Exhibit 99.1
Pacific Energy Partners, L.P. Reports Earnings for Third Quarter 2004
and Announces Distribution Increase
LONG BEACH, Calif.--(BUSINESS WIRE)--Oct. 27, 2004--Pacific Energy
Partners, L.P. (NYSE:PPX) announced net income for the three months
ended September 30, 2004, of $9.9 million, or $0.33 per diluted
limited partner unit compared to $6.9 million, or $0.30 per diluted
limited partner unit in the third quarter of 2003.
The results of the current quarter reflect three acquisitions: the
Pacific Terminals storage and distribution system, which was acquired
on July 31, 2003; the Rangeland Pipeline system, which was acquired on
May 11, 2004; and the Mid Alberta Pipeline ("MAPL"), which was
acquired on June 30, 2004. Pacific Terminals experienced an increase
in storage and distribution revenues due to increased storage capacity
and higher utilization. The quarter also reflects the benefit of
increased volumes and revenue on our Rocky Mountain pipelines.
Partially offsetting these increases were lower gathering and blending
margins of Pacific Marketing and Transportation ("PMT").
For the nine months ended September 30, 2004, recurring net income
was $30.0 million, or $1.05 per diluted limited partner unit, compared
with $18.6 million or $0.84 per diluted limited partner unit for the
nine months ended September 30, 2003. Acquisitions and increased Rocky
Mountain volumes, partly offset by lower West Coast pipeline volumes,
accounted for the increase in net income per unit. Recurring net
income for the nine months ending September 30, 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 $250 million bond offering in June 2004 and
repayment of our term loan. Including the non-recurring financing
expense, net income for the nine months ended September 30, 2004 was
$27.1 million or $0.94 per diluted limited partner unit.
On October 22, 2004, the Partnership announced a cash distribution
of $0.4875 per unit for the third quarter of 2004. The distribution
will be paid on November 12, 2004, to record holders as of November 1,
2004. Distributable cash flow available to the limited partners'
interest for the third quarter of 2004 was $16.0 million. On a
weighted average and diluted basis, there were 29,682,000 limited
partner units outstanding during the third quarter of 2004,
approximately 31 percent more units outstanding than in the third
quarter of 2003.
The Partnership is announcing today that it expects, subject to
final board approval, to increase its quarterly distribution rate to
$0.50 per unit beginning with the fourth quarter 2004 distributions
payable in February 2005. This would represent an increase of 2.6%
over the current distribution level. In addition, the Partnership has
previously announced that it expects to increase its distribution by
5% upon completion of its originating terminal and pump station in
Edmonton, Alberta with the resultant expected increase in volumes.
Completion of the Edmonton facility is expected by the end of the
third quarter of 2005.
"We are delighted to announce this distribution increase," stated
Irvin Toole, Jr., President and CEO. "It demonstrates that we are
making progress in growing and strengthening both of our strategic
asset groups. Our West Coast segment is realizing the value of the
Pacific Terminals storage and distribution system. Our Rocky Mountain
segment is experiencing increasing volumes on the Western Corridor and
Salt Lake City Core systems, and we remain extremely excited about the
growth prospects for our recently acquired Canadian pipelines."
Mr. Toole continued, "For the fourth quarter of 2004, we are
forecasting net income of $0.30 to $0.34 per unit. For full year 2004,
we expect recurring net income per unit to be in the range of $1.34 to
$1.38 per limited partner unit. This revised guidance level primarily
reflects lower fourth quarter volumes on the Partnership's pipelines
from the San Joaquin Valley to Los Angeles, as a result of the recent
announcement by Shell Oil that it will continue to operate its
Bakersfield refinery through March 31, 2005, to allow time to consider
purchase proposals for the facility."
OPERATING RESULTS BY SEGMENT
WEST COAST OPERATIONS
Operating income was $11.4 million for the three months ended
September 30, 2004 compared to $10.8 million in the corresponding
period in 2003. This increase was primarily due to the income earned
by Pacific Terminals, which the Partnership acquired on July 31, 2003.
PMT experienced lower gathering and blending margins due to
competitive pricing pressures as a result of steeply discounted
foreign crude entering the West Coast market. In addition, a change in
refined products specifications reduced demand for PMT's blended
crude. Pipeline volumes for the three months ended September 30, 2004
were 5% lower than in the corresponding period of 2003, primarily due
to California Outer Continental Shelf ("OCS") production declines, as
well as increased crude runs by Bakersfield refineries which reduces
the volumes available to move south to Los Angeles. Helping to offset
lower volumes were increased tariff rates, a more favorable tariff mix
and other revenues.
In the third quarter of 2004, producers began the development of
the Rocky Point field in the California OCS, with the drilling of the
first of eight planned wells. Rocky Point is estimated by the operator
to have reserves of up to 50 million barrels of crude oil. The first
well began producing at a rate of approximately 4,300 barrels per day,
thereby increasing the supply of crude available to be transported by
the Partnership into the Los Angeles Basin. The Partnership
anticipates that a significant portion of the Rocky Point production
will be transported on its pipelines.
As previously noted, Shell has extended the operation of its
Bakersfield refinery until March 31, 2005, during which time it plans
to continue to explore the sale of the refinery. This is an extension
to its previously announced October 1, 2004 closure date. Should Shell
ultimately close the refinery, the Partnership continues to believe
that volumes of crude oil transported by Pacific to the Los Angeles
Basin will increase. If the Bakersfield refinery stays in operation,
the Partnership believes there could be an opportunity to transport
additional volumes to the Bakersfield refinery.
On October 1, 2004, the Partnership applied for a 9.5% tariff
increase on Line 63, to become effective on November 1, 2004 subject
to approval from the California Public Utilities Commission ("CPUC").
Line 63 averaged approximately 58,000 barrels per day for the third
quarter of 2004. During the fourth quarter, the Partnership will
install vapor treating equipment at a cost of $0.6 million for its
Pacific Terminals facilities which is expected to reduce third party
contractor costs by approximately $1 million per year. In addition, it
has filed an application with the CPUC for the sale of certain idle
properties valued at approximately $10 million that were acquired as a
part of the Pacific Terminals acquisition.
ROCKY MOUNTAIN OPERATIONS
Operating income was $7.5 million for the three months ended
September 30, 2004, compared to $4.1 million in the corresponding
period in 2003. The increase was the result of higher pipeline volumes
on the Western Corridor system, an increase in volume to the Salt Lake
City refineries, and a full quarter's benefit of the Rangeland
Pipeline system, which was acquired on May 11, 2004. The volume
increase into Salt Lake City was enhanced by the 9,000 barrel per day
expansion that was completed during the second quarter. The
Partnership is currently evaluating a second expansion phase into Salt
Lake City.
The Partnership is in the process of designing a new receiving
terminal and pump station for the Rangeland Pipeline system, which
will provide access to synthetic and other types of crude oil in
Edmonton. Construction of this facility is expected to be completed
and begin operations at the end of the third quarter of 2005.
CAPITAL EXPENDITURES
Capital expenditures were approximately $11.5 million for the nine
months ended September 30, 2004, of which $8.8 million was related to
expansion, $1.2 million was related to the transition of the Rangeland
and Pacific Terminals systems, and $1.5 million was for sustaining
capital projects. For the full year, we forecast total capital
expenditures of $16 million, including $11 million for expansion
projects, $3 million for transition capital projects, and $2.0 to $2.5
million for sustaining capital projects.
OTHER MATTERS
The Partnership will host a conference call at 2:00 p.m. EDT
(11:00 a.m. PDT) on Thursday, October 28, 2004, to discuss the results
of the third quarter of 2004 and guidance for the balance of the year.
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 call.
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 Nine Months
Ended Sept. 30, Ended Sept. 30,
2004 2003 2004 2003
---- ---- ---- ----
Operating revenues:
Pipeline transportation revenue $28,160 $25,501 $79,879 $76,579
Storage and terminaling revenue 8,391 4,710 27,773 4,710
Pipeline buy/sell transportation
revenue 7,972 -- 11,662 --
Crude oil sales, net of
purchases 3,568 5,907 14,436 16,516
Net revenues 48,091 36,118 133,750 97,805
Expenses:
Operating 22,589 16,630 62,189 43,622
Transition costs 199 -- 383 397
General and administrative 3,762 3,305 11,252 10,289
Depreciation and amortization 6,821 5,049 17,776 13,435
Total expenses 33,371 24,984 91,600 67,743
Share of net income of Frontier 406 414 1,190 1,141
Operating income 15,126 11,548 43,340 31,203
Net interest expense (5,234) (4,782)(13,743)(12,930)
Write-off of deferred financing cost
and interest rate swap termination
expense -- -- (2,901) --
Other income 219 113 606 360
Income before foreign income tax
expense 10,111 6,879 27,302 18,633
Foreign income tax expense:
Current 118 -- 150 --
Deferred 103 -- 57 --
221 -- 207 --
Net income $9,890 $6,879 $27,095 $18,633
Weighted average units outstanding:
Basic 29,574 22,532 28,008 21,470
Diluted 29,682 22,725 28,125 21,648
Calculation of unitholders' interest in net income for the three
and nine months ended September 30, 2004 and 2003:
Net income $9,890 $6,879 $27,095 $18,633
Less: General Partner's interest (198) (138) (542) (373)
Unitholders' interest in net income $9,692 $6,741 $26,553 $18,260
Basic net income per unit $0.33 $0.30 $0.95 $0.85
Diluted net income per unit $0.33 $0.30 $0.94 $0.84
PACIFIC ENERGY PARTNERS, L.P.
(Unaudited)
(In thousands)
CONDENSED CONSOLIDATED BALANCE SHEETS
Sept. 30, Dec. 31,
2004 2003
---- ----
Assets
Current assets $97,977 $68,796
Property and equipment, net 713,351 567,954
Investment in Frontier Pipeline Company 7,841 6,886
Other assets 48,771 6,567
Total assets $867,940 $650,203
Liabilities and Partners' Capital
Current liabilities $61,011 $49,991
Long-term debt 341,493 298,000
Deferred income taxes 36,641 --
Other long term liabilities 7,185 7,145
Partners' capital 421,610 295,067
Total liabilities
and partners' capital $867,940 $650,203
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine Months Ended
September 30,
2004 2003
---- ----
Cash flows from operating activities:
Net income $27,095 $18,633
Depreciation, amortization, non-cash employee
compensation under long-term incentive plan,
deferred income taxes and Frontier adjustment 18,819 16,771
Non-cash write-off of deferred financing costs 2,321 --
Working capital adjustments (6,221) (2,003)
Net cash provided by operating activities 42,014 33,401
Cash flows from investing activities:
Acquisitions (139,000)(159,939)
Net additions to property and equipment (11,522) (2,320)
Other (621) 137
Net cash used in investing activities (151,143)(162,122)
Cash flows from financing activities:
Issuance of common units, net of fees and
offering expenses 125,881 131,716
Capital contribution from the general partner 2,708 1,955
Redemption of common units held by the
general partner, net of underwriters' fee -- (40,780)
Net proceeds from senior note offering 241,086 --
Repayment of term loan (225,000) --
Proceeds from bank credit facilities 157,924 149,000
Repayment of bank credit facilities (145,453) (90,000)
Deferred bank financing costs (1,388) --
Distributions to partners (41,800) (29,657)
Net cash provided by financing activities 113,958 122,234
Net increase (decrease) in cash and cash equivalents 4,829 (6,487)
Cash and cash equivalents, beginning of period 9,699 23,873
Cash and cash equivalents, end of period $14,528 $17,386
PACIFIC ENERGY PARTNERS, L.P.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
AND OPERATING HIGHLIGHTS BY SEGMENT
Three Months Ended September 30, 2004 and 2003
(Unaudited)
(In thousands)
Intersegment
Rocky and
West Coast Mountain Intrasegment
Operations Operations Eliminations(1) Total
---------- ---------- --------------- -----
Three Months Ended September 30, 2004:
Segment revenue:
Pipeline transportation
revenue $16,985 $12,500 $(1,325)$28,160
Storage and terminaling
revenue 8,544 -- (153) 8,391
Pipeline buy/sell
transportation revenue -- 7,972 7,972
Crude oil sales,
net of purchases 3,568 -- 3,568
Net revenue 29,097 20,472 48,091
Segment expenses:
Operating expense 14,309 9,758 (1,478) 22,589
Transition costs -- 199 199
Depreciation and
amortization 3,433 3,388 6,821
Total expenses 17,742 13,345 29,609
Share of net income of
Frontier -- 406 406
Operating income(2) $11,355 $7,533 $18,888
Operating Data (barrels per day, in thousands)
Line 2000 and Line 63
pipeline volume 139.7
Rangeland pipeline system:
Sundre - North 21.8
Sundre - South 46.8
Western Corridor system volume 23.1
Salt Lake City Core system volume 75.2
AREPI pipeline volume 47.4
Frontier pipeline volume 51.4
Three Months Ended September 30, 2003:
Segment revenue:
Pipeline transportation
revenue $16,662 $11,006 $(2,167)$25,501
Storage and distribution 4,710 -- 4,710
Pipeline buy/sell
transportation revenue -- -- --
Crude oil sales,
net of purchases 5,907 -- 5,907
Net revenue 27,279 11,006 36,118
Segment expenses:
Operating expense 12,997 5,800 (2,167) 16,630
Transition costs -- -- --
Depreciation and
amortization 3,529 1,520 5,049
Total expenses 16,526 7,320 21,679
Share of net income of
Frontier -- 414 414
Operating income(2) $10,753 $4,100 $14,853
Operating Data (barrels per day, in thousands)
Line 2000 and Line 63
pipeline volume 146.4
Western Corridor system volume 17.7
Salt Lake City Core system volume 68.3
AREPI pipeline volume 47.8
Frontier pipeline volume 47.9
(1) Eliminations are required to account for revenue on services
provided by one subsidiary to another.
(2) General and administrative expense is not allocated to segments
PACIFIC ENERGY PARTNERS, L.P.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
AND OPERATING HIGHLIGHTS BY SEGMENT
Nine Months Ended September 30, 2004 and 2003
(Unaudited)
(In thousands)
Intersegment
Rocky and
West Coast Mountain Intrasegment
Operations Operations Eliminations(1) Total
---------- ---------- --------------- -----
Nine Months Ended September 30, 2004:
Segment revenue:
Pipeline transportation
revenue $49,170 $34,847 $(4,138)$79,879
Storage and terminaling
revenue 28,126 -- (353) 27,773
Pipeline buy/sell
transportation revenue -- 11,662 11,662
Crude oil sales,
net of purchases 14,436 -- 14,436
Net revenue 91,732 46,509 133,750
Segment expenses:
Operating expense 43,197 23,483 (4,491) 62,189
Transition costs -- 383 383
Depreciation and
amortization 10,833 6,943 17,776
Total expenses 54,030 30,809 80,348
Share of net income of
Frontier -- 1,190 1,190
Operating income(2) $37,702 $16,890 $54,592
Operating Data (barrels per day, in thousands)
Line 2000 and Line 63
pipeline volume 137.6
Rangeland pipeline system:
Sundre - North 21.6
Sundre - South 47.6
Western Corridor system volume 19.7
Salt Lake City Core system volume 70.3
AREPI pipeline volume 45.8
Frontier pipeline volume 48.5
Nine Months Ended September 30, 2003:
Segment revenue:
Pipeline transportation
revenue $51,550 $30,726 $(5,697)$76,579
Storage and terminaling
revenue 4,710 -- 4,710
Pipeline buy/sell
transportation revenue -- -- --
Crude oil sales,
net of purchases 16,516 -- 16,516
Net revenue 72,776 30,726 97,805
Segment expenses:
Operating expense 32,793 16,526 (5,697) 43,622
Transition costs -- 397 397
Depreciation and
amortization 9,210 4,225 13,435
Total expenses 42,003 21,148 57,454
Share of net income of
Frontier -- 1,141 1,141
Operating income(2) $30,773 $10,719 $41,492
Operating Data (barrels per day, in thousands)
Line 2000 and Line 63
pipeline volume 154.0
Western Corridor system volume 16.2
Salt Lake City Core system volume 65.9
AREPI pipeline volume 41.6
Frontier pipeline volume 41.5
(1) Eliminations are required to account for revenue on services
provided by one subsidiary to another.
(2) General and administrative expense is not allocated to segments
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 Nine Months
Ended Sept. 30, Ended Sept. 30,
2004 2003 2004 2003
---- ---- ---- ----
Operating income by segment:
West Coast $11,355 $10,753 $37,702 $30,773
Rocky Mountain 7,533 4,100 16,890 10,719
18,888 14,853 54,592 41,492
General expenses
and other income/(expense):(1)
General and administrative expense (3,762) (3,305)(11,252)(10,289)
Net interest expense (5,234) (4,782)(13,743)(12,930)
Other income 219 113 606 360
Write-off of deferred financing cost
and interest rate swap
termination expense(2) -- -- (2,901) --
Foreign income tax expense (221) -- (207) --
Net income $9,890 $6,879 $27,095 $18,633
RECONCILIATION OF NET INCOME TO RECURRING NET INCOME
Three Months Nine Months
Ended Sept. 30, Ended Sept. 30,
2004 2003 2004 2003
---- ---- ---- ----
Net income $9,890 $6,879 $27,095 $18,633
Add: write-off of deferred financing
cost and interest rate swap
termination expense(2) -- -- 2,901 --
Recurring net income 9,890 6,879 29,996 18,633
Less: General Partner's interest (198) (138) (600) (373)
Unitholders' interest
in recurring net income $9,692 $6,741 $29,396 $18,260
Basic recurring net income per unit $0.33 $0.30 $1.05 $0.85
Diluted recurring net income per unit $0.33 $0.30 $1.05 $0.84
CALCULATION OF DISTRIBUTABLE CASH FLOW(3)
Three Months Nine Months
Ended Sept. 30, Ended Sept. 30,
2004 2003 2004 2003
---- ---- ---- ----
Net income $9,890 $6,879 $27,095 $18,633
Plus: depreciation and amortization 6,821 5,049 17,776 13,435
Plus: amortization of bond discount
and debt issue costs 430 188 1,100 745
Plus (less): non-cash employee
compensation under long-term
incentive plan (231) 111 1,120 1,954
Plus: write-off of deferred
financing cost -- -- 2,321 --
Plus: deferred income tax expense 103 -- 57 --
Less: sustaining capital expenditures (729) (590) (1,454) (1,282)
Distributable Cash Flow 16,284 11,637 48,015 33,485
Less: General Partner's interest (326) (233) (960) (670)
Unitholders' interest in Distributable
Cash Flow $15,958 $11,404 $47,055 $32,815
(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
fax: 562-728-2881
email: aharris@PacificEnergy.com