less: General Partner's interest (183) (112) (344) (235)
Unitholders' interest in net income $8,945 $5,514 $16,861 $11,519
Basic net income per unit $0.30 $0.26 $0.62 $0.55
Diluted net income per unit $0.30 $0.26 $0.62 $0.55
PACIFIC ENERGY PARTNERS, L.P.
(Unaudited)
(In thousands)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended
June 30,
-----------------
2004 2003
-----------------
Cash flows from operating activities:
Net income $17,205 $11,754
Depreciation, amortization, non-cash employee
compensation under long-term incentive plan,
deferred taxes and Frontier adjustment 12,814 11,392
Non-cash write-off of deferred financing costs 2,321 --
Working capital adjustments (2,468) (3,972)
Net cash provided by operating activities 29,872 19,174
Cash flows from investing activities:
Acquisitions (139,050) --
Net additions to property and
equipment and other (7,896) (1,144)
Net cash used in investing activities (146,946) (1,144)
Cash flows from financing activities:
Issuance of common units, net of fees
and offering expenses 125,881 --
Capital contribution from the general partner 2,690 --
Net proceeds from senior note offering 241,086 --
Repayment of term loan (225,000) --
Proceeds from bank credit facilities 154,168 --
Repayment of bank credit facilities (141,500) --
Deferred bank financing costs (1,008) --
Distributions to partners (27,081)(19,755)
Net cash provided by (used in)
financing activities 129,236 (19,755)
Net increase (decrease) in cash and cash equivalents 12,162 (1,725)
Cash and cash equivalents, beginning of period 9,699 23,873
Cash and cash equivalents, end of period $21,861 $22,148
SELECTED BALANCE SHEET DATA
June 30, Dec. 31,
2004 2003
------------------
Working capital(1) $45,759 $18,805
Long-term debt $335,735 $298,000
Partners' capital $422,439 $295,067
(1) Working capital includes cash balances of $21,861 and $9,699
as of June 30, 2004 and December 31, 2003, respectively.
PACIFIC ENERGY PARTNERS, L.P.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
AND OPERATING HIGHLIGHTS BY SEGMENT
Three Months Ended June 30, 2004 and 2003
(Unaudited)
(In thousands)
Intersegment
Rocky and
West Coast Mountain Intrasegment
Operations Operations Eliminations(1) Total
-------------------------------------------
Three Months Ended June 30, 2004:
Segment revenue:
Pipeline transportation
revenue $16,494 $11,804 $(1,306)$26,992
Storage and terminaling
revenue 9,359 -- (100) 9,259
Pipeline buy/sell
transportation revenue -- 3,690 3,690
Crude oil sales,
net of purchases 6,056 -- 6,056
Net revenue 31,909 15,494 45,997
Segment expenses:
Operating expense 14,182 7,907 (1,406) 20,683
Transition costs -- 184 184
Depreciation and
amortization 3,635 2,078 5,713
Total expenses 17,817 10,169 26,580
Share of net income of
Frontier -- 391 391
Operating income $14,092 $5,716 $19,808
Operating Data (barrels per day, in thousands)
Line 2000 and Line 63
pipeline volume 139.5
Rangeland pipeline system:
Sundre - North 21.2
Sundre - South 48.8
Western Corridor system volume 19.8
Salt Lake City Core system volume 73.0
AREPI pipeline volume 46.2
Frontier pipeline volume 50.0
Three Months Ended June 30, 2003:
Segment revenue:
Pipeline transportation
revenue $17,554 $10,321 $(2,117)$25,758
Storage and distribution -- -- --
Pipeline buy/sell
transportation revenue -- -- --
Crude oil sales,
net of purchases 4,979 -- 4,979
Net revenue 22,533 10,321 30,737
Segment expenses:
Operating expense 10,377 6,084 (2,117) 14,344
Transition costs -- -- --
Depreciation and
amortization 2,859 1,346 4,205
Total expenses 13,236 7,430 18,549
Share of net income of
Frontier -- 386 386
Operating income $9,297 $3,277 $12,574
Operating Data (barrels per day, in thousands)
Line 2000 and Line 63
pipeline volume 156.5
Western Corridor system volume 17.6
Salt Lake City Core system volume 64.7
AREPI pipeline volume 41.4
Frontier pipeline volume 41.0
(1) Eliminations are required to account for revenue on services
provided by one subsidiary to another.
PACIFIC ENERGY PARTNERS, L.P.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
AND OPERATING HIGHLIGHTS BY SEGMENT
Six Months Ended June 30, 2004 and 2003
(Unaudited)
(In thousands)
Intersegment
Rocky and
West Coast Mountain Intrasegment
Operations Operations Eliminations(1) Total
-------------------------------------------
Six Months Ended June 30, 2004:
Segment revenue:
Pipeline transportation
revenue $32,185 $22,347 $(2,813)$51,719
Storage and
terminaling revenue 19,582 -- (200) 19,382
Pipeline buy/sell
transportation revenue -- 3,690 3,690
Crude oil sales,
net of purchases 10,868 -- 10,868
Net revenue 62,635 26,037 85,659
Segment expenses:
Operating expense 28,888 13,725 (3,013) 39,600
Transition costs -- 184 184
Depreciation and
amortization 7,400 3,555 10,955
Total expenses 36,288 17,464 50,739
Share of net income of
Frontier -- 784 784
Operating income $26,347 $9,357 $35,704
Operating Data (barrels per day, in thousands)
Line 2000 and Line 63
pipeline volume 136.6
Rangeland pipeline system:
Sundre - North 21.2
Sundre - South 48.8
Western Corridor system volume 18.0
Salt Lake City Core system volume 67.9
AREPI pipeline volume 45.1
Frontier pipeline volume 47.0
Six Months Ended June 30, 2003:
Segment revenue:
Pipeline transportation
revenue $34,888 $19,720 $(3,530)$51,078
Storage and
terminaling revenue -- -- --
Pipeline buy/sell
transportation revenue -- -- --
Crude oil sales,
net of purchases 10,609 -- 10,609
Net revenue 45,497 19,720 61,687
Segment expenses:
Operating expense 19,796 10,726 (3,530) 26,992
Transition costs -- 397 397
Depreciation and
amortization 5,681 2,705 8,386
Total expenses 25,477 13,828 35,775
Share of net income of
Frontier -- 727 727
Operating income $20,020 $6,619 $26,639
Operating Data (barrels per day, in thousands)
Line 2000 and Line 63
pipeline volume 157.9
Western Corridor system volume 15.6
Salt Lake City Core system volume 64.7
AREPI pipeline volume 38.5
Frontier pipeline volume 38.2
(1) Eliminations are required to account for revenue on services
provided by one subsidiary to another.
PACIFIC ENERGY PARTNERS, L.P.
(Unaudited)
(Amounts in thousands, except per unit amounts)
RECONCILIATION OF OPERATING INCOME BY SEGMENT TO CONDENSED
CONSOLIDATED STATEMENTS OF INCOME
Three Months Six Months
Ended June 30, Ended June 30,
---------------------------------
2004 2003 2004 2003
---------------------------------
Operating income by segment:
West Coast $14,092 $9,297 $26,347 $20,020
Rocky Mountain 5,716 3,277 9,357 6,619
19,808 12,574 35,704 26,639
General expenses and other
income/(expense):(1)
General and administrative expense (3,636)(3,002) (7,490) (6,984)
Net interest expense (4,383)(4,102) (8,509) (8,148)
Other income 226 156 387 247
Write-off of deferred financing cost
and interest rate swap
termination expense (2,901) -- (2,901) --
Foreign tax benefit (expense) 14 -- 14 --
Net income $9,128 $5,626 $17,205 $11,754
RECONCILIATION OF NET INCOME TO RECURRING NET INCOME
Three Months Six Months
Ended June 30, Ended June 30,
-------------------------------
2004 2003 2004 2003
-------------------------------
Net income $9,128 $5,626 $17,205 $11,754
Add: write-off of deferred financing
cost and interest rate swap
termination expense(2) 2,901 -- 2,901 --
Recurring net income 12,029 5,626 20,106 11,754
Less: General Partner's interest (241) (112) (402) (235)
Unitholders' interest in recurring
net income $11,788 $5,514 $19,704 $11,519
Basic and diluted recurring net income
per unit $0.40 $0.26 $0.72 $0.55
CALCULATION OF DISTRIBUTABLE CASH FLOW(3)
Three Months Six Months
Ended June 30, Ended June 30,
2004 2003 2004 2003
--------------------------------
Net income $9,128 $5,626 $17,205 $11,754
Plus: depreciation and amortization 5,713 4,205 10,955 8,386
Plus: amortization of bond discount
and debt issue costs 359 287 670 557
Plus: non-cash employee compensation
under long-term incentive plan 692 810 1,351 1,843
Plus: write-off of deferred
financing cost 2,321 -- 2,321 --
Less: deferred tax benefit (46) -- (46) --
Less: sustaining capital expenditures (178) (368) (725) (692)
Distributable Cash Flow 17,989 10,560 31,731 21,848
Less: General Partner's interest (360) (211) (635) (437)
Unitholders' interest in
Distributable Cash Flow $17,629$10,349 $31,096 $21,411
(1) General and administrative expenses, net interest expense and
other income are not allocated among the West Coast and Rocky
Mountain operations.
(2) In June 2004, in connection with the repayment of our term
loan, we had a $2.3 million non-cash write-down of deferred
financing costs and incurred a $0.6 million cash expense to
terminate related interest rate swaps.
(3) 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 annual report on Form
10-K for the year ended December 31, 2003.
CONTACT: Pacific Energy Partners, L.P.
Aubrye Harris, 562-728-2871
Manager, Investor Relations
fax: 562-728-2881