Exhibit 99.1
Pacific Energy Partners, L.P. Reports Earnings for Fourth Quarter
and Full Year 2005; Provides Guidance for 2006;
Over $100 Million in Growth Projects in 2006
LONG BEACH, Calif.--(BUSINESS WIRE)--Feb. 2, 2006--Pacific Energy
Partners, L.P. (NYSE:PPX) ("Pacific Energy" or the "Partnership")
announced that net income for the three months ended December 31,
2005, was $11.8 million, or $0.30 per limited partner unit, compared
to net income of $8.6 million, or $0.29 per limited partner unit, for
the three months ended December 31, 2004. Recurring net income for the
three months ended December 31, 2005 was $12.3 million, or $0.31 per
limited partner unit, compared to recurring net income of $9.4
million, or $0.31 per limited partner unit, in the fourth quarter of
2004. Recurring net income for the fourth quarter of 2005 excludes a
$0.5 million write-down of an idle Pacific Terminals property and
recurring net income for the fourth quarter of 2004 also excludes a
similar write-down of $0.8 million. All per unit amounts in the text
of this news release are reported on a diluted basis.
On January 20, 2006, Pacific Energy declared a cash distribution
of $0.555 per unit for the fourth quarter of 2005, or $2.22 per unit
annualized. This distribution is 8.3% greater than the distribution
declared for the quarter ended September 30, 2005, and 11.0% greater
than the distribution declared for the quarter ended December 31,
2004. The distribution will be paid on February 14, 2006, to holders
of record as of January 31, 2006.
Distributable cash flow to the limited partners for the fourth
quarter of 2005 was $19.1 million. On a diluted, weighted average
basis, there were 39,298,000 limited partner units outstanding during
the fourth quarter of 2005, which is approximately 32% more than in
the fourth quarter of 2004. The increase in units outstanding is
attributable to the equity offerings Pacific Energy completed for the
financing of the acquisition of assets from Valero L.P.
The results for the quarter ended December 31, 2005, reflect the
addition of assets acquired from Valero L.P., increased margins for
Pacific Marketing and Transportation ("PMT"), increased tank
utilization for Pacific Terminals and increased pipeline volumes in
the Rocky Mountains. These increases were partially offset by lower
pipeline volumes and higher pipeline repair expense on the West Coast,
as well as lower revenues on the Rangeland Pipeline system.
Recurring net income for the year ended December 31, 2005, was
$47.0 million, or $1.42 per limited partner unit, compared with $39.4
million, or $1.36 per limited partner unit, for the year ended
December 31, 2004.
"We had an excellent year in 2005, as evidenced by our
distribution growth of 11%, particularly after considering the cost of
rain-related repairs in Southern California and Alberta," stated Irv
Toole, President and CEO. "Both of our strategic business units
continue to grow and the refined products storage and pipeline assets
we acquired from Valero L.P. in September 2005 have met all of our
expectations. We are extremely excited about the prospects for
continued growth through acquisition as well as internal growth
projects of approximately $106 million scheduled for 2006."
OPERATING RESULTS BY SEGMENT
WEST COAST BUSINESS UNIT
Operating income was $18.4 million for the three months ended
December 31, 2005, compared to $11.0 million in the corresponding
period in 2004. The largest portion of this increase was associated
with the addition of the Northern California and East Coast terminals
that were acquired on September 30, 2005, from Valero L.P.
Margins for PMT were greater in the fourth quarter of 2005
compared to the fourth quarter of 2004. In addition, certain crude oil
contracts that were acquired on July 1, 2005, have added to the
business. Pacific Terminals' storage facilities had a higher rate of
utilization during the 2005 quarter than in the fourth quarter of
2004.
West Coast pipeline volumes to Los Angeles destinations for the
three months ended December 31, 2005, were approximately 23% lower
than in the fourth quarter of 2004. During the 2005 quarter, volumes
were impacted by refinery issues in Los Angeles, as well as declines
in San Joaquin Valley (SJV) and Outer Continental Shelf (OCS)
production. The effect on revenue of the decline in Los Angeles
delivered volumes was partially offset by increased tariffs, as well
as higher Bakersfield area deliveries. In addition, in the fourth
quarter of 2004, Northern California refinery maintenance resulted in
the shift of some volume south to the Los Angeles area.
Pacific Energy continued to incur costs for pipeline repairs
associated with last winter's record rainfall: $0.4 million of
pipeline repair costs and $2.5 million of sustaining capital
expenditures were incurred in the fourth quarter of 2005.
ROCKY MOUNTAIN BUSINESS UNIT
Operating income was $7.3 million for the three months ended
December 31, 2005, compared to $6.8 million in the corresponding
period of 2004. The Rocky Mountain Products Pipeline, formerly Valero
L.P.'s West Pipeline, provided additional pipeline income for the
quarter. In addition, increased crude oil demand by Salt Lake City
refiners, as well as increased tariff rates, helped drive higher
pipeline revenues.
In Canada, higher revenues resulted from increased location
differentials and higher volumes transported south to the U.S. The
higher revenues were reduced however for the correction of a billing
error, identified by Pacific Energy, related to one of its buy/sell
customers, which had occurred since the time of the acquisition of
Rangeland in May 2004. The billing error amounted to approximately
$2.4 million pre-tax. The new receiving terminal and pump station in
Edmonton, which will provide direct access to supplies of synthetic
and other types of crude oil, should begin operations by the end of
February 2006.
To further meet the increasing crude oil demand in Salt Lake City,
including increasing demand for heavy Canadian crude oil and Canadian
synthetic crude oil, Pacific Energy is finalizing its plans to
construct a new 16-inch pipeline from the terminus of Frontier
Pipeline near Evanston, Wyoming to the Salt Lake City refining
complex. This expansion will occur in two phases, the first taking
place in 2006. Pacific Energy has obtained the necessary permits for
the initial phase of the expansion and is currently working with
shippers to finalize the project. Once the first phase is completed,
additional capacity will be available immediately, and the second
phase will be constructed in 2007.
In January 2006, Pacific Energy acquired the assets of La Barge
Trucking, Inc., a Wyoming crude oil trucking company, with 9 trucks,
27 trailer units and 13 employees. The La Barge operation has been
integrated with Pacific Energy's existing crude oil trucking business
in the Rocky Mountain region, providing additional trucking services
to handle increasing production in the region.
FULL YEAR RESULTS
For the year ended December 31, 2005, net income was $39.6
million, or $1.25 per limited partner unit, compared to $35.7 million,
or $1.23 per limited partner unit for the year ended December 31,
2004. Recurring net income for the year ended December 31, 2005, was
$47.0 million, or $1.42 per limited partner unit, compared with $39.4
million, or $1.36 per limited partner unit, for the year ended
December 31, 2004.
Recurring net income for the year ended December 31, 2005,
excludes a $2.0 million expense for the insurance deductible
associated with the remediation of the Pyramid Lake oil release on
Line 63, a $3.1 million expense related to the accelerated vesting of
restricted units under Pacific Energy's long-term incentive plan as a
result of the change in control attributable to the purchase of
Pacific Energy's general partner by LB Pacific, LP, a $1.8 million
expense as a result of the general partner purchase transaction (an
item that was required to be recorded as a partnership expense with
the general partner's payment of the item recorded as a capital
contribution), and a $0.5 million write-down of an idle Pacific
Terminals property. Recurring net income for the year ended December
31, 2004, excludes a $2.9 million write-off of deferred financing
costs and a $0.8 million write-down of an idle Pacific Terminals
property.
Recurring net income for 2005 reflects the benefit of a full year
of operations for the Rangeland system, which was acquired in May
2004, and the acquisition of the Rocky Mountain Products Pipeline and
the Northern California and East Coast terminals, on September 30,
2005. In addition, Pacific Energy realized higher pipeline volumes in
the Rocky Mountains, higher margins and new contracts at PMT, and
higher storage and terminaling revenues for Pacific Terminals.
Partially offsetting these increases were lower West Coast pipeline
volumes, repairs and maintenance expense associated with earth
movement and stream erosion problems caused by the record rainfall in
Southern California and Alberta, and unscheduled repairs of two
Pacific Terminals tanks. General and administrative expense increased
as a result of growth of the Partnership. Increased interest expense
reflects the debt portion of financing the acquisitions.
In March 2005, Pacific Energy experienced an oil release on Line
63 in northern Los Angeles County, which was caused by a rain-induced
landslide. In addition, record rainfall in Southern California caused
stream erosion and earth movement, exposing the Partnership's
pipelines in multiple locations. The total costs associated with the
oil recovery and restoration effort for the oil release are now
estimated at $26 million, of which Pacific Energy is paying $2.0
million for its insurance deductible. On August 1, 2005, we initiated
a temporary surcharge of $0.10 per barrel on Line 63 long haul tariff
rates to recover the repair costs and insurance deductible.
As a result of the repairs related to the record rainfall in
California last winter and in Alberta last summer, which were not
insured, a total of $3.0 million or $0.09 per limited partner unit was
expensed during 2005. In addition, $4.5 million of sustaining capital
was incurred. The Partnership expects to incur an additional $1.1
million of expense in 2006 to complete the repairs in California.
For full year 2005, distributable cash flow to the limited
partners was $66.8 million. On a diluted weighted average basis, there
were 32,414,000 limited partner units outstanding.
PIER 400
Pacific Energy continues to advance the Pier 400 deepwater import
terminal project in the environmental permitting process. Issuance of
the draft environmental impact study is anticipated in the first
quarter of 2006, at which time a public comment period will commence.
Other approvals or permits which Pacific Energy needs to obtain are
approvals from the Board of Harbor Commissioners and the City of Los
Angeles, and a permit to construct from the South Coast Air Quality
Management District. Pacific Energy expects to have these permits and
approvals necessary to begin construction early in the fourth quarter
of 2006. Once those permits have been obtained, the construction
period will commence. Pacific Energy expects that it will take
approximately 16 months to complete the project after construction
begins.
LOOKING FORWARD
For the full year ending December 31, 2006, Pacific Energy is
forecasting net income of $1.55 to $1.70 per unit. For the first
quarter ending March 31, 2006, Pacific Energy is forecasting net
income of $0.33 to $0.39 per unit.
Included in this guidance is EBITDA (earnings before interest,
taxes, depreciation and amortization) for the first quarter of 2006 of
$31 million to $36 million and EBITDA for the full year ending
December 31, 2006 of $142 million to $151 million.
For the full year, Pacific Energy is budgeting total capital
expenditures of $120 million, including $106 million for expansion
projects, $6 million for transition capital projects, and $8 million
to $9 million for sustaining capital projects.
The expansion capital relates to numerous projects that will
increase cash flow beginning in 2006. There will be $23 million of
expansion capital associated with the recently acquired Valero L.P.
assets. For Pacific Terminals, Pacific Energy expects to invest $11
million for the refurbishment of 600,000 barrels of additional storage
and new infrastructure to increase its pumping capacity and operating
efficiency. In the Rocky Mountains, $4 million is budgeted for the
completion of new tankage associated with the transport of synthetic
crude oil, and $32 million for the first phase of the Salt Lake City
expansion, as discussed above. Lastly, for Pier 400 Pacific Energy
expects to expend $21 million for the completion of the permitting
process, acquisition of additional emission credits and engineering.
The capital associated with Pier 400 does not include any construction
capital, which will be added later in the year upon completion of
permitting.
OTHER MATTERS
Pacific Energy will host a conference call at 2:00 p.m. ET (11:00
a.m. PT) on Thursday, February 2, 2006, to discuss the results of the
fourth quarter and full year 2005 and the guidance for 2006. The dial
in number for the live call is 800-446-2782 or 847-413-3235, and the
passcode is 13739514.
The call will be available one hour after the end of the
conference call and will be replayed for one week by dialing
888-843-8996 or 630-652-3044 and using 13739514 as the passcode.
The call will also be available both live and via replay on the
Pacific Energy Partners, L.P. website at www.PacificEnergy.com.
About Pacific Energy:
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, refined products and other related products.
Pacific Energy generates revenues by transporting such commodities on
its pipelines, by leasing capacity in its storage facilities and by
providing other terminaling services. Pacific Energy also buys and
sells crude oil, activities that are generally complementary to its
crude oil operations. Pacific Energy conducts its business through two
business units, the West Coast Business Unit, which includes
activities in California and the Philadelphia, PA area, and the Rocky
Mountain Business Unit, which includes activities in five Rocky
Mountain states and Alberta, Canada.
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 Pacific Energy 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 may affect Pacific Energy's operations and
financial performance. Among the factors that could cause results to
differ materially are those risks discussed in Pacific Energy's
filings with the Securities and Exchange Commission, including its
Annual Report on Form 10-K for the year ended December 31, 2004.
The estimates associated with the oil release are based on facts
known at the time of estimation and the Partnership's assessment of
the ultimate outcome. Among the many uncertainties that impact the
estimates are the necessary regulatory approvals for and potential
modification of remediation plans, changes in costs associated with
environmental remediation services and equipment and the possibility
of third party legal claims giving rise to additional expenses.
Therefore, no assurance can be made that costs incurred in excess of
the estimated costs, if any, would not have a material adverse effect
on the Partnership's financial condition, results of operations, or
cash flows, although the Partnership believes it is likely that most,
if not all, of any such excess cost, to the extent attributable to
clean-up and third-party claims, would be recoverable through
insurance. As new information becomes available in future periods, the
Partnership may change its expense accrual and recovery estimates.
The forward-looking statements in this news release include
Pacific Energy's forecasts of net earnings and EBITDA, which are
inherently uncertain and based upon assumptions of management as to
future market conditions, including the demand for products we
transport, regulatory and legal conditions, the non-occurrence of
environmental risks and certain other assumptions that may vary
significantly from those assumed. The Partnership is undertaking no
obligation to update its forecasts of net earnings and EBITDA.
For additional information about Pacific Energy, please visit its
website at www.PacificEnergy.com.
PACIFIC ENERGY PARTNERS, L.P.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(Amounts in thousands, except per unit amounts)
Three Months Ended Year Ended
December 31, December 31,
-------------------- ---------------------
2005 2004 2005 2004
--------- -------- --------- ---------
Operating revenues:
Pipeline transportation
revenue $ 33,581 $ 28,516 $ 116,648 $ 108,395
Storage and terminaling
revenue 21,063 9,804 51,986 37,577
Pipeline buy/sell
transportation revenue 6,766 6,978 35,671 18,640
Crude oil sales, net of
purchases 6,350 2,351 19,997 16,787
--------- -------- --------- ---------
Net revenues 67,760 47,649 224,302 181,399
--------- -------- --------- ---------
Expenses:
Operating 32,332 22,714 104,397 85,286
General and
administrative 5,485 4,148 18,472 15,400
Accelerated long-term
incentive plan
compensation expense -- -- 3,115 --
Line 63 oil release
costs -- -- 2,000 --
Transaction costs(1) -- -- 1,807 --
Depreciation and
amortization 9,711 6,397 29,406 24,173
--------- -------- --------- ---------
Total expenses 47,528 33,259 159,197 124,859
--------- -------- --------- ---------
Share of net income of
Frontier 394 138 1,757 1,328
Write-down of idle
properties (450) (800) (450) (800)
--------- -------- --------- ---------
Operating income 20,176 13,728 66,412 57,068
Net interest expense (9,041) (5,466) (26,720) (19,209)
Write-off of deferred
financing costs and
interest rate swap
termination expense -- -- -- (2,901)
Other income (expense) (268) 426 1,119 1,032
--------- -------- --------- ---------
Income before income
tax expense 10,867 8,688 40,811 35,990
--------- -------- --------- ---------
Income tax (expense)
benefit:
Current 646 (176) (1,252) (326)
Deferred 328 122 89 65
--------- -------- --------- ---------
974 (54) (1,163) (261)
--------- -------- --------- ---------
Net income $ 11,841 $ 8,634 $ 39,648 $ 35,729
--------- -------- --------- ---------
--------- -------- --------- ---------
Net income (loss) for
the general partner
interest(2) $ 237 $ 173 $ (978) $ 715
--------- -------- --------- ---------
--------- -------- --------- ---------
Net income for the
limited partner
interests(2) $ 11,604 $ 8,461 $ 40,626 $ 35,014
--------- -------- --------- ---------
--------- -------- --------- ---------
Weighted average units
outstanding:
Basic 39,298 29,593 32,381 28,406
Diluted 39,298 29,665 32,414 28,488
--------- -------- --------- ---------
Basic and diluted net
income per limited
partner unit $ 0.30 $ 0.29 $ 1.25 $ 1.23
--------- -------- --------- ---------
--------- -------- --------- ---------
(1) Pursuant to an Ancillary Agreement, our general partner
reimbursed us $1.8 million for costs incurred in connection with the
sale of our general partner. Generally accepted accounting principles
require us to record an expense with the reimbursement shown as a
partner's capital contribution.
(2) See "General Partner and Limited Partners Allocation of Net
Income" schedule included herein.
PACIFIC ENERGY PARTNERS, L.P.
(Unaudited)
(In thousands)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended December 31,
------------------------
2005 2004
--------- ---------
Cash flows from operating activities:
Net income $ 39,648 $ 35,729
Depreciation, amortization, non-cash
employee compensation under long-term
incentive plan, deferred income taxes,
loss on disposal and Frontier(1)
adjustment 34,010 26,349
Non-cash write-off of deferred financing
costs -- 2,321
Write-down of idle properties 450 800
Net changes in operating assets and
liabilities 1,676 (7,973)
--------- ---------
Net cash provided by operating
activities 75,784 57,226
--------- ---------
Cash flows from investing activities:
Acquisitions (462,553) (138,701)
Net additions to property and equipment (51,717) (16,520)
Other 1,519 (731)
--------- ---------
Net cash used in investing activities (512,751) (155,952)
--------- ---------
Cash flows from financing activities:
Issuance of common units, net of fees and
offering expenses 289,284 125,881
Capital contribution from the general
partner 8,569 2,720
Net proceeds from senior notes offering 170,889 240,932
Repayment of term loan -- (225,000)
Proceeds from credit facilities 283,502 140,922
Repayment of credit facilities (249,466) (115,253)
Deferred financing costs (4,573) (1,227)
Distributions to partners (66,775) (56,518)
Issuance of common units pursuant to
exercise of unit option 707 --
Related parties (533) (47)
--------- ---------
Net cash provided by financing
activities 431,604 112,410
Effect of exchange rate changes on cash 44 --
--------- ---------
Net increase (decrease) in cash and cash
equivalents (5,319) 13,684
Cash and cash equivalents, beginning of year 23,383 9,699
--------- ---------
Cash and cash equivalents, end of year $ 18,064 $ 23,383
--------- ---------
--------- ---------
(1) Net Cash received from (paid to) Frontier was $1,317 and $(44) for
the years ended December 31, 2005 and 2004, respectively.
SELECTED BALANCE SHEET DATA
December 31,
--------------------------
2005 2004
---------- ----------
Current assets(1) $ 192,115 $ 95,545
Total assets $1,476,452 $ 869,905
Current liabilities $ 156,187 $ 48,045
Long-term debt $ 565,632 $ 357,163
Partners' capital $ 698,239 $ 422,466
(1) Current assets includes cash balances of $18,064 and $23,383 at
December 31, 2005 and 2004, respectively.
PACIFIC ENERGY PARTNERS, L.P.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
AND OPERATING HIGHLIGHTS BY SEGMENT
Three Months Ended December 31, 2005
(Unaudited)
(In thousands)
West Coast Rocky Intersegment Total
Operations Mountain and
Operations Intrasegment
Eliminations(1)
----------- ---------- --------------- --------
Three Months Ended
December 31, 2005:
Segment revenue:
Pipeline
transportation
revenue $ 16,481 $ 18,723 $ (1,623) $33,581
Storage and
terminaling
revenue 21,063 -- 21,063
Pipeline buy/sell
transportation
revenue -- 6,766 6,766
Crude oil sales,
net of purchases 6,441 5 (96) 6,350
---------- --------- -------
Net revenue 43,985 25,494 67,760
---------- --------- -------
Segment expenses:
Operating expense 19,730 14,321 (1,719) 32,332
Depreciation and
amortization 5,430 4,281 9,711
---------- --------- -------
Total expenses 25,160 18,602 42,043
---------- --------- -------
Share of net income
of Frontier -- 394 394
---------- --------- -------
Write-down of idle
property(2) (450) -- (450)
---------- --------- -------
Operating income(3) $ 18,375 $ 7,286 $25,661
---------- --------- -------
---------- --------- -------
Operating Data (barrels
per day, in thousands)
Line 2000 and Line 63
pipeline volume 116.1
Rangeland pipeline
system:
Sundre - North 20.1
Sundre - South 52.5
Western Corridor
system volume 27.0
Salt Lake City Core
system volume 119.3
Rocky Mountain
Products pipeline(4) 60.2
Frontier pipeline
volume 50.0
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 9,755 (2,041) 22,714
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 112.3
Frontier pipeline
volume 44.1
(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 and certain other items are
not allocated to segments. See "Reconciliation of Operating Income by
Segment to Condensed Consolidated Statements of Income" included
herein.
(4) Rocky Mountain Products Pipeline was purchased on September 30,
2005 as part of the acquisition of assets from Valero, L.P.
PACIFIC ENERGY PARTNERS, L.P.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
AND OPERATING HIGHLIGHTS BY SEGMENT
Year Ended December 31, 2005
(Unaudited)
(In thousands)
West Coast Rocky Intersegment Total
Operations Mountain and
Operations Intrasegment
Eliminations(1)
---------- ---------- --------------- ---------
Year Ended December 31,
2005:
Segment revenue:
Pipeline
transportation
revenue $ 63,006 $ 60,071 $ (6,429) $116,648
Storage and
terminaling
revenue 52,136 -- (150) 51,986
Pipeline buy/sell
transportation
revenue -- 35,671 35,671
Crude oil sales,
net of purchases 19,809 374 (186) 19,997
--------- --------- --------
Net revenue 134,951 96,116 224,302
--------- --------- --------
Segment expenses:
Operating expense 66,237 44,925 (6,765) 104,397
Line 63 oil release
costs 2,000 -- 2,000
Depreciation and
amortization 15,927 13,479 29,406
--------- --------- --------
Total expenses 84,164 58,404 135,803
--------- --------- --------
Share of net income
of Frontier -- 1,757 1,757
--------- --------- --------
Write-down of idle
property(2) (450) -- (450)
--------- --------- --------
Operating income(3) $ 50,337 $ 39,469 $ 89,806
--------- --------- --------
--------- --------- --------
Operating Data (barrels
per day, in thousands)
Line 2000 and Line 63
pipeline volume 119.6
Rangeland pipeline
system:(4)
Sundre - North 21.0
Sundre - South 47.1
Western Corridor
system volume 24.7
Salt Lake City Core
system volume 119.6
Rocky Mountain
Products pipeline(5) 60.2
Frontier pipeline
volume 47.3
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 33,621 (6,532) 85,286
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:(4)
Sundre - North 21.0
Sundre - South 48.1
Western Corridor
system volume 20.2
Salt Lake City Core
system volume 115.1
Frontier pipeline
volume 47.4
(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 and certain other items are
not allocated to segments. See "Reconciliation of Operating Income by
Segment to Condensed Consolidated Statements of Income" included
herein.
(4) Rangeland Pipeline System was purchased on May 11, 2004 and the
Mid Alberta Pipeline (MAPL) was purchased on June 30, 2004.
(5) Rocky Mountain Products Pipeline was purchased on September 30,
2005 as part of the acquisition of assets from Valero, L.P.
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 Ended Year Ended
December 31, December 31,
------------------- --------------------
2005 2004 2005 2004
-------- -------- -------- ---------
Operating income by segment:
West Coast $ 18,375 $ 11,037 $ 50,337 $ 48,739
Rocky Mountain 7,286 6,839 39,469 23,729
-------- -------- -------- ---------
25,661 17,876 89,806 72,468
General expenses and other
income/(expense):(1)
General and administrative
expense (5,485) (4,148) (18,472) (15,400)
Accelerated long-term
incentive plan
compensation expense(2) -- -- (3,115) --
Transaction costs(3) -- -- (1,807) --
Interest expense (9,041) (5,466) (26,720) (19,209)
Write-off of deferred
financing cost and
interest rate swap
termination expense(4) -- -- -- (2,901)
Other income (268) 426 1,119 1,032
Income tax (expense)
benefit 974 (54) (1,163) (261)
-------- -------- -------- ---------
Net income $ 11,841 $ 8,634 $ 39,648 $ 35,729
-------- -------- -------- ---------
-------- -------- -------- ---------
GENERAL PARTNER AND LIMITED PARTNERS ALLOCATION OF NET INCOME
Three Months Ended Year Ended
December 31, December 31,
------------------- --------------------
2005 2004 2005 2004
-------- -------- -------- ---------
Net income $ 11,841 $ 8,634 $ 39,648 $ 35,729
-------- -------- -------- ---------
Transaction costs reimbursed
by general partner:
Senior notes consent
solicitation and other
costs -- -- 893 --
Severance costs -- -- 914 --
-------- -------- -------- ---------
Total transaction costs
reimbursed by general
partner -- -- 1,807 --
-------- -------- -------- ---------
Income before transaction
costs reimbursed by general
partner 11,841 8,634 41,455 35,729
General partner's share of
income 2% 2% 2% 2%
-------- -------- -------- ---------
General partner allocated
share of net income before
transaction costs 237 173 829 715
Transaction costs reimbursed
by general partner(3) -- -- (1,807) --
-------- -------- -------- ---------
Net income (loss) allocated
to general partner $ 237 $ 173 $ (978) $ 715
-------- -------- -------- ---------
-------- -------- -------- ---------
Income before transaction
costs reimbursed by general
partner $ 11,841 $ 8,634 $ 41,455 $ 35,729
Limited partners' share of
income 98% 98% 98% 98%
-------- -------- -------- ---------
Limited partners' share of
net income $ 11,604 $ 8,461 $ 40,626 $ 35,014
-------- -------- -------- ---------
-------- -------- -------- ---------
Net income (loss) allocated
to general partner $ 237 $ 173 $ (978) $ 715
Net income allocated to
limited partners 11,604 8,461 40,626 35,014
-------- -------- -------- ---------
Net income $ 11,841 $ 8,634 $ 39,648 $ 35,729
-------- -------- -------- ---------
-------- -------- -------- ---------
(1) General and administrative expenses, accelerated long-term
incentive plan expense, transaction costs, interest expense, write-off
of deferred financing costs and interest rate swap termination
expense, other income and income tax expense are not allocated among
the West Coast and Rocky Mountain business units.
(2) On March 3, 2005, in connection with the change in control of
the Partnership's general partner, all restricted units outstanding
under the Long-Term Incentive Plan became immediately vested pursuant
to the terms of the grants. The Partnership recognized accelerated
compensation expense of $3.1 million relating to the vesting.
(3) Pursuant to an Ancillary Agreement, our general partner
reimbursed us $1.8 million for costs incurred in connection with the
sale of our general partner. Generally accepted accounting principles
require us to record an expense with the reimbursement shown as a
partner's capital contribution.
(4) 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 RECURRING NET INCOME(1)
(Unaudited)
(Amounts in thousands, except per unit amounts)
Three Months Ended Year Ended
December 31, December 31,
----------------------- ----------------------
2005 2004 2005 2004
---------- ---------- ---------- ---------
Net income $ 11,841 $ 8,634 $ 39,648 $ 35,729
Add: Line 63 oil
release costs(2) -- -- 2,000 --
Add: Accelerated
long-term incentive
plan compensation
expense(3) -- -- 3,115 --
Add: Transaction
costs(4) -- -- 1,807 --
Add: Write-off of
deferred financing
cost and interest
rate swap
termination
expense(5) -- -- -- 2,901
Add: Write-down of
idle properties(6) 450 800 450 800
---------- ---------- ---------- ---------
Recurring net income 12,291 9,434 47,020 39,430
Recurring net income
for the general
partner interest 246 189 940 789
---------- ---------- ---------- ---------
Recurring net income
for the limited
partner interest $ 12,045 $ 9,245 $ 46,080 $ 38,641
---------- ---------- ---------- ---------
---------- ---------- ---------- ---------
Basic and diluted
recurring net income
per limited partner
unit $ 0.31 $ 0.31 $ 1.42 $ 1.36
---------- ---------- ---------- ---------
---------- ---------- ---------- ---------
(1) Recurring net income is a non-GAAP financial measure. This measure
is used to more precisely compare year over year net income by
eliminating one-time, non-recurring charges. You should not consider
Recurring Net Income 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 Recurring Net Income may
not be comparable to similarly titled measures of other entities.
(2) On March 23, 2005, there was an oil release of approximately
3,400 barrels in northern Los Angeles County. Although this event
involved an outlay of cash, we believe these costs are unusual and are
not indicative of the Partnership's recurring earnings.
(3) On March 3, 2005, in connection with the change in control of
the Partnership's general partner, all restricted units outstanding
under the Long-Term Incentive Plan became immediately vested pursuant
to the terms of the grants. The Partnership recognized accelerated
compensation expense of $3.1 million relating to the vesting.
(4) Pursuant to an Ancillary Agreement, our general partner
reimbursed us $1.8 million for costs incurred in connection with the
sale of our general partner. Generally accepted accounting principles
require us to record an expense with the reimbursement shown as a
partner's capital contribution.
(5) 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.
(6) Represents a write-down to fair market value of idle properties
that are expected to be sold.
PACIFIC ENERGY PARTNERS, L.P.
RECONCILIATION OF NET INCOME TO DISTRIBUTABLE CASH FLOW(1)
(Unaudited)
(Amounts in thousands)
Three Months Ended Year Ended
December 31, December 31,
----------------------- ----------------------
2005 2004 2005 2004
---------- ---------- ---------- ---------
Net income $ 11,841 $ 8,634 $ 39,648 $ 35,729
Depreciation and
amortization 9,711 6,397 29,406 24,173
Amortization of debt
issue costs and
accretion of discount
on long-term debt 603 441 2,027 1,537
Non-cash employee
compensation under
long-term incentive
plan -- (244) 1,429 857
Write-off of deferred
financing costs(2) -- -- -- 2,321
Write-down of idle
property(3) 450 800 450 800
Loss on disposal of
idle property 220 -- 220 --
Transaction costs(4) -- -- 1,807 --
Deferred income tax
expense (benefit) (328) (122) (89) (65)
Sustaining capital
expenditures (2,997) (493) (6,067) (1,953)
---------- ---------- ---------- ---------
Distributable cash
flow(5) 19,500 15,413 68,831 63,399
Less net (increase)
decrease in operating
assets and
liabilities (11,916) (1,301) 1,676 (7,973)
Less share of income
of Frontier (394) (138) (1,757) (1,328)
Add net distributions
from Frontier (deduct
contributions to
Frontier) -- -- 1,317 (44)
Less non-cash employee
compensation under
long-term incentive
plan added (deducted)
above -- 244 (1,429) (857)
Employee compensation
under long-term
incentive
plan -- 299 2,886 2,076
Less transaction costs -- -- (1,807) --
Add other non-cash
adjustments (58) -- -- --
Add sustaining capital
expenditures 2,997 493 6,067 1,953
---------- ---------- ---------- ---------
Net cash provided
by operating
activities $ 10,129 $ 15,010 $ 75,784 $ 57,226
---------- ---------- ---------- ---------
---------- ---------- ---------- ---------
General partner
interest in
distributable cash
flow $ 390 $ 308 $ 2,049 $ 1,764
Limited partner
interest in
distributable cash
flow 19,110 15,105 66,782 61,635
---------- ---------- ---------- ---------
Total distributable
cash flow $ 19,500 $ 15,413 $ 68,831 $ 63,399
---------- ---------- ---------- ---------
---------- ---------- ---------- ---------
(1) 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,
2004.
(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
cots and incurred a $0.6 million cash expense to terminate related
interest rate swaps.
(3) Represents a write-down to fair market value of idle property
that is expected to be sold.
(4) Pursuant to an Ancillary Agreement, our general partner
reimbursed us $1.8 million for costs incurred in connection with the
sale of our general partner. Generally accepted accounting principles
require us to record an expense with the reimbursement shown as a
partner's capital contribution.
(5) For the year ended December 31, 2005, distributable cash flow
has been reduced by $2.0 of oil release costs and $1.9 million of cash
costs associated with the accelerated vesting of units. For year ended
December 31, 2004, distributable cash flow has been reduced by $0.6
million cash expense to terminate interest rate swaps.
PACIFIC ENERGY PARTNERS, L.P.
RECONCILIATION OF NET INCOME GUIDANCE TO EBITDA GUIDANCE(1)
(Unaudited)
(Amounts in millions)
Three Months Ended Year Ended
March 31, 2006 December 31, 2006
---------------------- ---------------------
Low High Low High
---------- ----------- ---------- ----------
Net income guidance(2) $ 13.3 $ 15.6 $ 63.4 $ 70.0
Add: Depreciation and
amortization 9.5 10.0 40.0 41.0
Add: Interest
expense(3) 8.7 10.0 38.0 39.0
Add: Income tax
expense(4) -- 0.4 1.0 1.0
--------- ---------- --------- ---------
Earnings before
interest, tax,
depreciation and
amortization (EBITDA) $ 31.5 $ 36.0 $ 142.4 $ 151.0
--------- ---------- --------- ---------
--------- ---------- --------- ---------
(1) The guidance for the three months ending March 31, 2006 and for
the twelve months ending December 31, 2006 are based on assumptions
and estimates that we believe are reasonable given our assessment of
historical trends, business cycles and other information reasonably
available. However, our assumptions and future performance are both
subject to a wide range of business risks and uncertainties so no
assurance can be provided that actual performance will fall within the
guidance ranges. Please see "Forward-Looking Statements" above. These
risks and uncertainties, as well as other unforeseeable risks and
uncertainties, could cause our actual results to differ materially
from those in the table. This financial guidance is given as of the
date hereof, based on information known to us as of February 1, 2006.
We undertake no obligation to publicly update or revise any
forward-looking statements.
(2) Included in the net income guidance for the year ended December
31, 2006, is forecast general and administrative expense of $20
million to $21 million, including non-cash long-term incentive plan
expense of $1.5 million.
(3) Included for the year ended December 31, 2006, is non-cash
interest expense of $2.4 million.
(4) Included for the year ended December 31, 2006, is forecast cash
tax expense of $3.5 million and a deferred tax benefit of $2.4
million.
CONTACT: Pacific Energy Partners, L.P.
Aubrye Harris, 562-728-2871
Fax: 562-728-2881
Email: AHarris@PacificEnergy.com