Exhibit 99.1
First Quarter 2006 Earnings Reported by Pacific Energy Partners, L.P.
LONG BEACH, Calif.--(BUSINESS WIRE)--May 3, 2006--Pacific Energy Partners,
L.P. (NYSE:PPX) (the "Partnership") announced that net income for the three
months ended March 31, 2006, was $11.6 million, or $0.30 per limited partner
unit, compared to net income of $3.4 million, or $0.17 per limited partner unit,
in the first quarter of 2005. Recurring net income for the first quarter of 2005
was $10.3 million, or $0.34 per limited partner unit. Recurring net income for
the 2005 quarter excluded a $2.0 million insurance deductible associated with
the Line 63 oil release, a $3.1 million expense for the accelerated vesting of
restricted units under the Partnership's long-term incentive plan that resulted
from the change of control of the general partner and $1.8 million of
transaction costs related to the change of control.
The results for the first quarter of 2006 reflect the benefit of the
September 30, 2005, acquisition of refined products terminals and a refined
products pipeline from Valero L.P. and increased margins for Pacific Marketing
and Transportation ("PMT"). Partially offsetting these increases were income
reductions in the Rocky Mountain region caused by substantial downtime at a
major Rocky Mountain refinery and lower tank utilization at Pacific Terminals.
The Partnership incurred higher interest expense in the first quarter of 2006
and there were approximately 32% more units outstanding compared to the 2005
quarter, both attributable to the financing of the Valero asset acquisition.
General and administrative costs were also higher this quarter.
On April 21, 2006, the Partnership announced an increase in its cash
distribution of $0.0125 per unit to $0.5675 per unit for the first quarter of
2006, or $2.27 per unit annualized. This represents an increase of 2.3% over the
fourth quarter 2005 distribution level and 10.7% over the first quarter 2005
distribution level. The distribution will be paid on May 12, 2006, to holders of
record as of May 1, 2006.
"We are pleased to be able to increase our cash distribution again this
quarter," said Irv Toole, President and CEO. "Although net income per unit for
the first quarter was below our previous guidance, due in large part to the
impact of the unplanned Rocky Mountain refinery downtime, our outlook for the
full year remains positive due to the number and quality of organic growth
projects that are currently under construction or scheduled to commence
construction later this year. We look forward to additional increases in our
distributions as we complete these projects and continue to make accretive
acquisitions."
Distributable cash flow available to the limited partners' interest for the
first quarter of 2006 was $21.5 million, compared to $13.0 million in the first
quarter of 2005. On a weighted average and diluted basis, there were 39,313,000
limited partner units outstanding during the first quarter of 2006 compared to
29,673,000 units outstanding in the 2005 quarter. EBITDA (earnings before
interest, tax, depreciation and amortization expenses) was $31.0 million for the
three months ended March 31, 2006, compared to $16.1 million in the first
quarter of 2005.
OPERATING RESULTS BY SEGMENT
WEST COAST BUSINESS UNIT
Operating income was $17.6 million for the three months ended March 31,
2006, compared to $9.7 million in the corresponding period in 2005, which period
included a $2.0 million insurance deductible expense relating to an oil release.
This increase was primarily due to increased margins for Pacific Marketing and
Transportation and the addition of the Northern California and East Coast
terminals that were acquired on September 30, 2005, from Valero L.P. The
Northern California terminals are operating at 100% capacity with 450,000
barrels of additional storage capacity currently under construction at Martinez.
This storage is scheduled to be operational early in the third quarter of 2006.
Due to strong customer demand, it is expected that the capital budget for the
West Coast Business Unit will be increased later this year to construct
additional storage capacity at Martinez. At the East Coast terminals, an
expansion of ethanol storage, handling and blending capabilities will become
operational in the second quarter.
PMT's margins in the first quarter of 2006 were significantly higher than
in the prior year's quarter. In the 2005 quarter, pricing pressures from steeply
discounted crude oil imports and an unfavorable purchase contract which expired
on March 31, 2005, adversely affected margins. In addition, crude oil contracts
acquired on July 1, 2005, benefited PMT's business in the current quarter.
During the first quarter, the impact of the West Coast pipeline volume
decline was largely offset by tariff increases on Line 2000 and Line 63, and a
substantial increase in Bakersfield delivery volumes. West Coast volumes
transported to Los Angeles for the three months ended March 31, 2006 were
approximately 14% lower than in the first quarter of 2005. The primary reasons
for the variance were natural production declines, third-party production
problems, and higher than normal San Francisco area refinery turnarounds in the
first quarter of 2005 which resulted in increased volumes transported south to
Los Angeles area refineries. Partly offsetting this impact, on May 1, 2005, Line
2000 tariffs were increased by $0.065 per barrel, and on August 1, 2005, a
temporary surcharge of $0.10 per barrel was implemented on Line 63 long-haul
movements to recover the costs of the oil release and other storm related
damages experienced last winter. In addition, deliveries to Bakersfield
refineries almost doubled from the prior year quarter, as a result of pipeline
modifications in the San Joaquin Valley completed October 1, 2005, which
increased delivery capacity to the Bakersfield area refineries.
Pacific Terminals' storage utilization was 8% lower than in the first
quarter of 2005 when a record utilization of 94% was achieved. This was the
result of extensive refinery maintenance and resultant demand for black oil
storage in the prior year quarter. There are currently two major profit
generating projects under construction: the reactivation of 600,000 barrels of
storage at the Alamitos terminal and infrastructure changes to increase pumping
capacity and improve operating efficiencies. These projects are expected to be
completed in the second half of 2006.
PIER 400
The Partnership continues to advance development of the Pier 400 deepwater
import terminal in the Port of Los Angeles. As previously announced, long term
volume commitments have been signed by Valero and ConocoPhillips, and it is
anticipated that with additional customer commitments that are currently being
negotiated, the estimated 250,000 barrels per day of offloading capacity will be
fully subscribed. The draft environmental impact report is expected to be issued
in the second quarter of 2006, and the Partnership expects to receive the
permits necessary to begin construction in first quarter 2007. Completion of
construction and start-up are expected in the first half of 2008. The total
investment is now estimated at $315 million and provides for four million
barrels of storage capacity. The cost estimate was increased by approximately
$65 million, principally to add an additional 1.0 million barrels of storage
capacity with a commensurate increase in expected revenues.
ROCKY MOUNTAIN BUSINESS UNIT
Operating income was $9.8 million for the three months ended March 31,
2006, compared to $9.6 million in the corresponding period in 2005. Extensive
downtime in the first quarter of 2006 at a major Rocky Mountain refinery had a
significant impact on income. Volumes transported south on the Rangeland system
were down 16% compared to the first quarter of 2005, and lower volumes were also
experienced on the Rocky Mountain Products Pipeline. In addition, the refinery
downtime negatively impacted the pricing of crude oil inventory at the end of
the quarter. Volumes on the Western Corridor and Salt Lake City Core pipeline
systems increased by 8% and 14%, respectively.
Several significant capital initiatives were accomplished in the first
quarter of 2006. Construction of the initiating facility for synthetic crude oil
in Edmonton, Alberta, was completed in March 2006, and initial movements of
synthetic crude oil began. This connection provides direct access to synthetic
crude oil in Edmonton for delivery through the Partnership's pipeline systems to
U.S. Rocky Mountain refineries. In addition, to facilitate the movement and
maintain the quality of synthetic crude oil, three 120,000 barrel tanks were
constructed at storage facilities along the pipeline system.
As previously announced, the Partnership is proceeding with the
construction of a new 16-inch crude oil pipeline from the terminus of Frontier
Pipeline near Evanston, Wyoming to the Salt Lake City, Utah refining complex.
This new pipeline, which will be 91 miles in length, will be able to transport
multiple grades of crude oil in segregated batches and will provide 95,000
barrels per day of capacity to meet increased crude oil demand in Salt Lake
City. The project will be constructed in two phases, the first to be completed
in the fourth quarter of 2006 and the second to be completed by October 2007.
The total cost for both phases of the project is expected to be approximately
$77 million and is supported by firm, 10-year transportation agreements with
four Salt Lake City refiners.
In addition, a subsidiary of the Partnership signed a transportation
agreement with Frontier Oil and Refining Company to construct a 24-inch crude
oil pipeline, approximately 10 miles in length, from Guernsey, Wyoming to its
Fort Laramie, Wyoming tank farm and a 16-inch crude oil pipeline, approximately
85 miles in length, from Fort Laramie to Frontier Oil's Cheyenne refinery, in
exchange for Frontier Oil's ten year firm commitment to ship 35,000 barrels per
day and lease approximately 300,000 barrels of storage capacity at Fort Laramie
to support the construction of the new pipeline. The total project cost is
estimated at $59 million. Construction will begin in the second quarter of 2006
and is expected to be completed in the second quarter of 2007. Initial capacity
will be 55,000 barrels per day which can be expanded to a capacity of 90,000
barrels per day.
CORPORATE ITEMS
General and administrative expenses were $6.9 million in the first quarter
of 2006, approximately $1.7 million higher than in the first quarter of 2005.
This increase was associated with support of newly acquired assets, professional
fees, and costs of a new LB Pacific, LP option plan, which are required by
generally accepted accounting principles to be recorded as a Pacific Energy
expense even though the plan is funded by LB Pacific, LP, not the Partnership.
The first quarter general and administrative expenses, which include audit and
Schedule K-1 costs, were higher than are expected to be incurred in each quarter
of the remainder of 2006.
Interest expense was $9.1 million for the first quarter of 2006, $3.5
million greater than in the same period of 2005, due to the increase in debt for
the new assets, as well as higher floating interest rates.
LOOKING FORWARD
For the quarter ending June 30, 2006, Pacific Energy is forecasting net
income of $0.39 to $0.45 per unit and EBITDA of $35 million to $38 million. For
full year 2006, Pacific Energy is forecasting net income of $1.53 to $1.63 per
unit and EBITDA of $142 million to $151 million.
For the full year, Pacific Energy is projecting total capital expenditures
of $166 million, including $150 million for expansion projects, $7 million for
transition capital projects, and $9 million for sustaining capital projects. The
$44 million increase from first quarter's estimates includes expenditures
associated with the Salt Lake City and Cheyenne pipeline projects described
above.
OTHER MATTERS
The Partnership will host a conference call at 2:00 p.m. EDT (11:00 a.m.
PDT) on Thursday, May 4, 2006, to discuss the results of the first quarter of
2006. Please join Pacific Energy at www.PacificEnergy.com for the live
broadcast. The call, with questions and answers, will continue to be available
on the Partnership's web site following the call.
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 our Annual Report on Form 10-K for
the year ended December 31, 2005.
For additional information about the partnership, please visit
www.PacificEnergy.com.
PACIFIC ENERGY PARTNERS, L.P.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(Amounts in thousands, except per unit amounts)
Three Months
Ended March 31,
-----------------
2006 2005
-------- --------
Operating revenues:
Pipeline transportation revenue $33,857 $28,037
Storage and terminaling revenue 20,086 10,322
Pipeline buy/sell transportation revenue 9,699 9,106
Crude oil sales, net of purchases 6,809 1,782
-------- --------
Net revenues 70,451 49,247
-------- --------
Expenses:
Operating 33,419 21,754
General and administrative 6,873 5,172
Accelerated long-term incentive plan compensation
expense -- 3,115
Line 63 oil release costs -- 2,000
Transaction costs(1) -- 1,807
Depreciation and amortization 10,002 6,529
-------- --------
Total expenses 50,294 40,377
-------- --------
Share of net income of Frontier 398 357
-------- --------
Operating income 20,555 9,227
Interest expense (9,088) (5,598)
Other income 443 353
-------- --------
Income before income tax expense 11,910 3,982
-------- --------
Income tax (expense) benefit:
Current (394) (732)
Deferred 98 171
-------- --------
(296) (561)
-------- --------
Net income $11,614 $3,421
======== ========
Net loss for the general partner interest(2) $(19) $(1,702)
======== ========
Net income for limited partner interests(2) $11,633 $5,123
======== ========
Weighted average units outstanding:
Basic 39,301 29,655
Diluted 39,313 29,673
Basic and diluted net income per limited partner
unit $0.30 $0.17
======== ========
(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 in the first quarter of 2005. 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 BALANCE SHEETS
March December
31, 31,
2006 2005
----------- -----------
Assets
Current assets $206,186 $192,115
Property and equipment, net 1,205,642 1,185,534
Intangible assets 68,426 69,180
Investment in Frontier Pipeline Company 8,089 8,156
Other assets 17,907 21,467
----------- -----------
Total assets $1,506,250 $1,476,452
=========== ===========
Liabilities and Partners' Capital
Current liabilities $160,997 $156,187
Long-term debt 600,985 565,632
Deferred income taxes 35,631 35,771
Environmental and other long term liabilities 20,433 20,623
Partners' capital 688,204 698,239
----------- -----------
Total liabilities and partners'
capital $1,506,250 $1,476,452
=========== ===========
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months
Ended March 31,
-----------------
2006 2005
-------- --------
Cash flows from operating activities:
Net income $11,614 $3,421
Depreciation, amortization, non-cash employee
compensation under long-term incentive plan,
deferred tax benefit and Frontier(1) adjustment 11,401 9,346
Net changes in operating assets and liabilities (17,000) 3,091
-------- --------
Net cash provided by operating activities 6,015 15,858
Cash flows from investing activities:
Acquisitions (2,361) --
Net additions to property and equipment (24,158) (4,389)
Other 110 129
-------- --------
Net cash used in investing activities (26,409) (4,260)
Cash flows from financing activities:
Proceeds from bank credit facilities 74,417 26,833
Repayment of bank credit facilities (37,366) (25,854)
Deferred financing costs -- (600)
Distributions to partners (22,516) (15,114)
Capital contribution from the general partner -- 2,438
Related parties (229) (661)
-------- --------
Net cash provided by (used in) financing
activities 14,306 (12,958)
Effect of exchange rate changes on cash (32) 74
-------- --------
Net decrease in cash and cash equivalents (6,120) (1,286)
Cash and cash equivalents, beginning of period 18,064 23,383
-------- --------
Cash and cash equivalents, end of period $11,944 $22,097
======== ========
(1)Net Cash received from Frontier was $422 and $0 for the three
months ended March 31, 2006 and 2005, respectively.
PACIFIC ENERGY PARTNERS, L.P.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
AND OPERATING HIGHLIGHTS BY SEGMENT
Three Months Ended March 31, 2006 and 2005
(Unaudited)
(In thousands)
West Rocky Intersegment
Coast Mountain and
Business Business Intrasegment
Unit Unit Eliminations(1) Total
-------- --------- --------------- --------
Three Months Ended March
31, 2006:
Revenues:
Pipeline
transportation
revenue $17,163 $18,868 $(2,174) $33,857
Storage and
terminaling revenue 20,086 -- 20,086
Pipeline buy/sell
transportation
revenue -- 9,699 9,699
Crude oil sales, net
of purchases 7,311 (360) (142) 6,809
-------- --------- --------
Net revenue 44,560 28,207 70,451
-------- --------- --------
Expenses:
Operating expenses 21,432 14,303 (2,316) 33,419
Depreciation and
amortization 5,499 4,503 10,002
-------- --------- --------
Total expenses 26,931 18,806 43,421
-------- --------- --------
Share of net income of
Frontier -- 398 398
-------- --------- --------
Operating income(2) $17,629 $9,799 $27,428
======== ========= ========
Operating Data (barrels
per day, in thousands)
Line 2000 and Line 63
pipeline volume 118.6
Rangeland pipeline
system:
Sundre - North 24.7
Sundre - South 40.7
Western Corridor system
volume 24.4
Salt Lake City Core
system volume 123.8
Frontier pipeline volume 48.2
Rocky Mountain Products
Pipeline(3) 61.5
Three Months Ended March
31, 2005:
Revenues:
Pipeline
transportation
revenue $17,443 $12,456 $(1,862) $28,037
Storage and
terminaling revenue 10,472 -- (150) 10,322
Pipeline buy/sell
transportation
revenue -- 9,106 9,106
Crude oil sales, net
of purchases 1,812 -- (30) 1,782
-------- --------- --------
Net revenue 29,727 21,562 49,247
-------- --------- --------
Expenses:
Operating expenses 14,507 9,289 (2,042) 21,754
Line 63 oil release
costs(4) 2,000 -- 2,000
Depreciation and
amortization 3,477 3,052 6,529
-------- --------- --------
Total expenses 19,984 12,341 30,283
-------- --------- --------
Share of net income of
Frontier -- 357 357
-------- --------- --------
Operating income(2) $9,743 $9,578 $19,321
======== ========= ========
Operating Data (barrels
per day, in thousands)
Line 2000 and Line 63
pipeline volume 138.5
Rangeland pipeline
system:
Sundre - North 21.4
Sundre - South 48.2
Western Corridor system
volume 22.5
Salt Lake City Core
system volume 108.7
Frontier pipeline volume 38.3
Rocky Mountain Products
Pipeline(3) --
(1)Eliminations are required to account for revenue on services
provided by one subsidiary to another.
(2)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.
(3)Rocky Mountain Products Pipeline was purchased on September 30,
2005.
(4)On March 23, 2005, there was an oil release of approximately 3,400
barrels in northern Los Angeles County.
PACIFIC ENERGY PARTNERS, L.P.
(Unaudited)
(In thousands)
RECONCILIATION OF OPERATING INCOME BY SEGMENT TO CONDENSED
CONSOLIDATED STATEMENTS OF INCOME
Three Months
Ended March 31,
----------------
2006 2005
-------- -------
Operating income by Business Unit
West Coast Business Unit $17,629 $9,743
Rocky Mountain Business Unit 9,799 9,578
-------- -------
27,428 19,321
General expenses and other income/(expense):(1)
General and administrative expense (6,873) (5,172)
Accelerated long-term incentive plan compensation
expense(2) -- (3,115)
Transaction costs(3) -- (1,807)
Interest expense (9,088) (5,598)
Other income 443 353
Income tax expense (296) (561)
-------- -------
Net income $11,614 $3,421
======== =======
GENERAL PARTNER AND LIMITED PARTNERS ALLOCATION OF NET INCOME
Three Months
Ended March 31,
-----------------
2006 2005
-------- --------
Net income $11,614 $3,421
-------- --------
Costs allocated to general partner:
LBP Option Plan costs(4) 511 --
Senior Notes consent solicitation and other
costs(3) -- 893
Severance costs(3) -- 914
-------- --------
Total costs allocated to general partner 511 1,807
-------- --------
Income before costs allocated to general partner 12,125 5,228
Less: Incentive distribution rights payments (255) --
-------- --------
Net income allocable to partners 11,870 5,228
General partner's share of income 2% 2%
-------- --------
General partner allocated share of net income
allocable to partners 237 105
Incentive distribution rights payments 255 --
Costs allocated to general partner (511) (1,807)
-------- --------
Net loss allocated to general partner $(19) $(1,702)
======== ========
Net income allocable to partners $11,870 $5,228
Limited partners share of income 98% 98%
-------- --------
Limited partners share of net income $11,633 $5,123
======== ========
Net loss allocated to general partner $(19) $(1,702)
Net income allocated to limited partners 11,633 5,123
-------- --------
Net income $11,614 $3,421
======== ========
(1)General and administrative expenses, accelerated long-term
incentive plan expense, transaction costs, interest 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 January 2006, LB Pacific, LP ("LBP"), the owner of our General
Partner, granted options under its LBP Option Plan (the "Plan") to
certain of our officers and key employees. Under the Plan,
participants are granted options to acquire partnership interests
in LBP. We are not obligated to pay any amounts to LBP for the
benefits granted or paid to our officers and key employees under
the Plan, although generally accepted accounting principles require
that we record an expense in the Partnership's financial statements
with a corresponding increase in the general partner's capital
account. For the three months ended March 31, 2006, we recorded
compensation expense of $0.5 million relating to the LBP Option
Plan.
PACIFIC ENERGY PARTNERS, L.P.
(Unaudited)
(Amounts in thousands, except per unit amounts)
RECONCILIATION OF NET INCOME TO RECURRING NET INCOME(1)
Three Months
Ended March 31,
-----------------
2006 2005
-------- --------
Net income $11,614 $3,421
Add: Line 63 oil release costs(2) -- 2,000
Add: Accelerated long-term incentive plan
compensation expense(3) -- 3,115
Add: Transaction costs reimbursed by general
partner(4) -- 1,807
-------- --------
Recurring net income 11,614 10,343
Recurring net income (loss) for the general partner
interest (19) 207
-------- --------
Recurring net income for the limited partner
interest $11,633 $10,136
======== ========
Basic and diluted recurring net income per limited
partner unit $0.30 $0.34
======== ========
RECONCILIATION OF NET INCOME TO EBITDA(5)
Three Months
Ended March 31,
-----------------
2006 2005
-------- --------
Net income $11,614 $3,421
Interest expense 9,088 5,598
Depreciation and amortization 10,002 6,529
Income tax expense 296 561
-------- --------
EBITDA $31,000 $16,109
======== ========
(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)In 2005, 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)EBITDA is used as a supplemental performance measure by management
to assess (i) the financial performance of our assets without
regard to financing methods, capital structures or historical cost
basis, (ii) the ability of our assets to generate cash sufficient
to pay interest cost and support our indebtedness, (iii) our
operating performance and return on capital as compared to those of
other companies in the midstream energy sector, without regard to
financing and capital structure, and (iv) the viability of projects
and the overall rates of return on alternative investment
opportunities. You should not consider EBITDA 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
EBITDA may not be comparable to similarly titled measures of other
entities. Additional information regarding EBITDA is included in
our annual report on Form 10-K for the year ended December 31,
2005.
PACIFIC ENERGY PARTNERS, L.P.
RECONCILIATION OF NET INCOME TO DISTRIBUTABLE CASH FLOW(1)
(Unaudited)
(Amounts in thousands)
Three Months Ended
March 31,
-------------------
2006 2005(4)
-------- ----------
(Restated)
Net income $11,614 $3,421
Depreciation and amortization 10,002 6,529
Amortization of debt issue costs and accretion of
discount on long-term debt 606 459
Non-cash employee compensation under long-term
incentive plan 306 1,429
Costs allocated to general partner(2) 511 1,807
Deferred income tax expense (benefit) (98) (171)
Sustaining capital expenditures (817) (240)
-------- ----------
Distributable cash flow(3) 22,124 13,234
Less net (increase) decrease in operating assets
and liabilities (17,000) 3,091
Less share of income of Frontier (398) (357)
Add distributions from Frontier 422 --
Less non-cash employee compensation under long-
term incentive plan added above (306) (1,429)
Employee compensation under long-term incentive
plan 356 2,886
Less costs reimbursed by general partner -- (1,807)
Add sustaining capital expenditures 817 240
-------- ----------
Net cash provided by operating activities $6,015 $15,858
======== ==========
General partner interest in distributable cash
flow $646 $265
Limited partner interest in distributable cash
flow 21,478 12,969
-------- ----------
Total distributable cash flow $22,124 $13,234
======== ==========
(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, 2005.
(2)In January 2006, LB Pacific, LP ("LBP"), the owner of our General
Partner, granted options under its LBP Option Plan (the "Plan") to
certain of our officers, and key employees. Under the Plan,
participants are granted options to acquire partnership interests
in LBP. We are not obligated to pay any amounts to LBP for the
benefits granted or paid to our officers and key employees under
the Plan, although generally accepted accounting principles require
that we record an expense in the Partnership's financial statements
with a corresponding increase in the general partner's capital
account. For the three months ended March 31, 2006, we recorded
compensation expense of $0.5 million relating to the LBP Option
Plan. In 2005, 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 in each case to record an expense
with the reimbursement shown as a partner's capital contribution.
(3)For the three months ended March 31, 2005, distributable cash flow
has been reduced by $2.0 million of oil release costs and $1.9
million of cash costs associated with the accelerated vesting of
units.
(4)In September 2005, we changed the presentation of Distributable
Cash Flow. The previously reported amount of $17.1 million for
Distributable Cash Flow for the three months ended March 31, 2005
has been reduced by $2.0 million of oil release costs and $1.9
million of cash costs associated with the accelerated vesting of
units.
PACIFIC ENERGY PARTNERS, L.P.
RECONCILIATION OF NET INCOME GUIDANCE TO EBITDA GUIDANCE(1)
(Unaudited)
(Amounts in millions)
Three Months Year Ending
Ending December 31, 2006
June 30, 2006
----------------- -------------------
Low High Low High
-------- -------- --------- ---------
Net income guidance(2) $15.5 $17.8 $62.5 $66.5
Add: Depreciation and
amortization 10.0 10.3 41.0 42.5
Add: Interest expense 9.5 10.0 38.0 40.0
Add: Income tax expense(3) -- 0.3 0.9 1.5
-------- -------- --------- ---------
Earnings before interest, tax,
depreciation and amortization
(EBITDA) $35.0 $38.4 $142.4 $150.5
======== ======== ========= =========
(1)The guidance for the three months ending June 30, 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 May 3, 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 $21 million
to $22 million.
(3)Included for the year ended December 31, 2006 is forecast cash tax
expense of $3.3 million and a deferred tax benefit of $2.1 million.
CONTACT: Pacific Energy Partners, L.P.
Jennifer Shigei, 562-728-2871 (Investor Relations)
Fax: 562-728-2881
JShigei@PacificEnergy.com