Exhibit 99.1
Pacific Energy Partners, L.P. Reports Earnings for Fourth Quarter and
Full Year 2004 and Provides 2005 Guidance
LONG BEACH, Calif.--(BUSINESS WIRE)--Feb. 2, 2005--Pacific Energy
Partners, L.P. (NYSE:PPX) announced fourth quarter and full year 2004
recurring net income in line with previously published guidance.
Recurring net income for the three months ended December 31, 2004, was
$9.4 million, or $0.31 per diluted limited partner unit, compared to
recurring net income of $8.0 million, or $0.31 per diluted limited
partner unit, in the fourth quarter of 2003. Recurring net income for
the full year ended December 31, 2004, was $39.4 million, or $1.36 per
diluted limited partner unit, compared to recurring net income of
$26.7 million, or $1.16 per diluted limited partner unit, for full
year 2003.
On January 21, 2005, the Partnership announced an increase in its
cash distribution to $0.50 per unit for the fourth quarter of 2004, or
$2.00 per unit annualized. This represents an increase of 2.6% over
its previous quarterly distribution level of $0.4875 per unit, or
$1.95 per unit annualized. The distribution will be paid on February
14, 2005, to record holders as of January 31, 2005.
"We had a very good year in 2004," stated Irv Toole, President and
CEO. "Both of our strategic asset groups continue to strengthen and
grow, as shown by our distribution increase this quarter. The Pacific
Terminals storage and distribution system is a strong and growing
asset in our West Coast segment. Our Rocky Mountain segment has
enjoyed the benefits of a concerted marketing effort in the US, as
well as the early impact of the Canadian pipelines we acquired in
2004. By entering this new market, we have gained access to growing
synthetic crude oil production, as well as a customer base that will
have a positive impact on our future volumes in the Rocky Mountains.
In addition, increasing volumes on the Western Corridor and Salt Lake
City Core systems further enhance our revenue growth. We're excited
about the growth potential in both of our operating segments."
FOURTH QUARTER RESULTS
Recurring net income for the three months ended December 31, 2004,
was $9.4 million, or $0.31 per diluted limited partner unit, compared
to recurring net income of $8.0 million, or $0.31 per diluted limited
partner unit, in the fourth quarter of 2003. Recurring net income for
the 2004 quarter excludes a non-cash impairment expense of $0.8
million associated with the pending sale of an idle Pacific Terminals
property. Recurring net income for the 2003 quarter excludes a $1.6
million rate case and litigation settlement expense. Including the
non-recurring expenses, net income for the three months ended December
31, 2004, was $8.6 million, or $0.29 per diluted limited partner unit,
compared to $6.4 million, or $0.25 per diluted limited partner unit,
for the fourth quarter of 2003.
The fourth quarter of 2004 reflects an increase in Pacific
Terminals' storage and distribution revenues due to greater storage
capacity and higher utilization. Pacific Pipelines experienced higher
revenues due to improved volumes and tariff increases. The quarter
also reflects the benefit of increased volumes and revenue on our
Rocky Mountain pipelines. Offsetting these benefits were substantially
lower gathering and blending margins of Pacific Marketing and
Transportation ("PMT").
Included in fourth quarter 2004 results are two acquisitions: the
Rangeland Pipeline system, which was acquired on May 11, 2004; and the
Mid Alberta Pipeline ("MAPL"), which was acquired on June 30, 2004.
Distributable cash flow available to the limited partners'
interest for the fourth quarter of 2004 was $15.1 million. On a
weighted average and diluted basis, there were 29,665,000 limited
partner units outstanding during the fourth quarter of 2004,
approximately 18% more units outstanding than in the fourth quarter of
2003.
FULL YEAR RESULTS
Recurring net income for the year ended December 31, 2004, was
$39.4 million, or $1.36 per diluted limited partner unit, compared to
recurring net income of $26.7 million, or $1.16 per diluted limited
partner unit, for full year 2003. Recurring net income for the 2004
period excludes a non-cash impairment expense of $0.8 million and a
$2.9 million financing expense. Of the $2.9 million financing 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. Recurring net
income for the 2003 period excludes a $1.6 million rate case and
litigation settlement expense. Including the non-recurring expenses,
net income for the year ended December 31, 2004, was $35.7 million, or
$1.23 per diluted limited partner unit, compared to $25.0 million, or
$1.09 per diluted limited partner unit, for the year ended December
31, 2003.
For the year ended December 31, 2004, the improvement in recurring
net income was due primarily to increased Rocky Mountain volumes, the
benefit of the Canadian acquisitions, and a full year benefit of
Pacific Terminals, which was acquired on July 31, 2003. These benefits
were partly offset by lower gathering and blending margins and lower
West Coast pipeline volumes.
For full year 2004, distributable cash flow available to the
limited partners was $61.6 million. On a weighted average and diluted
basis, there were 28,488,000 limited partner units outstanding for
full year 2004, approximately 26% more units outstanding than in full
year 2003. Our distribution coverage ratio for full year 2004 was 1.1
times. The distribution coverage ratio is the ratio of distributable
cash flow available to the limited partners compared to distributions
paid to them for the year.
OPERATING RESULTS BY SEGMENT
WEST COAST OPERATIONS
Operating income was $11.0 million for the three months ended
December 31, 2004, after the $0.8 million impairment expense, compared
to $11.9 million in the corresponding period in 2003. Pacific
Terminals had higher utilization as well as increased storage
capacity, resulting in increased revenues. Pipeline volumes for the
three months ended December 31, 2004, were approximately 7% higher
than in the corresponding period of 2003, primarily due to San
Francisco-area refinery maintenance, which resulted in an increase in
volumes moving south to the Los Angeles Basin refineries. PMT
continued to experience lower gathering and blending margins in the
fourth quarter, due to competitive pricing pressures as a result of
steeply discounted foreign crude oil entering the West Coast market.
This pricing pressure began in the third quarter of 2004 and is
expected to continue through the first quarter of 2005. At that time,
an existing PMT contract that has resulted in adverse pricing
consequences will terminate.
On January 10, 2005, Shell announced an agreement to sell their
Bakersfield refinery to Flying J. The Partnership believes there could
be an opportunity to transport additional volumes of crude oil to the
Bakersfield refinery and additional mid-barrel volumes from the
refinery to Los Angeles.
In the third quarter of 2004, producers began the development of
the Rocky Point field in the California Outer Continental Shelf
("OCS"), with the drilling of the first of eight planned wells. The
second well is anticipated to be completed soon. Rocky Point is
estimated by the operator to have reserves of up to 50 million barrels
of crude oil, and the Partnership anticipates that a significant
portion of the Rocky Point production will be transported on its
pipelines.
The Partnership recently installed vapor treating equipment at a
cost of $0.6 million at its Pacific Terminals facilities, which is
expected to reduce third-party contractor costs by approximately $1
million annually. In addition, the Partnership has filed an
application with the California Public Utilities Commission for the
sale of certain surplus properties that were part of the Pacific
Terminals acquisition. The fourth quarter impairment expense of $0.8
million is associated with one of these properties. It is expected
that the overall sales program will result in an improvement to net
income as well as approximately $10 million of cash proceeds.
For the year ended December 31, 2004, operating income was $48.7
million, after the $0.8 million impairment expense, compared to $42.7
million for the year ended December 31, 2003. This increase was
primarily attributable to a full year benefit of the Pacific Terminals
storage and distribution system, which was acquired on July 31, 2003.
PMT experienced lower gathering and blending margins in the third and
fourth quarter of 2004, as well as reduced demand for PMT's blended
crude. Pipeline volumes for the year ended December 31, 2004, were 6%
lower than in the year ended 2003, primarily due to OCS production
declines, as well as increased crude runs by Bakersfield refineries
which reduced the volumes available to move south to Los Angeles.
Helping to offset lower volumes were increased tariff rates on Line
2000 in May 2004 and Line 63 in November 2004, and a more favorable
tariff mix.
The future growth strategy in West Coast operations focuses on
expansion, both through development projects and through acquisitions.
At present, Pacific Terminals has approximately 1.5 million barrels of
idle storage, which can be reactivated as demand increases, and
existing gas oil storage can continue to be converted to high demand
crude oil storage, providing less seasonality. In addition, pipeline
tariff rate increases, as well as new services to our customers, are
assessed periodically. We also expect to capitalize on the anticipated
growth of crude oil imports to the Los Angeles Basin, with our Pier
400 deepwater import terminal project. The project continues to move
forward in securing additional customer commitments, as well as
progressing the environmental permitting process.
ROCKY MOUNTAIN OPERATIONS
Operating income was $6.8 million for the three months ended
December 31, 2004, compared to $2.4 million in the corresponding
period in 2003. The increase included results of the Rangeland
Pipeline system, which was acquired on May 11, 2004, as well as higher
pipeline volumes on all US Rocky Mountain systems driven by an
increase in demand by the refineries in Salt Lake City and Billings.
On our Salt Lake City Core system, higher gathered and truck volumes
also increased revenues.
On December 1, 2004, we increased our location differentials for
the Rangeland Pipeline system. Location differentials are the
difference between the values of the purchase and sale contracts for
crude oil and related products transported between various origin and
destination points on Rangeland's pipeline. In addition, the new
receiving terminal and pump station for Rangeland, which will provide
access to synthetic and other types of crude oil in Edmonton, is in
the initial development stages. Construction of this facility is
expected to be completed and begin operations at the beginning of the
fourth quarter of 2005.
For the year ended December 31, 2004, operating income was $23.7
million, compared to $13.1 million for the year ended December 31,
2003. Strengthened demand at Billings in the latter half of the year,
as well as the increased demand by the Salt Lake City refineries,
helped drive higher pipeline volumes on all US Rocky Mountain systems.
The 9,000-barrel-per-day expansion at Wahsatch, completed in the
second quarter of 2004, further increased volumes into Salt Lake City.
The Partnership is currently evaluating a second expansion phase into
Salt Lake City to meet increasing demand.
Expansion projects, such as the one into Salt Lake City, are an
integral part of Pacific's strategy for growth in the Rocky Mountain
segment. Our Western Corridor and Salt Lake City Core system, as well
as Frontier Pipeline, all have the potential for expansion to meet the
projected demand in the area. Other enhancement projects such as
additional tankage, truck terminals or gathering connections would
provide increased volume and revenue. Lastly, acquisitions that
further enhance or expand the existing infrastructure of the strategic
pipeline corridor created by the acquisition of the Rangeland Pipeline
system are being evaluated.
CAPITAL EXPENDITURES
Capital expenditures were $16.5 million for the year ended
December 31, 2004, of which $12.9 million was related to expansion,
$1.6 million was related to the transition of the Rangeland and
Pacific Terminals systems, and $2.0 million was for sustaining capital
projects.
LOOKING FORWARD
For the first quarter ending March 31, 2005, we are forecasting
net income of $0.28 to $0.32 per unit. For full year 2005, we expect
net income to be in the range of $1.38 to $1.46 per unit. We are
forecasting capital expenditures for the full year 2005 of $36.5
million, of which $23 million is related to expansion, $11 million is
related to transition projects and $2.5 million is related to
sustaining capital projects. In addition, upon completion of its
terminal and pump station in Edmonton, Alberta, with the expected
increase in volumes, the Partnership previously announced that it
expects to increase its distribution by 5% for the fourth quarter of
2005, payable in February 2006.
Mr. Toole stated, "We continue to focus on enhancing our existing
strategic asset groups, as well as expansion into other midstream
pipeline or terminal businesses. We look forward to further increases
in our cash distributions as we develop the Rangeland Pipeline system,
complete additional acquisitions, and pursue key development projects,
such as Pier 400. We are excited about our prospects for 2005 and
beyond."
OTHER MATTERS
On October 29, 2004, we announced that The Anschutz Corporation
had agreed to sell its 36.6% interest in the Partnership (the
"Transaction"), to LB Pacific, LP, formed by Lehman Brothers Merchant
Banking Group. Under the terms of the Transaction agreement, The
Anschutz Corporation will sell its 10,465,000 subordinated units,
representing a 34.6% limited partner interest and its 2% general
partner interest. The closing of the Transaction is anticipated to
occur in the first quarter of 2005. In the guidance provided for 2005
as listed above, we have not included any non-recurring costs
associated with the Transaction, including an expense for the
accelerated vesting of restricted units outstanding under the
Partnership's long-term incentive plan, in accordance with the terms
of the restricted unit agreements.
The Partnership will host a conference call at 2:00 p.m. EST
(11:00 a.m. PST) on Thursday, February 3, 2005, to discuss the results
of the fourth quarter and full year 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 call.
Pacific Energy Partners, L.P. is a master limited partnership
headquartered in Long Beach. 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 Year Ended
Ended December 31,
December 31,
----------------- -------------------
2004 2003 2004 2003
-------- -------- --------- ---------
Operating revenues:
Pipeline transportation
revenue $28,516 $25,559 $108,395 $101,811
Storage and terminaling
revenue 9,804 7,674 37,577 12,711
Pipeline buy/sell
transportation revenue 6,978 -- 18,640 --
Crude oil sales, net of
purchases 2,351 4,777 16,787 21,293
-------- -------- --------- ---------
Net revenues 47,649 38,010 181,399 135,815
-------- -------- --------- ---------
Expenses:
Operating 22,540 17,021 84,729 60,649
Transition costs 174 -- 557 397
General and administrative 4,148 3,421 15,400 13,705
Depreciation and amortization 6,397 5,431 24,173 18,865
-------- -------- --------- ---------
Total expenses 33,259 25,873 124,859 93,616
-------- -------- --------- ---------
Share of net income (loss) of
Frontier:
Income before rate case and
litigation expense 138 318 1,328 1,459
Rate case and litigation
expense -- (1,621) -- (1,621)
-------- -------- --------- ---------
Share of net income (loss) of
Frontier 138 (1,303) 1,328 (162)
-------- -------- --------- ---------
Write-down of idle property (800) -- (800) --
-------- -------- --------- ---------
Operating income 13,728 10,834 57,068 42,037
Net interest expense (5,466) (4,531) (19,209) (17,331)
Write-off of deferred financing
cost and interest rate swap
termination expense -- -- (2,901) --
Other income 426 93 1,032 323
-------- -------- --------- ---------
Income before foreign income tax
expense 8,688 6,396 35,990 25,029
-------- -------- --------- ---------
Foreign income tax benefit
(expense):
Current (176) -- (326) --
Deferred 122 -- 65 --
-------- -------- --------- ---------
(54) -- (261) --
-------- -------- --------- ---------
Net income $8,634 $6,396 $35,729 $25,029
======== ======== ========= =========
Weighted average units
outstanding:
Basic 29,593 24,874 28,406 22,328
Diluted 29,665 25,095 28,488 22,540
Calculation of unitholders' interest in net income for the three
months and year ended December 31, 2004 and 2003:
- ----------------------------------------------------------------------
Net income $8,634 $6,396 $35,729 $25,029
Less: General Partner's
interest (173) (128) (715) (501)
-------- -------- --------- ---------
Unitholders' interest in net
income $8,461 $6,268 $35,014 $24,528
======== ======== ========= =========
Basic net income per unit $0.29 $0.25 $1.23 $1.10
======== ======== ========= =========
Diluted net income per unit $0.29 $0.25 $1.23 $1.09
======== ======== ========= =========
PACIFIC ENERGY PARTNERS, L.P.
(Unaudited)
(In thousands)
CONDENSED CONSOLIDATED BALANCE SHEETS
December 31, December 31,
2004 2003
------------- ------------
Assets
Current assets $95,669 $68,796
Property and equipment, net 718,624 567,954
Investment in Frontier Pipeline Company 7,886 6,886
Other assets 47,850 6,567
------------- ------------
Total assets $870,029 $650,203
============= ============
Liabilities and Partners' Capital
Current liabilities $48,169 $49,991
Long-term debt 357,163 298,000
Deferred income taxes 34,556 --
Other long term liabilities 7,675 7,145
Partners' capital 422,466 295,067
------------- ------------
Total liabilities and partners'
capital $870,029 $650,203
============= ============
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended
December 31,
---------------------
2004 2003
--------- ---------
Cash flows from operating activities:
Net income $35,729 $25,029
Depreciation, amortization, non-cash
employee compensation under long-term
incentive plan, deferred income taxes
and Frontier(1) adjustment 25,130 24,009
Non-cash write-off of deferred financing
costs 2,321 --
Write-down of idle property 800 --
Working capital adjustments (6,801) (6,656)
--------- ---------
Net cash provided by operating activities 57,179 42,382
Cash flows from investing activities:
Acquisitions (138,701) (169,740)
Net additions to property and equipment (16,520) (10,892)
Other (731) 300
--------- ---------
Net cash used in investing activities (155,952) (180,332)
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 2,720 1,955
Redemption of common units held by the
general partner, net of underwriters'
fee -- (40,780)
Net proceeds from senior note offering 240,932 --
Repayment of term loan (225,000) --
Proceeds from bank credit facilities 140,922 166,000
Repayment of bank credit facilities (115,253) (93,000)
Deferred bank financing costs (1,227) --
Distributions to partners (56,518) (42,115)
--------- ---------
Net cash provided by financing activities 112,457 123,776
Net increase (decrease) in cash and cash
equivalents 13,684 (14,174)
Cash and cash equivalents, beginning of period 9,699 23,873
--------- ---------
Cash and cash equivalents, end of period $23,383 $9,699
========= =========
(1) Net Cash received from Frontier was $(44) and $1,755 for the years
ended December 31, 2004 and 2003, respectively.
PACIFIC ENERGY PARTNERS, L.P.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
AND OPERATING HIGHLIGHTS BY SEGMENT
Three Months Ended December 31, 2004 and 2003
(Unaudited)
(In thousands)
Intersegment
Rocky and
West Coast Mountain Intrasegment
Operations Operations Eliminations(1) Total
---------- ---------- --------------- --------
Three Months Ended December 31, 2004:
Segment revenue:
Pipeline
transportation
revenue $18,003 $12,284 $(1,771) $28,516
Storage and
terminaling revenue 9,954 -- (150) 9,804
Pipeline buy/sell
transportation
revenue -- 6,978 6,978
Crude oil sales, net
of purchases 2,471 -- (120) 2,351
---------- ---------- --------
Net revenue 30,428 19,262 47,649
---------- ---------- --------
Segment expenses:
Operating expense 15,000 9,581 (2,041) 22,540
Transition costs -- 174 174
Depreciation and
amortization 3,591 2,806 6,397
---------- ---------- --------
Total expenses 18,591 12,561 29,111
---------- ---------- --------
Share of net income
of Frontier -- 138 138
---------- ---------- --------
Write-down of idle
property(2) (800) -- (800)
---------- ---------- --------
Operating income(3) $11,037 $6,839 $17,876
========== ========== ========
Operating Data (barrels per day, in thousands)
Line 2000 and Line 63
pipeline volume 151.7
Rangeland pipeline
system:
Sundre - North 19.9
Sundre - South 48.8
Western Corridor system
volume 21.2
Salt Lake City Core
system volume(4) 112.3
Frontier pipeline
volume 44.1
Three Months Ended December 31, 2003:
Segment revenue:
Pipeline
transportation
revenue $16,723 $10,572 $(1,736) $25,559
Storage and
distribution 7,674 -- 7,674
Pipeline buy/sell
transportation
revenue -- -- --
Crude oil sales, net
of purchases 4,777 -- 4,777
---------- ---------- --------
Net revenue 29,174 10,572 38,010
---------- ---------- --------
Segment expenses:
Operating expense 13,488 5,269 (1,736) 17,021
Transition costs -- -- --
Depreciation and
amortization 3,790 1,641 5,431
---------- ---------- --------
Total expenses 17,278 6,910 22,452
---------- ---------- --------
Share of net income
of Frontier -- (1,303) (1,303)
---------- ---------- --------
Operating income(3) $11,896 $2,359 $14,255
========== ========== ========
Operating Data (barrels per day, in thousands)
Line 2000 and Line 63
pipeline volume 142.1
Western Corridor
system volume 19.6
Salt Lake City Core
system volume(4) 106.7
Frontier pipeline
volume 42.5
(1) Eliminations are required to account for revenue on services
provided by one subsidiary to another.
(2) Represents a write-down to fair market value of idle property that
is expected to be sold.
(3) General and administrative expense is not allocated to segments.
(4) AREPI pipeline became part of the Salt Lake City Core system on
January 1, 2004.
PACIFIC ENERGY PARTNERS, L.P.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
AND OPERATING HIGHLIGHTS BY SEGMENT
Year Ended December 31, 2004 and 2003
(Unaudited)
(In thousands)
Intersegment
Rocky and
West Coast Mountain Intrasegment
Operations Operations Eliminations(1) Total
---------- ---------- --------------- ---------
Year Ended December 31, 2004:
Segment revenue:
Pipeline
transportation
revenue $67,173 $47,131 $(5,909) $108,395
Storage and
terminaling
revenue 38,080 -- (503) 37,577
Pipeline buy/sell
transportation
revenue -- 18,640 18,640
Crude oil sales,
net of purchases 16,907 -- (120) 16,787
---------- ---------- ---------
Net revenue 122,160 65,771 181,399
---------- ---------- ---------
Segment expenses:
Operating expense 58,197 33,064 (6,532) 84,729
Transition costs -- 557 557
Depreciation and
amortization 14,424 9,749 24,173
---------- ---------- ---------
Total expenses 72,621 43,370 109,459
---------- ---------- ---------
Share of net income
of Frontier -- 1,328 1,328
---------- ---------- ---------
Write-down of idle
property(2) (800) -- (800)
---------- ---------- ---------
Operating income(3) $48,739 $23,729 $72,468
========== ========== =========
Operating Data (barrels per day, in thousands)
Line 2000 and Line 63
pipeline volume 141.2
Rangeland pipeline
system:
Sundre - North 21.0
Sundre - South 48.1
Western Corridor
system volume 20.2
Salt Lake City Core
system volume(4) 115.1
Frontier pipeline
volume 47.4
Year Ended December 31, 2003:
Segment revenue:
Pipeline
transportation
revenue $67,946 $41,298 $(7,433) $101,811
Storage and
terminaling
revenue 12,711 -- 12,711
Pipeline buy/sell
transportation
revenue -- -- --
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 -- (162) (162)
---------- ---------- ---------
Operating income(3) $42,664 $13,078 $55,742
========== ========== =========
Operating Data (barrels per day, in thousands)
Line 2000 and Line 63
pipeline volume 151.0
Western Corridor
system volume 16.7
Salt Lake City Core
system volume(4) 107.5
Frontier pipeline
volume 41.7
(1) Eliminations are required to account for revenue on services
provided by one subsidiary to another.
(2) Represents a write-down to fair market value of idle property that
is expected to be sold.
(3) General and administrative expense is not allocated to segments.
(4) AREPI pipeline became part of the Salt Lake City Core system on
January 1, 2004.
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 Year Ended
Ended December 31,
December 31,
----------------- -----------------
2004 2003 2004 2003
-------- -------- -------- --------
Operating income by segment:
West Coast $11,037 $11,896 $48,739 $42,664
Rocky Mountain 6,839 2,359 23,729 13,078
-------- -------- -------- --------
17,876 14,255 72,468 55,742
General expenses and other
income/(expense):(1)
General and administrative
expense (4,148) (3,421) (15,400) (13,705)
Net interest expense (5,466) (4,531) (19,209) (17,331)
Other income 426 93 1,032 323
Write-off of deferred financing
cost and interest rate swap
termination expense(2) -- -- (2,901) --
Foreign income tax expense (54) -- (261) --
-------- -------- -------- --------
Net income $8,634 $6,396 $35,729 $25,029
======== ======== ======== ========
(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.
PACIFIC ENERGY PARTNERS, L.P.
RECONCILIATION OF NET INCOME TO NON-GAAP FINANCIAL MEASURES
(Unaudited)
(Amounts in thousands, except per unit amounts)
RECONCILIATION OF NET INCOME
TO RECURRING NET INCOME
Three Months Year Ended
Ended December 31,
December 31,
--------------- -----------------
2004 2003 2004 2003
------- ------- -------- --------
Net income $8,634 $6,396 $35,729 $25,029
Add: write-off of deferred
financing cost and interest rate
swap termination expense(1) -- -- 2,901 --
Add: Frontier rate case and
litigation expense(2) -- 1,621 -- 1,621
Add: Write-down of idle property(3) 800 -- 800 --
------- ------- -------- --------
Recurring net income 9,434 8,017 39,430 26,650
Less: General Partner's interest (189) (160) (789) (533)
------- ------- -------- --------
Unitholders' interest in recurring
net income $9,245 $7,857 $38,641 $26,117
======= ======= ======== ========
Basic recurring net income per unit $0.31 $0.32 $1.36 $1.17
======= ======= ======== ========
Diluted recurring net income per
unit $0.31 $0.31 $1.36 $1.16
======= ======= ======== ========
RECONCILIATION OF NET INCOME
TO DISTRIBUTABLE CASH FLOW(4)
Three Months Year Ended
Ended December 31,
December 31,
----------------- -----------------
2004 2003 2004 2003
-------- -------- -------- --------
Net income $8,634 $6,396 $35,729 $25,029
Plus: depreciation and
amortization 6,397 5,431 24,173 18,865
Plus: amortization of bond
discount and debt issue costs 441 284 1,537 1,029
Plus (less): non-cash employee
compensation under long-term
incentive plan (244) 194 857 2,199
Plus: write-off of deferred
financing cost -- -- 2,321 --
Plus: write-down of idle property 800 -- 800 --
Less: deferred income tax
recovery (122) -- (65) --
Less: sustaining capital
expenditures (493) (867) (1,953) (2,149)
-------- -------- -------- --------
Distributable Cash Flow 15,413 11,438 63,399 44,973
Less: General Partner's interest (308) (229) (1,763) (899)
-------- -------- -------- --------
Unitholders' interest in
Distributable Cash Flow $15,105 $11,209 $61,636 $44,074
======== ======== ======== ========
(1) 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.
(2) Reflects rate case and litigation expense for earlier years,
matters which had no impact on current rates or revenues.
(3) Represents a write-down to fair market value of idle property that
is expected to be sold.
(4) 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
E-mail: aharris@PacificEnergy.com