Plains All American Pipeline, L.P. (NYSE: PAA) and Plains GP
Holdings (NYSE: PAGP) today reported third-quarter 2016
results.
Plains All American Pipeline, L.P.
Summary Financial
Information (1) (unaudited)
(in millions, except per unit data)
Three Months Ended Nine Months Ended
September 30, September 30, % %
2016 2015 Change 2016
2015 Change Net income attributable to PAA $
297 $ 249 19 % $ 599 $ 657 (9 )%
Diluted net income per common
unit $ 0.40 $ 0.24 67 % $ 0.27 $ 0.53 (49 )%
Diluted
weighted average common units outstanding 402 399 1 % 400 395 1
%
Three Months Ended Nine Months Ended
September 30, September 30, % %
2016 2015 Change 2016
2015 Change Adjusted net income attributable to
PAA $ 293 $ 262 12 % $ 783 $ 887 (12 )%
Diluted adjusted net
income per common unit $ 0.39 $ 0.28 39 % $ 0.72 $ 1.11 (35 )%
EBITDA $ 445 $ 483 (8 )% $ 1,307 $ 1,364 (4 )%
Adjusted
EBITDA $ 450 $ 497 (9 )% $ 1,531 $ 1,605 (5 )%
Distribution per common unit declared for the period
$ 0.550 $ 0.700 (21.4 )%
________________
(1) PAA’s reported results include the impact of items that affect
comparability between reporting periods. The impact of certain of
these items is excluded from adjusted results. See the section of
this release entitled "Non-GAAP Financial Measures and Selected
Items Impacting Comparability" and the tables attached hereto for
information regarding certain selected items that PAA believes
impact comparability of financial results between reporting
periods, as well as for information regarding non-GAAP financial
measures (such as adjusted EBITDA) and their reconciliation to the
most directly comparable measures as reported in accordance with
GAAP.
“PAA reported third-quarter adjusted EBITDA of $450 million,
which included solid performance in our fee-based Facilities
segment and in-line performance from our fee-based Transportation
segment, offset by Supply and Logistics segment performance that
was below the low-end of our third quarter guidance. Our third
quarter Supply and Logistics segment was impacted by a combination
of delayed EBITDA recognition associated with our NGL inventory
costing and the timing of crude oil sales, as well as lower than
forecasted EBITDA as a result of continued margin compression and
less favorable market conditions for both our crude oil and NGL
activities,” said Greg Armstrong, Chairman and CEO of Plains All
American.
“Looking forward, we are encouraged by recent signals that
indicate the current industry cycle has reached a bottom and are
supportive of PAA’s positive intermediate-to-long term view.
However, we continue to anticipate a challenging midstream
environment over the near term and we have incorporated those
expectations into our forward guidance.”
Armstrong noted that in response to the industry downturn that
began approximately two years ago, PAA had taken a number of
actions to mitigate the adverse impacts and position PAA to manage
through challenging market conditions. Such actions include:
- Reducing capital commitments through
scope changes and project deferrals;
- Selling non-core assets and entering
into strategic joint ventures which collectively raised
approximately $550 million, reduced PAA’s capital commitments by
approximately $600 million and secured complementary
partners/shippers;
- Securing $1.6 billion of
non-conventional financing;
- Intensifying efforts to capture
incremental gathering and transportation barrels; and
- Lowering its incremental cost of equity
capital by executing an agreement to eliminate PAA’s incentive
distribution rights and, in connection therewith, resetting PAA’s
annualized distribution from $2.80 to $2.20 per common unit, which
resulted in a $320 million annual reduction in cash
distributions.
Armstrong continued “As a result of these actions, we believe
PAA is positioned to manage through the balance of the down-cycle,
benefit significantly during a recovery as U.S. & Canadian oil
production increases and capitalize on attractive
opportunities.”
The following table summarizes selected PAA financial
information by segment for the third quarter and first nine months
of 2016:
Summary of
Selected Financial Data by Segment (1)
(unaudited)
(in millions)
Three Months
Ended Three Months Ended September 30, 2016
September 30, 2015 Transportation Facilities
Supply andLogistics
Transportation Facilities
Supply andLogistics
Reported segment profit/(loss) $ 261 $ 173 $ (6 ) $ 254 $ 146 $ 87
Selected items impacting comparability of segment profit (2)
34 (2 ) (11 ) (1 ) 2 8
Adjusted segment profit/(loss) $ 295 $ 171 $ (17 ) $
253 $ 148 $ 95
Percentage change in reported segment
profit/(loss) versus 2015 period 3 %
18 % (107 )%
Percentage change in adjusted segment profit/(loss) versus 2015
period 17 % 16 %
(118 )% Nine Months Ended
Nine Months Ended September 30, 2016 September 30,
2015 Transportation Facilities
Supply andLogistics
Transportation Facilities
Supply andLogistics
Reported segment profit $ 760 $ 488 $ 13 $ 681 $ 432 $ 258 Selected
items impacting comparability of segment profit (2) 65
9 195 74 7
152 Adjusted segment profit $ 825 $ 497 $ 208
$ 755 $ 439 $ 410
Percentage change in reported
segment profit versus 2015 period 12 %
13 % (95 )% Percentage
change in adjusted segment profit versus 2015 period
9 % 13 % (49
)%
________________
(1) PAA’s reported results include the impact of items that affect
comparability between reporting periods. The impact of certain of
these items is excluded from adjusted results. See the section of
this release entitled "Non-GAAP Financial Measures and Selected
Items Impacting Comparability" and the tables attached hereto for
information regarding certain selected items that PAA believes
impact comparability of financial results between reporting
periods.
(2) Certain of our non-GAAP financial
measures may not be impacted by each of the selected items
impacting comparability.
Plains GP Holdings
PAGP’s sole assets are its ownership interest in PAA’s general
partner and incentive distribution rights. As the control entity of
PAA, PAGP consolidates PAA’s results into its financial statements,
which is reflected in the condensed consolidating balance sheet and
income statement tables included at the end of this release.
Information regarding PAGP’s distributions is reflected below:
Q3 2016
Q2 2016 Q3 2015 Distribution per Class A share
declared for the period $ 0.2065 $ 0.231 $ 0.231
Q3 2016 distribution percentage change from prior periods
(10.6 )% (10.6 )%
Conference Call
PAA and PAGP will hold a conference call on November 3, 2016
(see details below). Prior to this conference call, PAA will
furnish a current report on Form 8-K, which will include
material in this news release as well as PAA’s financial and
operational guidance for the fourth quarter and full year of 2016.
A copy of the Form 8-K will be available at
www.plainsallamerican.com, where PAA and PAGP routinely post
important information.
The PAA and PAGP conference call will be held at 11:00 a.m. ET
on Thursday, November 3, 2016 to discuss the following items:
1. PAA's third-quarter 2016 performance;
2. Financial and operating guidance for the
fourth quarter and full year of 2016;
3. Capitalization and liquidity;
4. 2017 preliminary guidance; and
5. PAA and PAGP’s outlook for the future.
Conference Call Webcast Instructions
To access the internet webcast of the conference call, please go
to www.plainsallamerican.com, under the “Investor Relations”
section of the website (Navigate to: Investor Relations / either
“PAA” or “PAGP” / News & Events / Quarterly Earnings).
Following the live webcast, an audio replay in MP3 format will be
available on the website within two hours after the end of the call
and will be accessible for a period of 365 days.
Non-GAAP Financial Measures and Selected Items Impacting
Comparability
To supplement our financial information presented in accordance
with GAAP, management uses additional measures known as “non-GAAP
financial measures” in its evaluation of past performance and
prospects for the future. The primary additional measures used by
management are adjusted earnings before interest, taxes,
depreciation and amortization (“adjusted EBITDA”) and implied
distributable cash flow (“DCF”).
Management believes that the presentation of such additional
financial measures provides useful information to investors
regarding our performance and results of operations because these
measures, when used to supplement related GAAP financial measures,
(i) provide additional information about our core operating
performance and ability to fund distributions to our unitholders
through cash generated by our operations and (ii) provide investors
with the same financial analytical framework upon which management
bases financial, operational, compensation and planning/budgeting
decisions. We also present these and additional non-GAAP financial
measures, including adjusted net income attributable to PAA, basic
and diluted adjusted net income per common unit and adjusted
segment profit, as they are measurements that investors, rating
agencies and debt holders have indicated are useful in assessing us
and our results of operations. These non-GAAP measures may exclude,
for example, (i) charges for obligations that are expected to be
settled with the issuance of equity instruments, (ii) the
mark-to-market of derivative instruments that are related to
underlying activities in another period (or the reversal of such
adjustments from a prior period), the mark-to-market related to our
Preferred Distribution Rate Reset Option, gains and losses on
derivatives that are related to investing activities (such as the
purchase of linefill) and inventory valuation adjustments, as
applicable, (iii) long-term inventory costing adjustments, (iv)
items that are not indicative of our core operating results and
business outlook and/or (v) other items that we believe should be
excluded in understanding our core operating performance. These
measures may further be adjusted to include amounts related to
deficiencies associated with minimum volume commitments whereby we
have billed the counterparties for their deficiency obligation and
such amounts are recognized as deferred revenue in “Accounts
payable and accrued liabilities” in our Condensed Consolidated
Financial Statements. Such amounts are presented net of applicable
amounts subsequently recognized into revenue. Furthermore, the
calculation of these measures contemplates tax effects as a
separate reconciling item, where applicable. We have defined all
such items as “Selected Items Impacting Comparability.” Due to the
nature of the selected items, certain selected items impacting
comparability may impact certain non-GAAP financial measures,
referred to as adjusted results, but not impact other non-GAAP
financial measures. We consider an understanding of these selected
items impacting comparability to be material to the evaluation of
our operating results and prospects.
Our definition and calculation of certain non-GAAP financial
measures may not be comparable to similarly-titled measures of
other companies. Adjusted EBITDA, Implied DCF and other non-GAAP
financial measures are reconciled to the most comparable measures
as reported in accordance with GAAP for the periods presented in
the tables attached to this release, and should be viewed in
addition to, and not in lieu of, our Condensed Consolidated
Financial Statements and notes thereto. In addition, we encourage
you to visit our website at www.plainsallamerican.com (in
particular the section under “Financial Information” entitled
“Non-GAAP Reconciliations” within the “Investor Relations” tab),
which presents a reconciliation of EBITDA as well as certain other
commonly used non-GAAP and supplemental financial measures.
Forward Looking Statements
Except for the historical information contained herein, the
matters discussed in this release consist of forward-looking
statements that involve certain risks and uncertainties that could
cause actual results or outcomes to differ materially from results
or outcomes anticipated in the forward-looking statements. These
risks and uncertainties include, among other things, declines in
the volume of crude oil, refined product and NGL shipped,
processed, purchased, stored, fractionated and/or gathered at or
through the use of our assets, whether due to declines in
production from existing oil and gas reserves, failure to develop
or slowdown in the development of additional oil and gas reserves,
whether from reduced cash flow to fund drilling or the inability to
access capital, or other factors; the effects of competition;
failure to implement or capitalize, or delays in implementing or
capitalizing, on expansion projects; unanticipated changes in crude
oil market structure, grade differentials and volatility (or lack
thereof); environmental liabilities or events that are not covered
by an indemnity, insurance or existing reserves; fluctuations in
refinery capacity in areas supplied by our mainlines and other
factors affecting demand for various grades of crude oil, refined
products and natural gas and resulting changes in pricing
conditions or transportation throughput requirements; the
occurrence of a natural disaster, catastrophe, terrorist attack or
other event, including attacks on our electronic and computer
systems; maintenance of our credit rating and ability to receive
open credit from our suppliers and trade counterparties; tightened
capital markets or other factors that increase our cost of capital
or limit our ability to obtain debt or equity financing on
satisfactory terms to fund additional acquisitions, expansion
projects, working capital requirements and the repayment or
refinancing of indebtedness; the currency exchange rate of the
Canadian dollar; continued creditworthiness of, and performance by,
our counterparties, including financial institutions and trading
companies with which we do business; inability to recognize current
revenue attributable to deficiency payments received from customers
who fail to ship or move more than minimum contracted volumes until
the related credits expire or are used; non-utilization of our
assets and facilities; increased costs, or lack of availability, of
insurance; weather interference with business operations or project
construction, including the impact of extreme weather events or
conditions; the availability of, and our ability to consummate,
acquisition or combination opportunities; the successful
integration and future performance of acquired assets or businesses
and the risks associated with operating in lines of business that
are distinct and separate from our historical operations; the
effectiveness of our risk management activities; shortages or cost
increases of supplies, materials or labor; the impact of current
and future laws, rulings, governmental regulations, accounting
standards and statements and related interpretations; fluctuations
in the debt and equity markets, including the price of our units at
the time of vesting under our long-term incentive plans; risks
related to the development and operation of our assets, including
our ability to satisfy our contractual obligations to our
customers; factors affecting demand for natural gas and natural gas
storage services and rates; general economic, market or business
conditions and the amplification of other risks caused by volatile
financial markets, capital constraints and pervasive liquidity
concerns; and other factors and uncertainties inherent in the
transportation, storage, terminalling and marketing of crude oil
and refined products, as well as in the storage of natural gas and
the processing, transportation, fractionation, storage and
marketing of natural gas liquids as discussed in the Partnerships'
filings with the Securities and Exchange Commission.
Plains All American Pipeline, L.P. is a publicly traded master
limited partnership that owns and operates midstream energy
infrastructure and provides logistics services for crude oil,
natural gas liquids ("NGL"), natural gas and refined products. PAA
owns an extensive network of pipeline transportation, terminalling,
storage and gathering assets in key crude oil and NGL producing
basins and transportation corridors and at major market hubs in the
United States and Canada. On average, PAA handles over 4.6 million
barrels per day of crude oil and NGL in its Transportation segment.
PAA is headquartered in Houston, Texas.
Plains GP Holdings is a publicly traded entity that owns an
interest in the general partner and incentive distribution rights
of Plains All American Pipeline, L.P., one of the largest energy
infrastructure and logistics companies in North America. PAGP is
headquartered in Houston, Texas.
PLAINS ALL
AMERICAN PIPELINE, L.P. AND SUBSIDIARIES FINANCIAL
SUMMARY (unaudited)
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS (1)
(in millions, except per unit data)
Three Months
Ended Nine Months Ended September 30,
September 30, 2016 2015 2016
2015 REVENUES $ 5,170 $ 5,551 $ 14,231 $
18,156
COSTS AND EXPENSES Purchases and related costs
4,429 4,701 12,000 15,591 Field operating costs 289 348 893 1,111
General and administrative expenses 70 60 210 217 Depreciation and
amortization (2) 33 107 351
319 Total costs and expenses 4,821 5,216
13,454 17,238
OPERATING INCOME 349 335 777 918
OTHER INCOME/(EXPENSE) Equity earnings in unconsolidated
entities 46 45 133 134 Interest expense, net (113 ) (109 ) (339 )
(320 ) Other income/(expense), net 17 (4 )
46 (7 )
INCOME BEFORE TAX 299
267 617 725 Current income tax expense (4 ) (11 ) (45 ) (72 )
Deferred income tax benefit/(expense) 3 (6 )
30 6
NET INCOME 298 250
602 659 Net income attributable to noncontrolling interests
(1 ) (1 ) (3 ) (2 )
NET INCOME ATTRIBUTABLE
TO PAA $ 297 $ 249 $ 599 $ 657
NET INCOME PER COMMON UNIT: Net income allocated to
common unitholders — Basic $ 162 $ 98 $ 110 $ 211 Basic weighted
average common units outstanding 401 398 399 393 Basic net income
per common unit $ 0.40 $ 0.25 $ 0.27 $ 0.54
Net income allocated to common unitholders — Diluted
$ 162 $ 98 $ 110 $ 211 Diluted weighted average common units
outstanding 402 399 400 395 Diluted net income per common unit $
0.40 $ 0.24 $ 0.27 $ 0.53
(1) The 2015 periods have been
retroactively adjusted to reflect the reclassification of the
amortization of debt issuance costs from "Depreciation and
amortization" to "Interest expense, net" as a result of our
adoption of revised debt issuance costs guidance issued by the
FASB.
(2) Includes gains and losses on asset
dispositions and asset impairments.
ADJUSTED
RESULTS
(in millions, except per unit data)
Three Months Ended
Nine Months Ended September 30, September 30,
2016 2015 2016 2015 Adjusted net
income attributable to PAA $ 293 $ 262 $ 783 $
887 Diluted adjusted net income per common unit $
0.39 $ 0.28 $ 0.72 $ 1.11
Adjusted EBITDA $ 450 $ 497 $ 1,531 $ 1,605
PLAINS ALL AMERICAN
PIPELINE, L.P. AND SUBSIDIARIES FINANCIAL SUMMARY
(unaudited)
CONDENSED
CONSOLIDATED BALANCE SHEET DATA
(in millions)
September 30, December 31, 2016
2015 ASSETS Current assets $ 3,773 $ 2,969 Property
and equipment, net 13,811 13,474 Goodwill 2,353 2,405 Investments
in unconsolidated entities 2,216 2,027 Linefill and base gas 899
898 Long-term inventory 146 129 Other long-term assets, net
309 386 Total assets $ 23,507 $ 22,288
LIABILITIES AND PARTNERS' CAPITAL Current
liabilities $ 4,077 $ 3,407 Senior notes, net of unamortized
discounts and debt issuance costs 9,130 9,698 Other long-term debt
504 677 Other long-term liabilities and deferred credits 722
567 Total liabilities 14,433 14,349
Partners' capital excluding noncontrolling interests 9,016 7,881
Noncontrolling interests 58 58 Total
partners' capital 9,074 7,939 Total
liabilities and partners' capital $ 23,507 $ 22,288
DEBT
CAPITALIZATION RATIOS
(in millions)
September 30, December 31, 2016
2015 Short-term debt $ 1,384 $ 999 Long-term debt
9,634 10,375 Total debt $ 11,018 $
11,374 Long-term debt $ 9,634 $ 10,375 Partners'
capital 9,074 7,939 Total book
capitalization $ 18,708 $ 18,314 Total book
capitalization, including short-term debt $ 20,092 $ 19,313
Long-term debt-to-total book capitalization 51 % 57 %
Total debt-to-total book capitalization, including short-term debt
55 % 59 %
PLAINS ALL AMERICAN PIPELINE, L.P. AND
SUBSIDIARIES FINANCIAL SUMMARY (unaudited)
OPERATING
DATA (1)
Three Months Ended Nine Months Ended September
30, September 30, 2016 2015 2016
2015 Transportation segment (average daily volumes
in thousands of barrels per day): Volumes from tariff
activities Crude oil pipelines (by region): Permian Basin (2) 2,162
1,885 2,129 1,810
South Texas / Eagle Ford (2)
263 321 283 298 Western 194 196 193 223 Rocky Mountain (2) 475 447
448 442 Gulf Coast 423 576 538 531 Central (2) 403 424 393 430
Canada 379 384 384 397 Crude oil pipelines 4,299 4,233 4,368 4,131
NGL pipelines 185 200 182 195 Total volumes from tariff activities
4,484 4,433 4,550 4,326 Trucking 118 112 113 114 Transportation
segment total volumes 4,602 4,545 4,663 4,440
Facilities
segment (average monthly volumes): Crude oil, refined products
and NGL terminalling and storage (average monthly capacity in
millions of barrels) 109 100 106 99 Rail load / unload volumes
(average volumes in thousands of barrels per day) 73 231 97 223
Natural gas storage (average monthly working capacity in billions
of cubic feet) 97 97 97 97 NGL fractionation (average volumes in
thousands of barrels per day) 119 98 113 101 Facilities segment
total volumes
(average monthly volumes in millions of
barrels) (3)
131 126 129 126
Supply and Logistics segment (average
daily volumes in thousands of barrels per day): Crude oil lease
gathering purchases 883 927 894 958 NGL sales 207 183 230 209
Waterborne cargos 8 4 7 1 Supply and Logistics segment total
volumes 1,098 1,114 1,131 1,168
(1)
Average volumes are calculated as total
volumes for the period (attributable to our interest) divided by
the number of days or months in the period.
(2)
Region includes volumes (attributable to
our interest) from pipelines owned by unconsolidated entities.
(3)
Facilities segment total is calculated as
the sum of: (i) crude oil, refined products and NGL terminalling
and storage capacity; (ii) rail load and unload volumes multiplied
by the number of days in the period and divided by the number of
months in the period; (iii) natural gas storage working capacity
divided by 6 to account for the 6:1 mcf of natural gas to crude Btu
equivalent ratio and further divided by 1,000 to convert to monthly
volumes in millions; and (iv) NGL fractionation volumes multiplied
by the number of days in the period and divided by the number of
months in the period.
PLAINS ALL
AMERICAN PIPELINE, L.P. AND SUBSIDIARIES FINANCIAL
SUMMARY (unaudited)
COMPUTATION OF
BASIC AND DILUTED NET INCOME PER COMMON UNIT
(in millions, except per unit data)
Three Months Ended
Nine Months Ended September 30, September 30,
2016 2015 2016 2015 Basic Net Income
per Common Unit Net income attributable to PAA $ 297 $ 249 $
599 $ 657 Distributions to Series A preferred units (1) (33 ) - (88
) - Distributions to general partner (1) (102 ) (154 ) (412 ) (454
) Distributions to participating securities (1) (1 ) (1 ) (3 ) (4 )
Undistributed loss allocated to general partner (1) 1
4 14 12 Net income
allocated to common unitholders in accordance with application of
the two-class method for MLPs $ 162 $ 98 $ 110
$ 211 Basic weighted average common units outstanding
401 398 399 393 Basic net income per common unit $ 0.40
$ 0.25 $ 0.27 $ 0.54
Diluted
Net Income per Common Unit Net income attributable to PAA $ 297
$ 249 $ 599 $ 657 Distributions to Series A preferred units (1) (33
) - (88 ) - Distributions to general partner (1) (102 ) (154 ) (412
) (454 ) Distributions to participating securities (1) (1 ) (1 ) (3
) (4 ) Undistributed loss allocated to general partner (1) 1
4 14 12 Net income
allocated to common unitholders in accordance with application of
the two-class method for MLPs $ 162 $ 98 $ 110
$ 211 Basic weighted average common units outstanding
401 398 399 393 Effect of dilutive securities: Weighted average
LTIP units (2) 1 1 1
2 Diluted weighted average common units outstanding
402 399 400 395
Diluted net income per common unit (3) $ 0.40
$ 0.24 $ 0.27 $ 0.53
(1)
Net income allocated to common unitholders
is calculated based on the distributions pertaining to the current
period’s net income. After adjusting for the appropriate period's
distributions, the remaining undistributed earnings or excess
distributions over earnings, if any, are allocated to the general
partner, common unitholders and participating securities in
accordance with the contractual terms of our partnership agreement
and as further prescribed under the two-class method.
(2)
Our Long-term Incentive Plan ("LTIP")
awards that contemplate the issuance of common units are considered
dilutive unless (i) vesting occurs only upon the satisfaction of a
performance condition and (ii) that performance condition has yet
to be satisfied. LTIP awards that are deemed to be dilutive are
reduced by a hypothetical unit repurchase based on the remaining
unamortized fair value, as prescribed by the treasury stock method
in guidance issued by the FASB.
(3)
The possible conversion of our Series A
preferred units was excluded from the calculation of diluted net
income per common unit for the three and nine months ended
September 30, 2016 as the effect was antidilutive.
PLAINS ALL
AMERICAN PIPELINE, L.P. AND SUBSIDIARIES FINANCIAL
SUMMARY (unaudited)
SELECTED ITEMS
IMPACTING COMPARABILITY
(in millions, except per unit data)
Three Months Ended
Nine Months Ended September 30, September 30,
2016 2015 2016 2015 Selected Items
Impacting Comparability (1): Gains/(losses) from
derivative activities net of inventory valuation adjustments (2) $
69 $ 39 $ (147 ) $ (112 ) Long-term inventory costing adjustments
(3) (38 ) (47 ) 6 (62 ) Deficiencies under minimum volume
commitments, net (4) (25 ) - (59 ) - Equity-indexed compensation
expense (5) (8 ) - (23 ) (22 ) Net gain/(loss) on foreign currency
revaluation (6) (3 ) (6 ) (1 ) 20 Line 901 incident (7) -
- - (65 ) Selected items
impacting comparability of EBITDA $ (5 ) $ (14 ) $ (224 ) $ (241 )
Deferred income tax expense (8) - - - (22 ) Tax effect on selected
items impacting comparability 9 1
40 33 Selected items impacting
comparability of net income attributable to PAA $ 4 $ (13 )
$ (184 ) $ (230 ) Impact to basic net income per common unit
$ 0.01 $ (0.03 ) $ (0.46 ) $ (0.57 ) Impact to diluted net
income per common unit $ 0.01 $ (0.04 ) $ (0.45 ) $ (0.58 )
(1)
Certain of our non-GAAP financial measures
may not be impacted by each of the selected items impacting
comparability.
(2)
We use derivative instruments for risk
management purposes and our related processes include specific
identification of hedging instruments to an underlying hedged
transaction. Although we identify an underlying transaction for
each derivative instrument we enter into, there may not be an
accounting hedge relationship between the instrument and the
underlying transaction. In the course of evaluating our results of
operations, we identify the earnings that were recognized during
the period related to derivative instruments for which the
identified underlying transaction does not occur in the current
period and exclude the related gains and losses in determining
adjusted results. In addition, we exclude gains and losses on
derivatives that are related to investing activities, such as the
purchase of linefill. We also exclude the impact of corresponding
inventory valuation adjustments, as applicable, as well as the
mark-to-market adjustment related to our Preferred Distribution
Rate Reset Option.
(3)
We carry approximately 5 million barrels
of crude oil and NGL inventory that is comprised of minimum working
inventory requirements in third-party assets and other working
inventory that is needed for our commercial operations. We consider
this inventory necessary to conduct our operations and we intend to
carry this inventory for the foreseeable future. Therefore, we
classify this inventory as long-term on our balance sheet and do
not hedge the inventory with derivative instruments (similar to
linefill in our own assets). We treat the impact of changes in the
average cost of the long-term inventory (that result from
fluctuations in market prices) and writedowns of such inventory
that result from price declines as a selected item impacting
comparability.
(4)
We have certain agreements that require
counterparties to deliver, transport or throughput a minimum volume
over an agreed upon period. Substantially all of such agreements
were entered into with counterparties to economically support the
return on our capital expenditure necessary to construct the
related asset. Some of these agreements include make-up rights if
the minimum volume is not met. We record a receivable from the
counterparty in the period that services are provided or when the
transaction occurs, including amounts for deficiency obligations
from counterparties associated with minimum volume commitments. If
a counterparty has a make-up right associated with a deficiency, we
defer the revenue attributable to the counterparty’s make-up right
and subsequently recognize the revenue at the earlier of when the
deficiency volume is delivered or shipped, when the make-up right
expires or when it is determined that the counterparty’s ability to
utilize the make-up right is remote. We include the impact of
amounts billed to counterparties for their deficiency obligation,
net of applicable amounts subsequently recognized into revenue, as
a selected item impacting comparability. We believe the inclusion
of the contractually committed revenues associated with that period
is meaningful to investors as the related asset has been
constructed, is standing ready to provide the committed service and
the fixed operating costs are included in the current period
results.
(5)
Our total equity-indexed compensation
expense includes expense associated with awards that will or may be
settled in units and awards that will or may be settled in cash.
The awards that will or may be settled in units are included in our
diluted net income per unit calculation when the applicable
performance criteria have been met. We consider the compensation
expense associated with these awards as a selected item impacting
comparability as the dilutive impact of the outstanding awards is
included in our diluted net income per unit calculation and the
majority of the awards are expected to be settled in units. The
portion of compensation expense associated with awards that are
certain to be settled in cash is not considered a selected item
impacting comparability.
(6)
During the periods presented, there were
fluctuations in the value of CAD to USD, resulting in gains and
losses that were not related to our core operating results for the
period and were thus classified as a selected item impacting
comparability.
(7)
Includes costs recognized during the
period related to the Line 901 incident that occurred in May 2015,
net of amounts we believe are probable of recovery from
insurance.
(8)
Includes the initial cumulative effect of
a change in Canadian tax legislation impacting the period.
PLAINS ALL AMERICAN PIPELINE, L.P. AND SUBSIDIARIES
FINANCIAL SUMMARY (unaudited)
SELECTED
FINANCIAL DATA BY SEGMENT
(in millions)
Three Months Ended Three Months Ended
September 30, 2016 September 30, 2015 Supply
and Supply and Transportation Facilities
Logistics Transportation Facilities
Logistics Revenues (1) $ 401 $ 282 $ 4,879 $ 401 $ 263 $
5,254 Purchases and related costs (1) (24 ) (6 ) (4,788 ) (26 ) (7
) (5,032 ) Field operating costs (1) (2) (133 ) (85 ) (70 ) (147 )
(96 ) (110 ) Equity-indexed compensation expense - operations (3 )
(1 ) - 1 1 - Segment general and administrative expenses (2) (3)
(22 ) (15 ) (23 ) (23 ) (17 ) (26 ) Equity-indexed compensation
expense - general and administrative (4 ) (2 ) (4 ) 3 2 1 Equity
earnings in unconsolidated entities 46 -
- 45 - -
Reported segment profit/(loss) $ 261 $ 173 $
(6 ) $ 254 $ 146 $ 87 Selected items
impacting comparability of segment profit: (Gains)/losses from
derivative activities net of inventory valuation adjustments $ - $
1 $ (53 ) $ - $ 2 $ (41 ) Long-term inventory costing adjustments -
- 38 - - 47 Deficiencies under minimum volume commitments, net 30
(5 ) - - - - Equity-indexed compensation expense/(benefit) 4 2 2 (1
) - 1 Net loss on foreign currency revaluation - - 2 - - 1 Line 901
incident - - - -
- - Selected items impacting
comparability of segment profit (4) $ 34 $ (2 ) $ (11 ) $ (1
) $ 2 $ 8 Adjusted segment profit/(loss) $ 295
$ 171 $ (17 ) $ 253 $ 148 $ 95
Maintenance capital $ 29 $ 15 $ 3 $ 34
$ 16 $ 2
Nine Months Ended Nine
Months Ended September 30, 2016 September 30,
2015 Supply and Supply and Transportation
Facilities Logistics Transportation
Facilities Logistics Revenues (1) $ 1,188 $ 817 $
13,353 $ 1,203 $ 789 $ 17,238 Purchases and related costs (1) (69 )
(17 ) (13,031 ) (85 ) (17 ) (16,553 ) Field operating costs (1) (2)
(406 ) (258 ) (226 ) (493 ) (284 ) (338 ) Equity-indexed
compensation expense - operations (9 ) (3 ) (1 ) (5 ) (1 ) -
Segment general and administrative expenses (2) (3) (67 ) (44 ) (72
) (67 ) (50 ) (79 ) Equity-indexed compensation expense - general
and administrative (10 ) (7 ) (10 ) (6 ) (5 ) (10 ) Equity earnings
in unconsolidated entities 133 -
- 134 - - Reported
segment profit $ 760 $ 488 $ 13 $ 681 $
432 $ 258 Selected items impacting
comparability of segment profit: Losses from derivative activities
net of inventory valuation adjustments $ - $ - $ 189 $ - $ 2 $ 110
Long-term inventory costing adjustments - - (6 ) - - 62
Deficiencies under minimum volume commitments, net 54 5 - - - -
Equity-indexed compensation expense 11 5 7 9 5 8 Net (gain)/loss on
foreign currency revaluation - (1 ) 5 - - (28 ) Line 901 incident
- - - 65
- - Selected items impacting
comparability of segment profit (4) $ 65 $ 9 $ 195
$ 74 $ 7 $ 152 Adjusted segment profit
$ 825 $ 497 $ 208 $ 755 $ 439 $
410 Maintenance capital $ 86 $ 32 $ 10
$ 101 $ 48 $ 5
(1)
Includes intersegment amounts.
(2)
Field operating costs and Segment general
and administrative expenses exclude equity-indexed compensation
expense, which is presented separately in the table above.
(3)
Segment general and administrative
expenses reflect direct costs attributable to each segment and an
allocation of other expenses to the segments. The proportional
allocations by segment require judgment by management and are based
on the business activities that exist during each period.
(4)
Certain of our non-GAAP financial measures
may not be impacted by each of the selected items impacting
comparability.
PLAINS ALL
AMERICAN PIPELINE, L.P. AND SUBSIDIARIES FINANCIAL
SUMMARY (unaudited)
FINANCIAL DATA
RECONCILIATIONS
(in millions)
Three Months Ended Nine Months Ended
September 30, September 30, 2016 2015
2016 2015 Net Income to Earnings Before Interest,
Taxes, Depreciation and Amortization ("EBITDA"),
Excluding Selected Items Impacting
Comparability ("Adjusted EBITDA") and Implied
Distributable Cash Flow ("DCF")
Reconciliations
Net Income $ 298 $ 250 $ 602 $ 659 Interest expense, net 113 109
339 320 Income tax expense 1 17 15 66 Depreciation and amortization
33 107 351 319
EBITDA $ 445 $ 483 $ 1,307 $ 1,364 Selected items impacting
comparability of EBITDA (1) 5 14
224 241 Adjusted EBITDA $ 450 $ 497 $ 1,531 $
1,605 Interest expense, net (2) (109 ) (105 ) (327 ) (309 )
Maintenance capital (47 ) (52 ) (128 ) (154 ) Current income tax
expense (4 ) (11 ) (45 ) (72 ) Equity earnings in unconsolidated
entities, net of distributions 4 12 18 25 Distributions to
noncontrolling interests (3) (1 ) (1 ) (3 )
(3 ) Implied DCF (4) $ 293 $ 340 $ 1,046
$ 1,092
(1)
Certain of our non-GAAP financial measures
may not be impacted by each of the selected items impacting
comparability.
(2)
Excludes certain non-cash items impacting
interest expense such as amortization of debt issuance costs and
terminated interest rate swaps.
(3)
Includes distributions that pertain to the
current period's net income, which are paid in the subsequent
period.
(4)
Including costs recognized during the
period related to the Line 901 incident that occurred during May
2015, Implied DCF would have been $1,027 million for the nine
months ended September 30, 2015.
PLAINS ALL
AMERICAN PIPELINE, L.P. AND SUBSIDIARIES FINANCIAL
SUMMARY (unaudited)
COMPUTATION OF
ADJUSTED BASIC AND DILUTED NET INCOME PER COMMON
UNIT
(in millions, except per unit data)
Three Months Ended
Nine Months Ended September 30, September 30,
2016 2015 2016 2015 Basic Adjusted
Net Income per Common Unit Net income attributable to PAA $ 297
$ 249 $ 599 $ 657 Selected items impacting comparability of net
income attributable to PAA (1) (4 ) 13
184 230 Adjusted net income attributable to
PAA 293 262 783 887 Distributions to Series A preferred units (2)
(33 ) - (88 ) - Distributions to general partner (2) (102 ) (154 )
(412 ) (454 ) Distributions to participating securities (2) (1 ) (1
) (3 ) (4 ) Undistributed loss allocated to general partner (2)
1 3 10 8
Adjusted net income allocated to common unitholders in accordance
with application of the two-class method for MLPs $ 158 $
110 $ 290 $ 437 Basic weighted average
common units outstanding 401 398 399 393 Basic adjusted net
income per common unit $ 0.39 $ 0.28 $ 0.73 $
1.11
Diluted Adjusted Net Income per Common
Unit Net income attributable to PAA $ 297 $ 249 $ 599 $ 657
Selected items impacting comparability of net income attributable
to PAA (1) (4 ) 13 184
230 Adjusted net income attributable to PAA 293 262 783 887
Distributions to Series A preferred units (2) (33 ) - (88 ) -
Distributions to general partner (2) (102 ) (154 ) (412 ) (454 )
Distributions to participating securities (2) (1 ) (1 ) (3 ) (4 )
Undistributed loss allocated to general partner (2) 1
3 10 8 Adjusted net
income allocated to common unitholders in accordance with
application of the two-class method for MLPs $ 158 $ 110
$ 290 $ 437 Basic weighted average
common units outstanding 401 398 399 393 Effect of dilutive
securities: Weighted average LTIP units (3) 1
1 1 2 Diluted weighted average
common units outstanding 402 399
400 395 Diluted adjusted net income per
common unit (4) $ 0.39 $ 0.28 $ 0.72 $ 1.11
(1)
Certain of our non-GAAP financial measures
may not be impacted by each of the selected items impacting
comparability.
(2)
Adjusted net income allocated to common
unitholders is calculated based on the distributions pertaining to
the current period’s net income. After adjusting for the
appropriate period's distributions, the remaining undistributed
earnings or excess distributions over earnings, if any, are
allocated to the general partner, common unitholders and
participating securities in accordance with the contractual terms
of our partnership agreement and as further prescribed under the
two-class method.
(3)
Our Long-term Incentive Plan ("LTIP")
awards that contemplate the issuance of common units are considered
dilutive unless (i) vesting occurs only upon the satisfaction of a
performance condition and (ii) that performance condition has yet
to be satisfied. LTIP awards that are deemed to be dilutive are
reduced by a hypothetical unit repurchase based on the remaining
unamortized fair value, as prescribed by the treasury stock method
in guidance issued by the FASB.
(4)
The possible conversion of our Series A
preferred units was excluded from the calculation of diluted
adjusted net income per common unit for the three and nine months
ended September 30, 2016 as the effect was antidilutive.
PLAINS GP HOLDINGS AND SUBSIDIARIES FINANCIAL SUMMARY
(unaudited)
CONDENSED
CONSOLIDATING STATEMENTS OF OPERATIONS (1)
(in millions, except per share data)
Three Months
Ended Three Months Ended September 30, 2016
September 30, 2015 PAA Consolidating
Adjustments (2)
PAGP PAA Consolidating
Adjustments (2)
PAGP REVENUES $ 5,170 $ - $ 5,170 $ 5,551 $ -
$ 5,551
COSTS AND EXPENSES Purchases and related
costs 4,429 - 4,429 4,701 - 4,701 Field operating costs 289 - 289
348 - 348 General and administrative expenses 70 1 71 60 - 60
Depreciation and amortization 33 -
33 107 1 108
Total costs and expenses 4,821 1 4,822 5,216 1 5,217
OPERATING INCOME 349 (1 ) 348 335 (1 ) 334
OTHER
INCOME/(EXPENSE) Equity earnings in unconsolidated entities 46
- 46 45 - 45 Interest expense, net (113 ) (3 ) (116 ) (109 ) (3 )
(112 ) Other income/(expense), net 17 -
17 (4 ) - (4 )
INCOME BEFORE TAX 299 (4 ) 295 267 (4 ) 263 Current income
tax expense (4 ) - (4 ) (11 ) - (11 ) Deferred income tax
benefit/(expense) 3 (15 ) (12 )
(6 ) (18 ) (24 )
NET INCOME 298 (19 )
279 250 (22 ) 228 Net income attributable to noncontrolling
interests (1 ) (254 ) (255 ) (1 )
(195 ) (196 )
NET INCOME ATTRIBUTABLE TO PAGP
$ 297 $ (273 ) $ 24 $ 249 $ (217 ) $ 32
BASIC NET INCOME PER CLASS A SHARE $ 0.09
$ 0.14
DILUTED NET INCOME PER CLASS A
SHARE $ 0.09 $ 0.14
BASIC WEIGHTED
AVERAGE CLASS A SHARES OUTSTANDING 268 225
DILUTED WEIGHTED AVERAGE CLASS A SHARES
OUTSTANDING 268 225
(1)
The 2015 period has been retroactively
adjusted to reflect the reclassification of the amortization of
debt issuance costs from "Depreciation and amortization" to
"Interest expense, net" as a result of our adoption of revised debt
issuance costs guidance issued by the FASB.
(2)
Represents the aggregate consolidating
adjustments necessary to produce consolidated financial statements
for PAGP.
PLAINS GP HOLDINGS AND SUBSIDIARIES FINANCIAL SUMMARY
(unaudited)
CONDENSED
CONSOLIDATING STATEMENTS OF OPERATIONS (1)
(in millions, except per share data)
Nine Months
Ended Nine Months Ended September 30, 2016
September 30, 2015 PAA Consolidating
Adjustments (2)
PAGP PAA Consolidating
Adjustments (2)
PAGP REVENUES $ 14,231 $ - $ 14,231 $ 18,156 $
- $ 18,156
COSTS AND EXPENSES Purchases and related
costs 12,000 - 12,000 15,591 - 15,591 Field operating costs 893 -
893 1,111 - 1,111 General and administrative expenses 210 2 212 217
2 219 Depreciation and amortization 351 1
352 319 1
320 Total costs and expenses 13,454 3 13,457 17,238 3 17,241
OPERATING INCOME 777 (3 ) 774 918 (3 ) 915
OTHER INCOME/(EXPENSE) Equity earnings in unconsolidated
entities 133 - 133 134 - 134 Interest expense, net (339 ) (10 )
(349 ) (320 ) (9 ) (329 ) Other income/(expense), net 46
- 46 (7 ) -
(7 )
INCOME BEFORE TAX 617 (13 ) 604 725 (12 )
713 Current income tax expense (45 ) - (45 ) (72 ) - (72 ) Deferred
income tax benefit/(expense) 30 (51 )
(21 ) 6 (54 ) (48 )
NET
INCOME 602 (64 ) 538 659 (66 ) 593 Net income attributable to
noncontrolling interests (3 ) (433 ) (436 )
(2 ) (498 ) (500 )
NET INCOME ATTRIBUTABLE
TO PAGP $ 599 $ (497 ) $ 102 $ 657 $ (564
) $ 93
BASIC NET INCOME PER CLASS A
SHARE $ 0.39 $ 0.42
DILUTED NET INCOME
PER CLASS A SHARE $ 0.38 $ 0.42
BASIC
WEIGHTED AVERAGE CLASS A SHARES OUTSTANDING 263
220
DILUTED WEIGHTED AVERAGE CLASS A SHARES
OUTSTANDING 629 220
(1)
The 2015 period has been retroactively
adjusted to reflect the reclassification of the amortization of
debt issuance costs from "Depreciation and amortization" to
"Interest expense, net" as a result of our adoption of revised debt
issuance costs guidance issued by the FASB.
(2)
Represents the aggregate consolidating
adjustments necessary to produce consolidated financial statements
for PAGP.
PLAINS GP HOLDINGS AND SUBSIDIARIES FINANCIAL SUMMARY
(unaudited)
CONDENSED
CONSOLIDATING BALANCE SHEET DATA
(in millions)
September 30, 2016 December 31, 2015
PAA Consolidating
Adjustments (1)
PAGP PAA Consolidating
Adjustments (1)
PAGP ASSETS Current assets $ 3,773 $ 3 $ 3,776 $
2,969 $ 3 $ 2,972 Property and equipment, net 13,811 18 13,829
13,474 19 13,493 Goodwill 2,353 - 2,353 2,405 - 2,405 Investments
in unconsolidated entities 2,216 - 2,216 2,027 - 2,027 Deferred tax
asset - 1,886 1,886 - 1,835 1,835 Linefill and base gas 899 - 899
898 - 898 Long-term inventory 146 - 146 129 - 129 Other long-term
assets, net 309 (3 ) 306 386 (3
) 383 Total assets $ 23,507 $ 1,904 $ 25,411 $ 22,288
$ 1,854 $ 24,142
LIABILITIES AND PARTNERS'
CAPITAL Current liabilities $ 4,077 $ 2 $ 4,079 $ 3,407 $ 2 $
3,409 Senior notes, net of unamortized discounts and debt issuance
costs 9,130 - 9,130 9,698 - 9,698 Other long-term debt, net of
unamortized debt issuance costs 504 602 1,106 677 557 1,234 Other
long-term liabilities and deferred credits 722 -
722 567 - 567 Total
liabilities 14,433 604 15,037 14,349 559 14,908 Partners'
capital excluding noncontrolling interests 9,016 (7,248 ) 1,768
7,881 (6,119 ) 1,762 Noncontrolling interests 58
8,548 8,606 58 7,414
7,472 Total partners' capital 9,074 1,300
10,374 7,939 1,295 9,234 Total
liabilities and partners' capital $ 23,507 $ 1,904 $ 25,411
$ 22,288 $ 1,854 $ 24,142 (1) Represents the
aggregate consolidating adjustments necessary to produce
consolidated financial statements for PAGP.
PLAINS GP HOLDINGS AND SUBSIDIARIES DISTRIBUTION
SUMMARY (unaudited)
Q3 2016 PAGP
DISTRIBUTION SUMMARY
(in millions, except per unit and per share data)
Q3
2016 (1) PAA Distribution/Common Unit $ 0.5500 GP
Distribution/Common Unit $ 0.2450 Total Distribution/Common
Unit $ 0.7950 PAA Common Units Outstanding at
10/31/16 413 Gross GP Distribution $ 104 Less: IDR Reduction
(3 ) Net Distribution from PAA to AAP (2) $ 101 Plus:
Borrowings to Fund True-up Distribution (3) 33 Cash
Available for Distribution by AAP $ 134
Distributions to AAP Partners Direct AAP Owners & AAP
Management (59% economic interest) $ 79 PAGP (41% economic
interest) 55 Total distributions to AAP Partners $
134 Distribution to PAGP Investors $ 55 PAGP
Class A Shares Outstanding at 10/31/16 268 PAGP
Distribution/Class A Share $ 0.2065
(1)
Amounts may not recalculate due to
rounding.
(2)
Plains AAP, L.P. ("AAP") is the general
partner of PAA.
(3)
AAP has agreed to borrow funds under its
credit agreement as necessary to make a special ‘‘true-up’’
distribution to its partners that, when added to the distributions
to be paid to AAP in respect of the 2% general partner interest in
PAA and the IDRs, equals the total distribution AAP's partners
would have received if the closing of the Simplification
Transactions had occurred immediately prior to the record date for
the third quarter distribution.
PLAINS
GP HOLDINGS AND SUBSIDIARIES FINANCIAL SUMMARY
(unaudited)
COMPUTATION OF
BASIC AND DILUTED NET INCOME PER CLASS A SHARE
(in millions, except per share data)
Three Months Ended
Nine Months Ended September 30, September 30,
2016 2015 2016 2015 Basic Net Income
per Class A Share Net income attributable to PAGP $ 24 $ 32 $
102 $ 93 Basic weighted average Class A shares outstanding 268 225
263 220 Basic net income per Class A share $ 0.09 $ 0.14 $
0.39 $ 0.42
Diluted Net Income per Class A Share Net
income attributable to PAGP $ 24 $ 32 $ 102 $ 93
Incremental net income allocated to PAGP
resulting from assumed exchange of AAP units and AAP Management
Units
- - 138 -
Net income allocated to PAGP including
incremental net income from assumed exchange of AAP units and AAP
Management Units
$ 24 $ 32 $ 240 $ 93 Basic weighted average Class A shares
outstanding 268 225 263 220 Dilutive shares resulting from assumed
exchange of AAP units and AAP Management Units - -
366 -
Diluted weighted average Class A shares
outstanding
268 225 629 220 Diluted net
income per Class A share $ 0.09 $ 0.14 $ 0.38 $ 0.42
View source
version on businesswire.com: http://www.businesswire.com/news/home/20161102006699/en/
Plains All American Pipeline, L.P. and Plains GP HoldingsRyan
Smith, 866-809-1291Director, Investor RelationsorAl Swanson,
800-564-3036Executive Vice President, CFO
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