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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1999
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER: 1-14569
PLAINS ALL AMERICAN PIPELINE, L.P.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 76-0582150
(STATE OR OTHER JURISDICTION OF (I.R.S. Employer
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
500 DALLAS STREET
HOUSTON, TEXAS 77002
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
(ZIP CODE)
(713) 654-1414
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
--- ---
At November 12, 1999, there were outstanding 23,049,239 Common Units, 1,307,190
Class B Common Units and 10,029,619 Subordinated Units.
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PLAINS ALL AMERICAN PIPELINE, L.P. AND SUBSIDIARIES
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PAGE
<S> <C>
PART I. FINANCIAL INFORMATION
CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS:
Consolidated Balance Sheets:
September 30, 1999 and December 31, 1998........................................ 3
Consolidated and Combined Statements of Income:
For the three and nine months ended September 30, 1999 and 1998 (Predecessor)... 4
Consolidated and Combined Statements of Cash Flows:
For the nine months ended September 30, 1999 and 1998 (Predecessor)............. 5
Notes to Consolidated and Combined Financial Statements........................... 6
MANAGEMENT'S DISCUSSION AND ANALYSIS.............................................. 11
PART II. OTHER INFORMATION........................................................ 23
</TABLE>
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PLAINS ALL AMERICAN PIPELINE, L.P. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except unit data)
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
--------------- ----------------
(unaudited)
ASSETS
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 3,187 $ 5,503
Accounts receivable 423,786 119,514
Inventory 92,200 37,711
Prepaid expenses and other 3,061 1,101
--------------- ----------------
Total current assets 522,234 163,829
--------------- ----------------
PROPERTY AND EQUIPMENT
Crude oil pipeline, gathering and terminal assets 551,244 378,254
Other property and equipment 2,229 581
--------------- ----------------
553,473 378,835
Less allowance for depreciation and amortization (10,507) (799)
--------------- ----------------
542,966 378,036
--------------- ----------------
OTHER ASSETS
Pipeline linefill 70,572 54,511
Other 12,561 10,810
--------------- ----------------
$ 1,148,333 $ 607,186
=============== ================
LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES
Accounts payable and other current liabilities $ 447,944 $ 136,980
Due to affiliates 28,625 7,768
Notes payable and current maturities of long-term debt 30,900 9,750
--------------- ----------------
Total current liabilities 507,469 154,498
LONG-TERM LIABILITIES
Bank debt 323,200 175,000
Deferred credits 10,960 45
Other 1,000 -
--------------- ----------------
Total liabilities 842,629 329,543
--------------- ----------------
PARTNERS' CAPITAL
Common unitholders (20,059,239 units outstanding
at September 30, 1999 and December 31, 1998) 257,479 256,997
Class B Common unitholders (1,307,190 units outstanding
at September 30, 1999) 25,184 -
Subordinated unitholders (10,029,619 units outstanding
at September 30, 1999 and December 31, 1998) 19,694 19,454
General Partner 3,347 1,192
--------------- ----------------
305,704 277,643
--------------- ----------------
$ 1,148,333 $ 607,186
=============== ================
</TABLE>
See notes to consolidated and combined financial statements.
Page 3
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PLAINS ALL AMERICAN PIPELINE, L.P. AND SUBSIDIARIES
CONSOLIDATED AND COMBINED STATEMENTS OF INCOME
(unaudited) (in thousands, except per unit data)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------------------- ----------------------------------
1999 1998 1999 1998
--------------- --------------- ---------------- ----------------
(Predecessor) (Predecessor)
<S> <C> <C> <C> <C>
REVENUES $ 1,260,808 $ 424,970 $ 2,579,092 $ 755,653
COST OF SALES AND OPERATIONS 1,227,504 411,056 2,499,748 732,539
--------------- --------------- ---------------- ----------------
Gross Margin 33,304 13,914 79,344 23,114
--------------- --------------- ---------------- ----------------
EXPENSES
General and administrative 7,270 1,520 15,217 3,561
Depreciation and amortization 4,700 1,984 11,371 2,605
Restructuring expense 1,000 - 1,410 -
--------------- --------------- ---------------- ----------------
Total expenses 12,970 3,504 27,998 6,166
--------------- --------------- ---------------- ----------------
Operating income 20,334 10,410 51,346 16,948
Interest expense 6,620 4,624 14,533 4,952
Related party interest expense - 750 - 2,250
Noncash compensation expense 1,947 - 1,947 -
Interest and other income (328) (66) (615) (647)
--------------- --------------- ---------------- ----------------
Net income before provision
in lieu of income taxes 12,095 5,102 35,481 10,393
Provision in lieu of income taxes - 1,844 - 3,881
--------------- --------------- ---------------- ----------------
NET INCOME $ 12,095 $ 3,258 $ 35,481 $ 6,512
=============== =============== ================ ================
NET INCOME - LIMITED PARTNERS $ 11,853 $ 3,193 $ 34,771 $ 6,382
=============== =============== ================ ================
NET INCOME - GENERAL PARTNER $ 242 $ 65 $ 710 $ 130
=============== =============== ================ ================
BASIC AND DILUTED NET INCOME
PER LIMITED PARTNER UNIT $ 0.38 $ 0.19 $ 1.13 $ 0.38
=============== =============== ================ ================
WEIGHTED AVERAGE UNITS
OUTSTANDING 31,396 17,004 30,769 17,004
=============== =============== ================ ================
</TABLE>
See notes to consolidated and combined financial statements.
Page 4
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PLAINS ALL AMERICAN PIPELINE, L.P. AND SUBSIDIARIES
CONSOLIDATED AND COMBINED STATEMENTS OF CASH FLOWS
(unaudited) (in thousands)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
-----------------------------------
1999 1998
---------------- ----------------
(Predecessor)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 35,481 $ 6,512
Items not affecting cash flows
from operating activities:
Depreciation and amortization 11,371 2,605
Change in payable in lieu of deferred taxes - 2,263
Noncash compensation expense 1,947 -
Other non cash items 216 124
Change in assets and liabilities:
Accounts receivable (155,181) 38,078
Inventory (37,669) (5,121)
Prepaid expenses and other 16 (1,153)
Accounts payable and other current liabilities 134,427 (19,878)
Pipeline linefill (3) (1,872)
Deferred gain on termination of interest rate swap 10,873 -
---------------- ----------------
Net cash provided by operating activities 1,478 21,558
---------------- ----------------
CASH FLOWS FROM INVESTING ACTIVITIES
Costs incurred in connection with acquisitions (see Note 2) (173,070) (393,891)
Additions to property and equipment (7,986) (3,398)
Disposals of property and equipment 201 -
Additions to other assets (269) (734)
---------------- ----------------
Net cash used in investing activities (181,124) (398,023)
---------------- ----------------
CASH FLOWS FROM FINANCING ACTIVITIES
Advances from affiliates 20,874 3,944
Proceeds from issuance of Class B Common Units 25,000 -
Proceeds from long-term debt 281,971 317,300
Proceeds from short-term debt 42,150 28,800
Principal payments of long-term debt (133,121) (32,300)
Principal payments of short-term debt (21,650) (35,300)
Debt issued costs incurred in connection with acquisitions (3,527) (6,138)
Capital contribution from General Partner 252 -
Capital contribution from parent - 113,700
Dividends to parent - (3,557)
Distributions to unitholders (34,619) -
---------------- ----------------
Net cash provided by financing activities 177,330 386,449
---------------- ----------------
Net (decrease) increase in cash and cash equivalents (2,316) 9,984
Cash and cash equivalents, beginning of period 5,503 2
---------------- ----------------
Cash and cash equivalents, end of period $ 3,187 $ 9,986
================ ================
</TABLE>
See notes to consolidated and combined financial statements.
Page 5
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PLAINS ALL AMERICAN PIPELINE, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 -- ORGANIZATION AND ACCOUNTING POLICIES
Plains All American Pipeline, L.P. (the "Partnership" or "PAA") is a Delaware
limited partnership formed in the third quarter of 1998, to acquire and operate
the midstream crude oil business and assets of Plains Resources Inc. ("Plains
Resources") and its wholly owned subsidiaries (the "Plains Midstream
Subsidiaries" or the "Predecessor"). On November 23, 1998, the Partnership
completed the initial public offering ("IPO") and the transactions whereby the
Partnership became the successor to the business of the Predecessor. The
operations of the Partnership are conducted through Plains Marketing, L.P., All
American Pipeline, L.P. and Plains Scurlock Permian, L.P. ("Plains Scurlock").
Plains All American Inc. ("PAAI"), a wholly owned subsidiary of Plains
Resources, is the general partner ("General Partner") of the Partnership. The
Partnership is engaged in interstate and intrastate crude oil pipeline
transportation and crude oil gathering and marketing activities and terminalling
and storage activities. The Partnership's operations are primarily conducted in
California, Texas, Oklahoma, Louisiana and the Gulf of Mexico.
The accompanying financial statements and related notes present the
consolidated financial position as of September 30, 1999, of the Partnership and
the results of its operations for the three and nine months ended September 30,
1999 and its cash flows for the nine months ended September 30, 1999. The
combined financial statements of the Predecessor include the accounts of the
Plains Midstream Subsidiaries for the 1998 periods presented.
The accompanying unaudited financial statements have been prepared in
accordance with the instructions for interim financial reporting as prescribed
by the Securities and Exchange Commission ("SEC"). For further information,
refer to the consolidated and combined financial statements and notes thereto
included in the Partnership's Annual Report on Form 10-K for the year ended
December 31, 1998, filed with the SEC. All material adjustments, consisting only
of normal recurring adjustments, which in the opinion of management were
necessary for a fair statement of the results for the interim periods, have been
reflected. The results for the three and nine months ended September 30, 1999
are not necessarily indicative of the final results to be expected for the full
year. Certain reclassifications have been made to the prior year statements to
conform to the current year presentation. All significant intercompany
transactions have been eliminated.
Recent Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 133, Accounting for Derivative
Instruments and Hedging Activities ("SFAS 133"). SFAS 133 requires that all
derivative instruments be recorded on the balance sheet at their fair value.
Changes in the fair value of derivatives are recorded each period in current
earnings or other comprehensive income, depending on whether a derivative is
designated as part of a hedge transaction and, if so, the type of hedge
transaction. For fair value hedge transactions in which the Partnership is
hedging changes in an asset's, liability's, or firm commitment's fair value,
changes in the fair value of the derivative instrument will generally be offset
in the income statement by changes in the hedged item's fair value. For cash
flow hedge transactions, in which the Partnership is hedging the variability of
cash flows related to a variable-rate asset, liability, or a forecasted
transaction, changes in the fair value of the derivative instrument will be
reported in other comprehensive income. The gains and losses on the derivative
instrument that are reported in other comprehensive income will be reclassified
as earnings in the periods in which earnings are affected by the variability of
the cash flows of the hedged item. This statement was amended by Statement of
Financial Accounting Standards No. 137, Accounting for Derivative Instruments
and Hedging Activities - Deferral of the Effective Date of FASB Statement No.
133 ("SFAS 137") issued in June 1999. SFAS 137 defers the effective date of SFAS
133 to fiscal years beginning after June 15, 2000. The Partnership is required
to adopt this statement beginning in 2001. The Partnership has not yet
determined the effect that the adoption of SFAS 133 will have on its financial
position or results of operations.
NOTE 2 -- ACQUISITIONS
Scurlock Acquisition
On May 12, 1999, Plains Scurlock, a limited partnership of which PAAI is the
general partner and Plains Marketing, L.P. is the limited partner, completed the
acquisition of Scurlock Permian LLC ("Scurlock") and certain other pipeline
assets (the "Scurlock Acquisition") from Marathon Ashland Petroleum LLC ("MAP").
Including working capital adjustments and associated closing and financing
costs, the cash purchase price was approximately $142 million.
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Scurlock, previously a wholly owned subsidiary of MAP, is engaged in crude oil
transportation, gathering and marketing, operating in 14 states with
approximately 2,300 miles of active pipelines, numerous storage terminals and a
fleet of more that 250 trucks. Its largest asset is an 800-mile pipeline and
gathering system located in the Spraberry Trend in West Texas that extends into
Andrews, Glasscock, Martin, Midland, Regan and Upton Counties, Texas. The assets
acquired also included approximately one million barrels of crude oil linefill.
Financing for the Scurlock Acquisition was provided through (i) borrowings of
approximately $92 million under Plains Scurlock's limited recourse bank facility
with BankBoston, N.A. (the "Plains Scurlock Credit Facility"), (ii) the sale to
the General Partner of 1.3 million Class B Common Units ("Class B Units") of PAA
at $19.125 per unit, the price equal to the market value of PAA's common units
("Common Units") on May 12, 1999, for a total cash consideration of $25 million
and (iii) a $25 million draw under PAA's existing revolving credit facility.
The Plains Scurlock Credit Facility consists of (i) a five-year $126.6 million
term loan and (ii) a three-year $35 million revolving credit facility. The
Plains Scurlock Credit Facility is nonrecourse to PAA, Plains Marketing, L.P.
and All American Pipeline, L.P. and is secured by the assets acquired.
Borrowings under the term loan bear interest at the London Interbank Offering
Rate ("LIBOR") plus 3% and under the revolving credit facility at LIBOR plus
2.75%. A commitment fee equal to one-half of one percent per year is charged on
the unused portion of the revolver. The revolving credit facility, which may be
used for borrowings or letters of credit to support crude oil purchases, matures
in May 2002. The term loan provides for principal amortization of $0.7 million
annually beginning May 2000, with a final maturity of May 2004. In addition,
Plains Scurlock has interest rate swap and collar arrangements for an aggregate
notional principal amount of $90 million. As of September 30, 1999, letters of
credit of approximately $14.0 million were outstanding under the revolver and
borrowings of $126.6 million and $8.0 million were outstanding under the term
loan and revolver, respectively. The term loan was reduced to $82.6 million in
connection with the Partnership's October 1999 public unit offering
(See Note 4).
The Class B Units are initially pari passu with Common Units with respect to
distributions, and after November 12, 1999 are convertible into Common Units
upon approval of a majority of Common Unitholders. After November 12, 1999, the
Class B Unitholder may request that PAA call a meeting of Common Unitholders to
consider approval of the conversion of Class B Units into Common Units. If the
approval of such conversion by the Common Unitholders is not obtained within 120
days of such request (the "Initial Approval Period"), the Class B Unitholders
will be entitled to receive distributions, on a per Unit basis, equal to 110% of
the amount of distributions paid on a Common Unit, with such distribution right
increasing to 115% if such approval is not secured within 90 days after the end
of the Initial Approval Period. Except for the vote to approve the conversion,
Class B Units have the same voting rights as the Common Units.
The assets, liabilities and results of operations of Scurlock are included in
the Consolidated Financial Statements of the Partnership effective May 1, 1999.
The Scurlock Acquisition has been accounted for using the purchase method of
accounting and the purchase price was allocated in accordance with Accounting
Principles Board Opinion No. 16, Business Combinations ("APB 16") as follows:
(in thousands)
Crude oil pipeline, gathering and terminal assets $ 125,067
Other property and equipment 1,546
Pipeline linefill 16,057
Other assets (debt issue costs) 3,100
Environmental accrual (1,000)
Net working capital items (3,090)
---------------
Cash paid $ 141,680
===============
The purchase price allocation was based on preliminary estimates of fair value
and is subject to adjustment as additional information becomes available and is
evaluated. The purchase accounting entries include a $1.0 million accrual for
estimated environmental remediation costs. Under the agreement for the sale of
Scurlock by MAP to Plains Scurlock, MAP has agreed to indemnify and hold
harmless Scurlock and Plains Scurlock for claims, liabilities and losses
(collectively "Losses") resulting from any act or omission attributable to
Scurlock's business or properties occurring prior to the date of the closing of
such sale to the extent the aggregate amount of such Losses exceed $1.0 million;
provided however, that claims for such Losses must individually exceed $25,000
and must be asserted by Scurlock against MAP on or before May 15, 2003.
West Texas Gathering System Acquisition
On July 15, 1999, Plains Scurlock completed the acquisition of a West Texas
crude oil pipeline and gathering system from Chevron Pipe Line Company for
approximately $36 million, including transaction costs. The Partnership's total
acquisition cost was approximately $38.9 million including costs to address
certain issues identified in the due diligence
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process. The principal assets acquired include approximately 450 miles of crude
oil transmission mainlines, approximately 400 miles of associated gathering and
lateral lines and approximately 2.9 million barrels of crude oil storage and
terminalling capacity in Crane, Ector, Midland, Upton, Ward and Winkler
Counties, Texas. Financing for the amounts paid at closing was provided by a
draw under the term loan portion of the Plains Scurlock Credit Facility.
Venice Terminal Acquisition
On September 3, 1999, Plains Scurlock completed the acquisition of a Louisiana
crude oil terminal facility and associated pipeline system from MAP for
approximately $1.5 million. The principal assets acquired include approximately
300,000 barrels of crude oil storage and terminalling capacity and a six-mile
crude oil transmission system near Venice, Louisiana.
Pro Forma Results for the Scurlock Acquisition and All American Pipeline
Acquisition
The following unaudited pro forma data is presented to show pro forma
revenues, net income and basic and diluted net income per limited partner unit
as if the Scurlock Acquisition, which was effective May 1, 1999, and the
acquisition of the All American Pipeline and the Celeron Gathering System (the
"All American Acquisition"), which was effective July 30, 1998, had both
occurred on January 1, 1998. The results for the 1998 nine month period do not
reflect certain pro forma adjustments to reflect the organizational structure of
the Partnership as if the Partnership had been formed on January 1, 1998.
Nine Months Ended
September 30,
-------------------------------
1999 1998
--------------- --------------
Revenues $ 2,966,394 $ 2,164,594
=============== ==============
Net income $ 41,829 $ 10,879
=============== ==============
Basic and diluted net income
per limited partner unit $ 1.31 $ 0.58
=============== ==============
NOTE 3 -- DISTRIBUTIONS
On February 12, 1999, the Partnership paid a cash distribution of $0.193 per
unit on its outstanding Common Units and Subordinated Units. The distribution
was paid to unitholders of record at the close of business on January 29, 1999.
The total distribution paid was approximately $5.9 million, with approximately
$2.5 million paid to the Partnership's public unitholders and the remainder paid
to the General Partner for its limited partner and general partner interests.
The distribution represented a partial quarterly distribution for the 39-day
period from November 23, 1998, the closing of the IPO, through December 31,
1998.
On May 14, 1999, the Partnership paid a cash distribution of $0.45 per unit on
its outstanding Common Units and Subordinated Units. The distribution was paid
to unitholders of record at the close of business on May 3, 1999. The total
distribution paid was approximately $13.8 million, with approximately $5.9
million paid to the Partnership's public unitholders and the remainder paid to
the General Partner for its limited partner and general partner interests. This
distribution was the first full quarterly distribution since the Partnership was
formed.
On August 13, 1999, the Partnership paid a cash distribution of $0.4625 per
Unit on its outstanding Common Units, Class B Units and Subordinated Units. The
distribution was paid to unitholders of record at the close of business on
August 3, 1999. The total distribution paid was approximately $14.9 million,
with approximately $6.1 million paid to the Partnership's public unitholders and
the remainder paid to the General Partner for its limited and general partner
interests. This distribution represents an increase of $.0125 per unit over the
minimum quarterly distribution of $0.45 per unit.
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On November 12, 1999, the Partnership paid a cash distribution of $0.48125 per
Unit on its outstanding Common Units, Class B Units and Subordinated Units. The
distribution was paid to unitholders of record on November 1, 1999. The total
distribution paid was approximately $17.1 million, with approximately $7.7
million paid to the Partnership's public unitholders and the remainder paid to
the General Partner for its limited and general partner interests. This
distribution represents an increase of $.01875 per unit over the previous
quarter's distribution. This current distribution level represents an increase
of 6.9% over the minimum quarterly distribution specified in the partnership
agreement of $0.45 per unit.
NOTE 4 -- SUBSEQUENT EVENTS
Public Offering
In October 1999, the Partnership completed a public offering of an additional
2,990,000 Common Units, representing limited partner interests in the
Partnership, at $18.00 per unit. Net proceeds to the Partnership were
approximately $50.8 million after deducting underwriters' discounts and
commissions and offering expenses of approximately $3.1 million. These proceeds,
together with the General Partner's capital contribution of approximately $0.5
million to maintain its 2% general partner interest, were used to reduce
outstanding debt. Approximately $44 million was used to reduce the term loan
portion of the Plains Scurlock Credit Facility and the remainder was used to
reduce the balance outstanding on the Partnership's other revolving credit
facility.
Sale of Crude Oil Linefill
The Partnership has begun implementing plans to sell approximately 5.2 million
barrels of crude oil linefill owned by the Partnership. The sale process will
commence in December and should be substantially completed by the end of the
first quarter of 2000. Proceeds from the sale of the linefill are expected to be
approximately $100 million, net of associated costs, and will be used to reduce
outstanding debt. If the transaction had occurred on January 1, 1999, interest
expense would have decreased by approximately $6 million for the nine months
ended September 30, 1999, based on a LIBOR rate of 6.5% plus an average interest
rate margin of 1.5%. The Partnership estimates that it will recognize a gain of
approximately $40 to $45 million in connection with the sale of linefill.
At September 30, 1999, the Partnership's long-term debt was $323 million.
Giving pro forma effect to the linefill sale proceeds and the October 1999
public unit offering, the Partnership's total long-term debt at September 30,
1999 would have been reduced to approximately $172 million, and debt-to-total
capitalization would approximate 33% as compared to 51% at September 30, 1999.
The Partnership owns 100% of the 5.2 million barrels of crude oil linefill
located in the segment of the All American Pipeline that extends from Emidio,
California, to McCamey, Texas. Except for minor third party volumes, a
subsidiary of the Partnership has been the sole shipper on this segment of the
pipeline since its predecessor acquired the line from the Goodyear Tire & Rubber
Company in July 1998. This section of the line is under FERC jurisdiction and
eligible shippers may initiate their own shipments by providing the 5.2 million
barrels of crude oil linefill required to operate the line, paying the posted
tariff and committing to minimum throughput volumes that are necessary to
operate the pipeline. Pending receipt of third party nominations and the
requisite crude oil linefill, All American Pipeline will suspend shipments on
this segment of the line. No other segment of the All American Pipeline will be
affected. For the twelve months ended September 30, 1999, the Partnership
reported gross margin of approximately $4 million from volumes transported on
this segment of the line.
The line will initially be kept in a state of readiness to service any third
party shippers that elect to transport crude oil on this segment of the line,
subject to their providing the required 5.2 million barrels of crude oil
linefill. Depending on market conditions, the Partnership may replace the
linefill at a future date and recommence its own shipments. In the event this
segment of the line remains unused for a reasonable period of time, the
Partnership intends to evaluate alternative uses for this segment of the
pipeline. The Partnership believes that no impairment of the asset is necessary
at this time.
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NOTE 5 -- OPERATING SEGMENTS
The Partnership's operations consist of two operating segments: (i) Pipeline
Operations - engages in interstate and intrastate crude oil pipeline
transportation and certain related merchant activities; (ii) Marketing,
Gathering, Terminalling and Storage Operations - engages in purchases and
resales of crude oil at various points along the distribution chain and the
leasing of certain terminalling and storage assets. The Partnership evaluates
segment performance based on gross margin, gross profit and income before income
taxes and extraordinary items.
The following table summarizes segment revenues, gross margin, gross profit
and income before income taxes and extraordinary items:
<TABLE>
<CAPTION>
Marketing,
Gathering,
Terminalling
(In thousands) (unaudited) Pipeline & Storage Total
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Three Months Ended September 30, 1999
Revenues:
External Customers $ 228,737 $ 1,032,071 $ 1,260,808
Intersegment (a) 32,621 - 32,621
Other 24 304 328
--------------- --------------- ---------------
Total revenues of reportable segments $ 261,382 $ 1,032,375 $ 1,293,757
=============== =============== ===============
Segment gross margin (b) $ 15,539 $ 17,765 $ 33,304
Segment gross profit (c) 14,979 11,055 26,034
Income before income taxes and
extraordinary items 5,901 6,194 12,095
- -------------------------------------------------------------------------------------------------------
Three Months Ended September 30, 1998
Revenues:
External Customers $ 164,010 $ 260,960 $ 424,970
Intersegment (a) 13,915 1,242 15,157
Other 162 (96) 66
--------------- --------------- ---------------
Total revenues of reportable segments $ 178,087 $ 262,106 $ 440,193
=============== =============== ===============
Segment gross margin (b) $ 8,110 $ 5,804 $ 13,914
Segment gross profit (c) 7,681 4,713 12,394
Income before income taxes and
extraordinary items 1,944 3,158 5,102
- -------------------------------------------------------------------------------------------------------
Nine Months Ended September 30, 1999
Revenues:
External Customers $ 606,352 $ 1,972,740 $ 2,579,092
Intersegment (a) 67,396 - 67,396
Other 119 496 615
--------------- --------------- ---------------
Total revenues of reportable segments $ 673,867 $ 1,973,236 $ 2,647,103
=============== =============== ===============
Segment gross margin (b) $ 40,475 $ 38,869 $ 79,344
Segment gross profit (c) 38,392 25,735 64,127
Income before income taxes and
extraordinary items 17,410 18,071 35,481
- -------------------------------------------------------------------------------------------------------
Nine Months Ended September 30, 1998
Revenues:
External Customers $ 164,010 $ 591,643 $ 755,653
Intersegment (a) 13,915 1,242 15,157
Other 691 (44) 647
--------------- --------------- ---------------
Total revenues of reportable segments $ 178,616 $ 592,841 $ 771,457
=============== =============== ===============
Segment gross margin (b) $ 8,110 $ 15,004 $ 23,114
Segment gross profit (c) 7,681 11,872 19,553
Income before income taxes and
extraordinary items 2,472 7,921 10,393
- -------------------------------------------------------------------------------------------------------
</TABLE>
a) Intersegment sales were conducted on an arm's length basis.
b) Gross margin is calculated as revenues less cost of sales and operations
expenses.
c) Gross profit is calculated as revenues less costs of sales and operations
and general and administrative expenses.
Page 10
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview
We were formed in September of 1998 to acquire and operate the midstream crude
oil business and assets of Plains Resources Inc. and its wholly owned
subsidiaries. In the following discussion, we refer to the midstream
subsidiaries of Plains Resources as our predecessor. On November 23, 1998, we
completed our initial public offering and the transactions whereby we became the
successor to the business of our predecessor. Our operations are conducted
through Plains Marketing, L.P., All American Pipeline, L.P. and Plains Scurlock
Permian, L.P. Plains All American Inc., a wholly owned subsidiary of Plains
Resources, is our general partner. We are engaged in interstate and intrastate
crude oil transportation, gathering and marketing as well as crude oil
terminalling and storage activities. Our operations are conducted primarily in
California, Texas, Oklahoma, Louisiana and the Gulf of Mexico.
Pipeline Operations. Our activities from pipeline operations generally consist
of transporting third-party volumes of crude oil for a tariff and merchant
activities designed to capture price differentials between the cost to purchase
and transport crude oil to a sales point and the price received for such crude
oil at the sales point. Tariffs on our pipeline systems vary by receipt point
and delivery point. The gross margin generated by our tariff activities depends
on the volumes transported on the pipeline and the level of the tariff charged,
as well as the fixed and variable costs of operating the pipeline. Our ability
to generate a profit on margin activities is not tied to the absolute level of
crude oil prices but is generated by the difference between an index related
price paid and other costs incurred in the purchase of crude oil and an index
related price at which we sell crude oil. We are well positioned to take
advantage of these price differentials due to our ability to move purchased
volumes on our pipeline systems. We combine reporting of gross margin for tariff
activities and margin activities due to the sharing of fixed costs between the
two activities.
Terminalling and Storage Activities and Gathering and Marketing Activities.
Gross margin from terminalling and storage activities is dependent on the
throughput volume of crude oil stored and the level of fees generated at our
terminalling and storage facilities. Gross margin from our gathering and
marketing activities is dependent on our ability to sell crude oil at a price in
excess of our aggregate cost. These operations are not directly affected by the
absolute level of crude oil prices, but are affected by overall levels of supply
and demand for crude oil and fluctuations in market related indices.
RECENT DEVELOPMENTS
On May 12, 1999, we completed the acquisition of Scurlock Permian LLC and
certain other pipeline assets from Marathon Ashland Petroleum LLC. Including
working capital adjustments and associated closing and financing costs, the cash
price was approximately $142 million. The assets, liabilities and results of
operations of the Scurlock acquisition are included in our Consolidated
Financial Statements effective May 1, 1999.
Scurlock, previously a wholly owned subsidiary of Marathon Ashland Petroleum,
is engaged in crude oil transportation, gathering and marketing, operating in 14
states with approximately 2,300 miles of active pipelines, numerous storage
terminals and a fleet of more than 250 trucks. Its largest asset is an 800-mile
pipeline and gathering system located in the Spraberry Trend in West Texas that
extends into Andrews, Glasscock, Martin, Midland, Regan and Upton Counties,
Texas. The assets we acquired also included approximately one million barrels of
crude oil linefill.
On July 15, 1999, we completed the acquisition of the West Texas Gathering
System from Chevron Pipe Line Company for approximately $36 million, including
transaction costs. Our total acquisition cost was approximately $38.9 million
including costs to address certain issues identified in the due diligence
process. The assets acquired include approximately 450 miles of crude oil
transmission mainlines, approximately 400 miles of associated gathering and
lateral lines, and approximately 2.9 million barrels of tankage located along
the system. The West Texas Gathering System provides us access to the Midland,
Texas crude oil interchange.
On September 3, 1999, we completed the acquisition of a Louisiana crude oil
terminal facility and associated pipeline system from Marathon Ashland Petroleum
LLC for approximately $1.5 million. The principal assets acquired include
approximately 300,000 barrels of crude oil storage and terminalling capacity and
a six-mile crude oil transmission system near Venice, Louisiana.
Page 11
<PAGE>
RESULTS OF OPERATIONS
Results of Operations for the Three and Nine Months Ended September 30, 1999 and
1998.
In this section we discuss:
. our historical results of operations for the three and nine months ended
September 30, 1999;
. our predecessor's historical results of operations for the three and nine
months ended September 30, 1998; and
. our pro forma results of operations for the three and nine months ended
September 30, 1998.
The historical results of operations for the three and nine months ended
September 30, 1999 are derived from our historical financial statements, which
include the results of the Scurlock acquisition effective May 1, 1999 and the
West Texas Gathering System acquisition effective July 1, 1999. The historical
results of operations for the three and nine months ended September 30, 1998 are
derived from the combined financial statements of our predecessor. The results
of operations of our predecessor for the three and nine months ended September
30, 1998, include the results of operations of the All American Pipeline and the
SJV Gathering System beginning July 1998, the date of acquisition by our
predecessor.
Our pro forma results of operations are derived from the historical financial
statements of Wingfoot Ventures Seven, Inc., and our predecessor. Wingfoot was a
wholly owned subsidiary of Goodyear and the former owner of the All American
Pipeline and the SJV Gathering System. The pro forma results of operations
reflect pro forma adjustments to the historical results of operations as if we
had been formed and the All American Pipeline acquisition had taken place on
January 1, 1998. The following pro forma results of operations do not include
pro forma adjustments related to the Scurlock acquisition or the West Texas
Gathering System acquisition.
Three Months Ended September 30, 1999 and 1998
The following table reflects our operating results on a historical basis for
the 1999 period and compares those results to our predecessor's historical
results, as well as to our pro forma results for the 1998 period (unaudited) (in
thousands):
<TABLE>
<CAPTION>
Three Months Ended September 30,
------------------------------------------------
1999 1998 1998
-------------- -------------- --------------
(Predecessor) (Pro Forma)
<S> <C> <C> <C>
Operating Results:
Revenues $ 1,260,808 $ 424,970 $ 488,409
============== ============== ==============
Gross margin:
Pipeline $ 15,539 $ 8,110 $ 11,468
Gathering and marketing
and terminalling and storage 17,765 5,804 6,248
-------------- -------------- --------------
Total 33,304 13,914 17,716
General and administrative expense (7,270) (1,520) (1,671)
-------------- -------------- --------------
Gross profit $ 26,034 $ 12,394 $ 16,045
============== ============== ==============
Net income $ 12,095 $ 3,258 $ 9,975
============== ============== ==============
Average Daily Volumes (barrels):
Pipeline Activities:
All American
Tariff activities 93 117 122
Margin activities 52 42 43
Other 106 - -
-------------- -------------- --------------
Total 251 159 165
============== ============== ==============
Lease gathering 347 91 111
Bulk purchases 181 77 77
-------------- -------------- --------------
Total 528 168 188
============== ============== ==============
Terminal throughput 68 88 88
============== ============== ==============
</TABLE>
Page 12
<PAGE>
For the three months ended September 30, 1999, we reported net income of $12.1
million, or $0.38 per limited partner unit, on total revenues of $1.3 billion,
compared to predecessor net income of $3.3 million on total revenues of $425.0
million. Pro forma net income was $10.0 million on total revenues of $488.4
million for the 1998 third quarter. The current period results include a $1.0
million severance-related restructuring charge and a $1.9 million noncash
incentive compensation charge. Excluding these two items, net income for the
quarter would have been $15.0 million or $0.47 per unit. Gross margin for the
third quarter of 1999 was $33.3 million, compared to $13.9 million for our
predecessor and $17.7 million on a pro forma basis during the third quarter of
last year. Approximately 47% of the current year gross margin was from pipeline
activities and 53% was from gathering, marketing, storage and terminalling
activities. The two recently completed acquisitions contributed approximately
$12.0 million and $2.7 million to gross margin and net income, respectively, for
the third quarter of 1999.
Pipeline Operations. Gross margin from pipeline operations was $15.5 million
for the third quarter of 1999 compared to $8.1 million for our predecessor and
$11.5 million on a pro forma basis during the third quarter of last year. The
increase from the prior year pro forma amount resulted primarily from increased
margins from our pipeline merchant activities, a reduction in operating costs
attributable to the All American Pipeline and the benefits of the Scurlock and
West Texas Gathering system acquisitions. Our predecessor's results for the
third quarter of 1998 include pipeline operations beginning July 30, 1998, the
date of acquisition of the All American Pipeline.
The margin between revenue and direct cost of crude purchased was $10.2
million for the third quarter of 1999, compared to $2.6 million for our
predecessor and $3.1 million on a pro forma basis for the 1998 third quarter.
Pipeline tariff revenues were approximately $11.7 million in the current year
quarter compared to approximately $9.5 million and $14.1 million for our
predecessor and on a pro forma basis, respectively, for the third quarter of
1998. The decrease in tariff revenues from the 1998 pro forma amount resulted
primarily from a decrease in tariff transport volumes. Pipeline operations and
maintenance expenses were approximately $7.1 million for the third quarter of
1999 as compared to $4.0 million and $6.1 million for our predecessor and on a
pro forma basis, respectively, for the third quarter of 1998. Excluding
operations and maintenance expenses associated with our two 1999 acquisitions,
operations and maintenance expenses were $5.6 million, a decrease of
approximately $0.5 million from the 1998 pro forma amount.
Tariff transport volumes on the All American Pipeline decreased from an
average of 122,000 barrels per day in the third quarter of 1998 on a pro forma
basis to 93,000 barrels per day in the current year quarter due primarily to a
decrease in shipments of offshore California production, which decreased from
approximately 94,000 barrels per day on a pro forma basis in the 1998 third
quarter to 75,000 barrels per day in the 1999 comparative period. Barrels
associated with our merchant activities on the All American Pipeline increased
from 43,000 barrels per day on a pro forma basis to 52,000 barrels per day in
the third quarter of 1999. Tariff volumes shipped on the Scurlock and West Texas
Gathering Systems averaged 106,000 barrels per day during the third quarter of
1999.
In July 1999, a wholly owned subsidiary of Plains Resources acquired Chevron
USA's 26% working interest in the offshore California Point Arguello Unit and
is the operator of record. All of the volumes attributable to Plains
Resources' interest are committed for transportation on the All American
Pipeline and will be subject to our Marketing Agreement with Plains Resources.
The following table sets forth the All American Pipeline average deliveries
per day within and outside California:
<TABLE>
<CAPTION>
Three Months Ended September 30,
--------------------------------------------
1999 1998 1998
------------ ------------ ------------
(Predecessor) (Pro Forma)
(in thousands)
<S> <C> <C> <C>
Deliveries:
Average daily volumes (barrels):
Within California 93 113 115
Outside California 52 46 50
------------ ------------ ------------
Total 145 159 165
============ ============ ============
</TABLE>
Gathering and Marketing Activities and Terminalling and Storage Activities.
Gross margin from gathering, marketing, terminalling and storage activities was
approximately $17.8 million for the third quarter of 1999 compared to $5.8
million and $6.2 million in the prior year comparative period for our
predecessor and on a pro forma basis, respectively. The Scurlock acquisition
contributed approximately $10.2 million to third quarter 1999 gross margin. The
increase in gross margin is due to an increase in lease gathering and bulk
purchase volumes, primarily as a result of the Scurlock acquisition and an
increase in storage capacity leased at our Cushing Terminal. Lease gathering
volumes increased from an average of 111,000 barrels per day on a pro forma
basis for the third quarter of 1998 to approximately 347,000 barrels per day in
the current year quarter. Bulk purchase volumes increased from approximately
77,000 barrels per day in last year's quarter to approximately 181,000 barrels
per day in the third quarter of 1999. Throughput
Page 13
<PAGE>
volumes at our terminals were down approximately 20,000 barrels per day in the
current year quarter. This decrease was offset by increased leased terminal
capacity which increased from approximately 1.4 million barrels per month in
last year's quarter to 1.7 million barrels per month during the current year
quarter. The 1.1 million barrel expansion of our Cushing Terminal was placed in
service in the second quarter of 1999.
General and administrative expenses were $7.3 million for the three months
ended September 30, 1999, compared to $1.5 million and $1.7 million for the
third quarter of 1998 for the predecessor and on a pro forma basis,
respectively. The increase in 1999 as compared to the 1998 pro forma amount is
due to the Scurlock acquisition and continued expansion of our activities. These
increases, in addition to expenses associated with the acquisition of the All
American Pipeline, account for the increase from our predecessor's 1998 third
quarter amount.
Depreciation and amortization expense was $4.7 million for the three months
ended September 30, 1999, compared to $2.0 million for our predecessor and $2.8
million on a pro forma basis, for the 1998 comparative period. The increase in
depreciation and amortization from the predecessor amount is due to the Scurlock
acquisition in May 1999, the West Texas Gathering System acquisition in July
1999, and the All American Pipeline acquisition in July 1998. The increase from
the 1998 pro forma amount is attributable to the two 1999 acquisitions.
Interest expense was $6.6 million for the third quarter of 1999, compared to
$5.4 million for our predecessor and $3.3 million on a pro forma basis for the
third quarter of 1998. The increase in interest expense from the predecessor
level is due to interest associated with the debt incurred for the Scurlock
acquisition, the West Texas Gathering System acquisition, the All American
Pipeline acquisition, and an increase in interest expense related to hedged
inventory transactions. The increase from the 1998 pro forma amount is primarily
attributable to the two 1999 acquisitions as well as the increase in interest
expense related to hedged inventory transactions. In October of this year, we
completed an equity offering for net proceeds of approximately $50.8 million
which were used to reduce debt. We should see the benefit of the debt reduction
on interest expense in the fourth quarter.
During the third quarter of 1999, we incurred a charge of $1.9 million related
to noncash incentive compensation incurred by our general partner for certain of
its' officers and key employees. In 1998, the general partner granted the
employees the right to earn ownership in our common units owned by the general
partner. The units vest over a three-year period subject to our paying
distributions on common and subordinated units. While we do not bear any of the
economic burden of this compensation, generally accepted accounting principles
require these charges to be "pushed down" from the general partner's financial
results to our results. This charge is offset by an equivalent increase in
partners' equity as the payments by the general partner are considered a
contribution to our equity. In addition, a $1.0 million restructuring charge,
primarily associated with severance-related expenses, was also incurred.
Nine months ended September 30, 1999 and 1998
The following table reflects our operating results on a historical basis for
the 1999 period and compares those results to our predecessor's historical
results, as well as to our pro forma results for the 1998 period (unaudited) (in
thousands):
<TABLE>
<CAPTION>
Nine Months Ended September 30,
-------------------------------------------------
1999 1998 1998
-------------- -------------- --------------
(Predecessor) (Pro Forma)
<S> <C> <C> <C>
Operating Results:
Revenues $ 2,579,092 $ 755,653 $ 1,194,648
============== ============== ==============
Gross margin:
Pipeline $ 40,475 $ 8,110 $ 42,236
Gathering and marketing
and terminalling and storage 38,869 15,004 16,350
-------------- -------------- --------------
Total 79,344 23,114 58,586
General and administrative expense (15,217) (3,561) (4,765)
-------------- -------------- --------------
Gross profit $ 64,127 $ 19,553 $ 53,821
============== ============== ==============
Net income $ 35,481 $ 6,512 $ 36,222
============== ============== ==============
</TABLE>
Table continued on following page
Page 14
<PAGE>
<TABLE>
<CAPTION>
Nine Months Ended September 30,
-------------------------------------------------
1999 1998 1998
-------------- -------------- --------------
(Predecessor) (Pro Forma)
<S> <C> <C> <C>
Average Daily Volumes (barrels):
Pipeline activities:
All American
Tariff activities 106 117 136
Margin activities 54 42 38
Other 43 - -
-------------- -------------- --------------
Total 203 159 174
============== ============== ==============
Lease gathering 240 85 105
Bulk purchases 138 94 94
-------------- -------------- --------------
Total 378 179 199
============== ============== ==============
Terminal throughput 75 79 79
============== ============== ==============
</TABLE>
For the nine months ended September 30, 1999, we reported net income of $35.5
million, or $1.13 per limited partner unit, on total revenues of $2.6 billion,
compared to predecessor net income of $6.5 million on total revenues of $755.7
million. Pro forma net income was $36.2 million on total revenues of $1.2
billion for the same nine month period in 1998. The current period results
include a $1.4 million severance-related restructuring charge and a $1.9 million
noncash incentive compensation charge. Excluding these two items, net income
would have been $38.8 million or $1.24 per unit. Gross margin for the first nine
months of 1999 was $79.3 million, compared to $23.1 million for our predecessor
and $58.6 million on a pro forma basis during the comparable period of last
year. Approximately 51% of the current year gross margin was from pipeline
activities and 49% was from gathering, marketing, storage and terminalling
activities. The two recently completed acquisitions contributed approximately
$19.1 million and $4.5 million to gross margin and net income, respectively, for
the first nine months of 1999. Net cash provided by operating activities, as
reported in the Consolidated Statements of Cash Flows was $1.5 million for the
nine months ended September 30, 1999, as compared to $21.6 million for the 1998
comparative period. The decrease in the current year period is primarily due to
increased inventory levels associated with hedged inventory transactions.
Pipeline Operations. Gross margin from pipeline operations was $40.5 million
for the first nine months of 1999 compared to $8.1 million for our predecessor
and approximately $42.2 million on a pro forma basis for the same period in
1998. The decrease from the prior year pro forma amount resulted primarily from
lower tariff transport volumes, primarily due to lower production from Exxon's
Santa Ynez Field and the Point Arguello Field, both offshore California. This
decrease was partially offset by increased margins from our pipeline merchant
activities, a reduction in operating costs attributable to the All American
Pipeline, and to the two recently completed acquisitions which contributed
approximately $2.6 million of pipeline gross margin. Our predecessor's results
for the first nine months of 1998 include pipeline operations beginning July 30,
1998, the date of acquisition of the All American Pipeline.
The margin between revenue and direct cost of crude purchased was $24.1
million for the first nine months of 1999, compared to $2.6 million for our
predecessor and $13.2 million on a pro forma basis for the comparable 1998
period. Pipeline tariff revenues were approximately $34.8 million in the first
nine months of 1999 compared to approximately $9.5 million and $48.0 million for
our predecessor and on a pro forma basis, respectively, for the same period of
1998. Pipeline operations and maintenance expenses were approximately $20.1
million for the first nine months of 1999 as compared to $4.0 million and $20.0
million for our predecessor and on a pro forma basis, respectively, for the
first nine months of 1998. Excluding operations and maintenance expenses
associated with our two 1999 acquisitions, operations and maintenance expenses
were $18.2 million, a decrease of approximately $1.8 million from the 1998 pro
forma amount.
Tariff transport volumes on the All American Pipeline decreased from an
average of 136,000 barrels per day in the first nine months of 1998 on a pro
forma basis to 106,000 barrels per day in the comparable current year period due
primarily to a decrease in shipments of offshore California production, which
decreased from 96,000 barrels per day on a pro forma basis in the first nine
months of 1998 to 81,000 barrels per day in the 1999 comparative period. Barrels
associated with our merchant activities on the All American Pipeline increased
from 38,000 barrels per day on a pro forma basis to 54,000 barrels per day in
the first nine months of 1999. Tariff volumes shipped on the Scurlock and West
Texas Gathering Systems averaged 43,000 barrels per day during the first nine
months of 1999.
Page 15
<PAGE>
The following table sets forth the All American Pipeline average deliveries
per day within and outside California.
<TABLE>
<CAPTION>
Nine Months Ended September 30,
--------------------------------------------
1999 1998 1998
------------ ------------ ------------
(Predecessor) (Pro Forma)
(in thousands)
<S> <C> <C> <C>
Deliveries:
Average daily volumes (barrels):
Within California 102 113 116
Outside California 58 46 58
------------ ------------ ------------
Total 160 159 174
============ ============ ============
</TABLE>
Gathering and Marketing Activities and Terminalling and Storage Activities.
Gross margin from gathering, marketing, terminalling and storage activities was
approximately $38.9 million for the first nine months of 1999 compared to $15.0
million and $16.4 million in the prior year comparative period for our
predecessor and on a pro forma basis, respectively. The Scurlock acquisition
contributed approximately $16.5 million to gross margin for the first nine
months of 1999. The increase in gross margin is due to an increase in lease
gathering and bulk purchase volumes, primarily as a result of the Scurlock
acquisition, and an increase in storage capacity leased at our Cushing Terminal.
Lease gathering volumes increased from an average of 105,000 barrels per day on
a pro forma basis for the first nine months of 1998 to approximately 240,000
barrels per day in the comparable period of 1999. Bulk purchase volumes
increased from approximately 94,000 barrels per day in last year's first nine
months to approximately 138,000 barrels per day this year. Throughput volumes at
our terminals were down approximately 4,000 barrels per day in the current year
period. This decrease was offset by increased leased terminal capacity which
increased significantly from approximately 1.1 million barrels per month in last
year's period to 1.9 million barrels per month during the current year period.
The 1.1 million barrel expansion of our Cushing Terminal was placed in service
in the second quarter of 1999.
General and administrative expenses were $15.2 million for the nine months
ended September 30, 1999, compared to $3.6 million and $4.8 million for the
first nine months of 1998 for our predecessor and on a pro forma basis,
respectively. The increase in 1999 as compared to the 1998 pro forma amount is
due to the Scurlock acquisition, continued expansion of our business activities
and expenses related to the operation of Plains All American Pipeline as a
public entity. These increases, in addition to expenses associated with the
acquisition of the All American Pipeline, account for the increase from our
predecessor's 1998 expense level.
Depreciation and amortization expense was $11.4 million for the nine months
ended September 30, 1999, compared to $2.6 million for our predecessor and $8.5
million on a pro forma basis, for the 1998 comparative period. The increase in
depreciation and amortization from the predecessor amount is due to the Scurlock
acquisition in May 1999, the West Texas Gathering System acquisition in July
1999, and the All American Pipeline acquisition in July 1998. The increase from
the 1998 pro forma amount is attributable to the two 1999 acquisitions.
Interest expense was $14.5 million for the first nine months of 1999, compared
to $7.2 million for our predecessor and $9.8 million on a pro forma basis for
the first nine months of 1998. The increase in interest expense from our
predecessor's level is due to interest associated with the debt incurred for the
Scurlock acquisition, the West Texas Gathering System acquisition, the All
American Pipeline acquisition and an increase in interest related to hedged
inventory transactions. The increase from the 1998 pro forma amount is primarily
attributable to the two 1999 acquisitions as well as the increase in interest
expense related to hedged inventory transactions. In October of this year, we
completed an equity offering for net proceeds of approximately $50.8 million
which were used to reduce debt. We should see the benefit of the debt reduction
on interest expense in the fourth quarter.
During the first nine months of 1999, we incurred a charge of $1.9 million
related to noncash incentive compensation incurred by our general partner for
certain of its' officers and key employees. In 1998, the general partner
granted the employees the right to earn ownership in our common units owned by
the general partner. The units vest over a three-year period subject to our
paying distributions on common and subordinated units. While we do not bear any
of the economic burden of this compensation, generally accepted accounting
principles require these charges to be "pushed down" from the general partner's
financial results to our results. This charge is offset by an equivalent
increase in partners' equity as the payments by the general partner are
considered a contribution to our equity. In addition, $1.4 million of
restructuring charges, primarily associated with severance-related expenses, was
also incurred. As a result of the restructuring, we expect to reduce costs by
approximately $1.3 million per year.
Page 16
<PAGE>
CAPITAL RESOURCES, LIQUIDITY AND FINANCIAL CONDITION
Public Offering
As of September 30, 1999, we had approximately $323 million of long-term debt
and a debt-to-total capitalization ratio of approximately 51%. We completed a
public offering of approximately three million common units in October 1999 for
net proceeds of approximately $51 million, which were used to reduce outstanding
debt. At September 30, 1999, pro forma for the offering, we had approximately
$272 million of long-term debt and a debt-to-total capitalization ratio of 43%.
All American Pipeline Linefill Sale
We have begun implementing plans to sell approximately 5.2 million barrels of
crude oil linefill which we own. The sale process will commence in December and
should be substantially completed by the end of the first quarter of 2000.
Proceeds from the sale of the linefill are expected to be approximately $100
million, net of associated costs, and will be used to reduce outstanding debt.
We estimate that as a result, annual interest expense will decrease by
approximately $8 million. We estimate that we will recognize a gain of
approximately $40 to $45 million in connection with the sale of linefill.
At September 30, 1999, our long-term debt was $323 million. Pro forma for the
linefill sale proceeds and the October 1999 public unit offering, our total
long-term debt will be reduced to approximately $172 million, and our debt-to-
total capitalization will improve to approximately 33% as compared to 51% at
September 30, 1999.
We own 100% of the 5.2 million barrels of crude oil linefill located in the
segment of the All American Pipeline that extends from Emidio, California, to
McCamey, Texas. Except for minor third party volumes, one of our subsidiaries
has been the sole shipper on this segment of the pipeline since its predecessor
acquired the line from the Goodyear Tire & Rubber Company in July 1998. This
section of the line is under FERC jurisdiction and eligible shippers may
initiate their own shipments by providing the 5.2 million barrels of crude oil
linefill required to operate the line, paying the posted tariff and committing
to minimum throughput volumes that are necessary to operate the pipeline.
Pending receipt of third party nominations and the requisite crude oil linefill,
All American Pipeline will suspend shipments on this segment of the line. No
other segment of the All American Pipeline will be affected. For the twelve
months ended September 30, 1999 we reported gross margin of approximately $4
million from volumes transported on this segment of the line.
The line will initially be kept in a state of readiness to service any third
party shippers that elect to transport crude oil on this segment of the line,
subject to their providing the required 5.2 million barrels of crude oil
linefill. Depending on market conditions, we may replace the linefill at a
future date and recommence our own shipments. In the event this segment of the
line remains unused for a reasonable period of time, we intend to evaluate
alternative uses for this segment of the pipeline. We believe that no impairment
of the asset is necessary at this time.
Scurlock Acquisition
On May 12, 1999, Plains Scurlock Permian, L.P., a limited partnership of which
Plains All American Inc. is the general partner and Plains Marketing, L.P. is
the limited partner, completed the Scurlock acquisition. Including working
capital adjustments and associated closing and financing costs, the cash
purchase price was approximately $142 million.
Financing for the Scurlock acquisition was provided through:
. borrowings of approximately $92 million under Plains Scurlock's limited
recourse bank facility with BankBoston, N.A.;
. the sale to the general partner of 1.3 million Class B common units of
Plains All American Pipeline for a total cash consideration of $25 million
representing a purchase price of $19.125 per unit, the price equal to the
market value of our common units on May 12, 1999; and
. a $25 million draw under our existing revolving credit agreement.
The Class B common units are pari passu with common units with respect to
quarterly distributions, and after November 12, 1999 are convertible into common
units upon approval by a majority of the common units voting at a meeting of
unitholders. If the approval of a conversion by the common unitholders is not
obtained within 120 days of a request by the Class B unitholders, the Class B
unitholders will be entitled to receive distributions, on a per unit basis,
equal to 110% of the amount of distributions paid on a common unit, with such
distribution right increasing to 115% if such approval is not secured within 90
days after the end of the initial 120 day period. Except for the vote to approve
the conversion, the Class B units have the same voting rights as the common
units.
Page 17
<PAGE>
West Texas Gathering System Acquisition
On July 15, 1999, Plains Scurlock Permian, L.P. completed the acquisition of a
West Texas crude oil pipeline and gathering system from Chevron Pipe Line
Company for approximately $36 million, including transaction costs. Our total
acquisition cost was approximately $38.9 million including costs to address
certain issues identified in the due diligence process. The principal assets
acquired include approximately 450 miles of crude oil transmission mainlines,
approximately 400 miles of associated gathering and lateral lines and
approximately 2.9 million barrels of crude oil storage and terminalling capacity
in Crane, Ector, Midland, Upton, Ward and Winkler Counties, Texas. Financing for
the amounts paid at closing was provided by a draw under the term loan portion
of the Plains Scurlock credit facility.
Credit Agreements
The Plains Scurlock credit facility consists of a five-year $126.6 million
term loan and a three-year $35 million revolving credit facility. The Plains
Scurlock credit facility is nonrecourse to Plains All American Pipeline, Plains
Marketing, L.P. and All American Pipeline, L.P. and is secured by substantially
all of the assets of Plains Scurlock Permian, L.P. and its subsidiaries,
including the Scurlock assets and the West Texas Gathering System. Borrowings
under the term loan bear interest at LIBOR plus 3% and under the revolving
credit facility at LIBOR plus 2.75%. A commitment fee equal to 0.5% per year is
charged on the unused portion of the revolving credit facility. The revolving
credit facility, which may be used for borrowings or letters of credit to
support crude oil purchases, matures in May 2002. The term loan provides for
principal amortization of $0.7 million annually beginning May 2000, with a final
maturity in May 2004. In addition, Plains Scurlock has interest rate swap and
collar arrangements for an aggregate notional principal amount of $90 million.
As of September 30, 1999, letters of credit of approximately $14.0 million were
outstanding under the revolver and borrowings of $126.6 and $8.0 million were
outstanding under the term loan and revolver, respectively. The term loan was
reduced to $82.6 million in connection with our October 1999 public unit
offering.
Concurrently with the closing of our initial public offering, All American
Pipeline, L.P. entered into a $225 million bank credit agreement that includes a
$175 million term loan facility and a $50 million revolving credit facility. The
bank credit agreement is secured by a lien on substantially all of our assets
except the assets which secure the Plains Scurlock credit facility. All American
Pipeline, L.P. may borrow up to $50 million under the revolving credit facility
for acquisitions, capital improvements, working capital and general business
purposes. At September 30, 1999, All American Pipeline, L.P. had $175 million
outstanding under the term loan facility, representing indebtedness assumed from
the general partner and $14.3 million outstanding under the revolving credit
facility. The term loan facility matures in 2005, and no principal is scheduled
for payment prior to maturity. The term loan facility may be prepaid at any time
without penalty. The revolving credit facility expires in November 2000.
In August 1999, we terminated a swap arrangement on an aggregate notional
principal amount of $175 million which was used to hedge the interest rate
under the All American Pipeline term loan facility. We received consideration of
approximately $10.9 million, which is being amortized over the life of the loan
as a reduction in interest expense. The balance of this transaction has been
classified in our Consolidated Balance Sheet under Deferred Credits.
Additionally, we entered into new interest rate collar arrangements on a
notional principal amount of $125 million.
Plains Marketing, L.P. has a $175 million letter of credit and borrowing
facility, the purpose of which is to provide standy letters of credit to support
the purchase and exchange of crude oil for resale and borrowings to finance
crude oil inventory which has been hedged against future price risk or
designated as working inventory. Aggregate availability under the letter of
credit facility for direct borrowings and letters of credit is limited to a
borrowing base which is determined monthly based on certain of Plains Marketing,
L.P.'s current assets and current liabilities, primarily crude oil inventory and
accounts receivable and accounts payable related to the purchase and sale of
crude oil. This facility is secured by a lien on substantially all of our assets
except the assets which secure the Plains Scurlock credit facility. At September
30, 1999, the borrowing base under the letter of credit facility supported the
full $175 million of availability. The letter of credit facility has a $40
million sublimit for borrowings to finance hedged inventories of crude oil. At
September 30, 1999, there were letters of credit of approximately $90.7 million
and borrowings of $30.3 million outstanding under this facility.
All of our credit facilities contain prohibitions on distributions on, or
purchases or redemptions of, units if any default or event of default is
continuing. In addition, our facilities contain various covenants limiting our
ability to:
. incur indebtedness;
. grant liens;
. sell assets in excess of certain limitations;
. engage in transactions with affiliates;
. make investments;
. enter into hedging contracts; and
. enter into a merger, consolidation or sale of assets.
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<PAGE>
Each of our facilities treats a change of control as an event of default. In
addition, the terms of the Plains Marketing letter of credit and borrowing
facility and the All American Pipeline bank credit agreement require us to
maintain:
. a current ratio of 1.0 to 1.0;
. a debt coverage ratio which is not greater than 5.0 to 1.0;
. an interest coverage ratio which is not less than 3.0 to 1.0;
. a fixed charge coverage ratio which is not less than 1.25 to 1.0; and
. a debt to capital ratio of not greater than 0.60 to 1.0.
The terms of the Plains Scurlock credit facility require us to maintain at the
end of each quarter:
. a debt coverage ratio of 6.0 to 1.0 from October 1, 1999 through June 30,
2000; 5.0 to 1.0 from July 1, 2000 through June 30, 2001; and 4.0 to 1.0
thereafter; and
. an interest coverage ratio of 2.0 to 1.0 from October 1, 1999 through
June 30, 2000 and 2.5 to 1.0 thereafter.
In addition, the Plains Scurlock credit facility contains limitations on the
Plains Scurlock Permian operating partnership's ability to make distributions to
us if its indebtedness and current liabilities exceed certain levels as well as
the amount of expansion capital it may expend.
We intend to amend or replace our existing credit facilities, except for our
$175 million letter of credit and borrowing facility, to enable us to
consolidate our various credit facilities and increase the size to approximately
$450 million to $500 million. This will increase the unused availability of the
credit facilities and, therefore, our liquidity and flexibility. At September
30, 1999, pro forma for our October public offering, the aggregate balance
of long-term debt outstanding on these facilities was approximately $273
million. While we are in discussions with our principal lenders under each of
our credit facilities, we cannot assure you that we will be successful in
obtaining borrowing capacity in excess of what is currently available to us or
that the terms under any new or amended facility will be as or more favorable to
us than those contained in our existing facilities.
Partnership Distributions
On November 12, 1999, we paid a cash distribution of $0.48125 per unit on our
outstanding common units, Class B units and subordinated units. The distribution
was paid to unitholders of record on November 1, 1999. The total distribution
paid was approximately $17.1 million, with approximately $7.7 million paid to
our public unitholders and the remainder paid to our general partner for its
limited and general partner interests. This distribution represents an increase
of $.01875 per unit over the previous quarter's distribution. This current
distribution level represents an increase of 6.9% over the minimum quarterly
distribution specified in the partnership agreement of $0.45 per unit.
Investing and Financing Activities
Net cash flows used in investing activities were $181.1 million and $398.0
million for the nine months ended September 30, 1999 and 1998, respectively. In
1999 these amounts include:
. approximately $136.4 million paid in connection with the Scurlock
acquisition (net of Scurlock cash on hand at the acquisition date);
. approximately $35.3 million paid in connection with the acquisition of the
West Texas Gathering System;
. payments for expansion capital of approximately $7.1 million, including
approximately $4.8 million related to the expansion of our Cushing
Terminal; and
. payments for maintenance capital of approximately $0.9 million.
In 1998 these amounts include:
. approximately $393.9 million paid in connection with the acquisition of the
All American Pipeline and the SJV Gathering System;
. payments for expansion capital of approximately $2.5 million; and
. payments for maintenance capital of approximately $0.9 million.
Maintenance capital expenditures are capital expenditures made to replace
partially or fully depreciated assets to maintain the existing operating
capacity of existing assets or extend their useful lives. Capital expenditures
made to expand capacity, whether through construction or acquisition, are not
considered maintenance capital expenditures. Repair
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<PAGE>
and maintenance expenditures associated with existing assets that do not extend
the useful life or expand the operating capacity are charged to expense as
incurred.
Net cash flows provided by financing activities were $177.3 million and $386.4
million for the nine months ended September 30, 1999 and 1998, respectively. In
1999 these amounts include:
. proceeds of $25 million from the Class B common units which were issued in
connection with the Scurlock acquisition;
. proceeds of approximately $117.0 million borrowed to fund the Scurlock
acquisition;
. proceeds of approximately $36.6 million borrowed to fund the West Texas
Gathering System acquisition;
. borrowings and repayments of approximately $128.4 million and $133.1
million, respectively, under our revolving credit facility and the Plains
Scurlock credit facility to fund our operating cash requirements;
. short-term borrowings and repayments under our letter of credit and
borrowing facility of approximately $42.2 million and $21.7 million,
respectively, for hedged inventory transactions; and
. cash distributions paid to unitholders of approximately $34.6 million,
including $14.5 million paid to our public unitholders, with the remainder
paid to our general partner for its limited partner and general partner
interests.
In 1998 these amounts include:
. proceeds of approximately $300 million from borrowings made in connection
with the acquisition of the All American Pipeline and the SJV Gathering
System;
. a capital contribution from Plains Resources of approximately $113.7
million;
. approximately $6.1 million of financing costs;
. short-term borrowings and repayments under our predecessor's letter of
credit and borrowing facility of approximately $28.8 million and $35.3
million, respectively, for hedged inventory transactions; and
. repayments of approximately $32.3 million under our predecessor's senior
credit facility.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 133, Accounting for Derivative
Instruments and Hedging Activities ("SFAS 133"). SFAS 133 requires that all
derivative instruments be recorded on the balance sheet at their fair value.
Changes in the fair value of derivatives are recorded each period in current
earnings or other comprehensive income, depending on whether a derivative is
designated as part of a hedge transaction and, if so, the type of hedge
transaction. For fair value hedge transactions in which we are hedging changes
in an asset's, liability's, or firm commitment's fair value, changes in the fair
value of the derivative instrument will generally be offset in the income
statement by changes in the hedged item's fair value. For cash flow hedge
transactions, in which we are hedging the variability of cash flows related to a
variable-rate asset, liability, or a forecasted transaction, changes in the fair
value of the derivative instrument will be reported in other comprehensive
income. The gains and losses on the derivative instrument that are reported in
other comprehensive income will be reclassified as earnings in the periods in
which earnings are affected by the variability of the cash flows of the hedged
item. This statement was amended by Statement of Financial Accounting Standards
No. 137, Accounting for Derivative Instruments and Hedging Activities - Deferral
of the Effective Date of FASB Statement No. 133 ("SFAS 137") issued in June
1999. SFAS 137 defers the effective date of SFAS 133 to fiscal years beginning
after June 15, 2000. We are required to adopt this statement beginning in 2001.
We have not yet determined the effect that the adoption of SFAS 133 will have on
our financial position or results of operations.
YEAR 2000
Year 2000 Issue. Some software applications, hardware and equipment, and
embedded chip systems identify dates using only the last two digits of the year.
These products may be unable to distinguish between dates in the year 2000 and
dates in the year 1900. That inability, if not addressed, could cause
applications, equipment or systems to fail or provide incorrect information
after December 31, 1999, or when using dates after December 31, 1999. This in
turn could have an adverse effect on us because we directly depend on our own
applications, equipment and systems and indirectly depend on those of third
parties with which we do business. Our key applications, equipment, and
automated systems consist of:
. financial systems applications;
. computer hardware and equipment;
. embedded chip systems; and
. third-party developed software.
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Year 2000 Project. In order to address the year 2000 issue, we have
established a year 2000 project team. As we evaluate new properties for
acquisition, we perform a pre-acquisition assessment to determine year 2000
readiness. Upon acquisition, we incorporate these properties into the year 2000
project. The project team coordinates the five phases of the year 2000 project.
Those phases are:
. assessment;
. remediation;
. testing;
. implementation of the necessary modifications; and
. contingency planning.
The year 2000 project also includes the evaluation of the extent and status of
the year 2000 compliance efforts of third parties who are material to our
operations and business units. We have retained a year 2000 consulting firm to
perform an assessment of certain field equipment which has embedded chip
systems. We have substantially completed performing the necessary remediation,
testing and modification of these embedded chip systems which are critical to
our field operations.
Year 2000 Project Status. All phases of our year 2000 project are
substantially complete for all key applications, equipment, and automated
systems.
An integral part of the year 2000 project is communication with our critical
suppliers and key customers and partners to determine whether their operations
and/or services or products will be year 2000 ready. We have contacted
substantially all of these third parties requesting information on the status of
their year 2000 efforts and have substantially completed our evaluation of their
responses. We are making additional inquiries as needed.
Contingency Planning. We have developed appropriate contingency plans for each
material "at risk" business activity to provide an alternative means of
functioning in an attempt to minimize the effect of any potential year 2000
disruptions, both internally and with third parties. The contingency plans are
expected to be completed by December 1, 1999. Communications with business
partners that are critical to our business will continue throughout the
remainder of 1999, and our contingency plans address any concerns regarding the
year 2000 readiness of these third parties to the extent we believe it is
necessary.
Costs of the Year 2000 Project. From November 23, 1998, the date we acquired
the business of the predecessor, through September 30, 1999, we have incurred
approximately $630,000 as our share of expenses for Plains Resources' year 2000
project, of which approximately $240,000 are costs paid to third parties. Prior
to November 23, 1998, the predecessor incurred approximately $242,000 to address
the year 2000 issue. While the total cost of the year 2000 project is still
being evaluated, we currently estimate that our costs of the project to be
incurred in the remainder of 1999 and 2000 is between $200,000 and $300,000. We
anticipate that approximately one-half of these estimated costs will be internal
costs. We expect to fund these expenditures with cash from operations or
borrowings.
Risk of Non-Compliance. The items that pose the greatest year 2000 risks for
us if implementation of the year 2000 project is not successful are our
financial systems applications, our pipeline supervisory control and data
acquisition ("SCADA") systems and embedded chip systems in our field equipment.
The potential problems if the year 2000 project is not successful with respect
to the financial systems applications are disruptions of our revenue gathering
from and distribution to our customers and vendors and the inability to perform
our other financial and accounting functions. Failures of SCADA systems or
embedded chip systems in our field equipment or our customers' equipment could
disrupt our crude oil transportation, terminalling and storage activities and
our gathering and marketing activities.
While we believe that the year 2000 project will substantially reduce the
risks associated with the year 2000 issue, there can be no assurance that we
will be successful in completing each and every aspect of the project on
schedule, and if successful, that the project will have the expected results.
Due to the general uncertainty inherent in the year 2000 issue, we cannot
conclude that our failure or the failure of third parties to achieve year 2000
compliance will not adversely affect our financial position, results of
operations or cash flows. Specific factors that might affect the success of our
year 2000 efforts and the occurrence of a year 2000 disruption or expense
include:
. our failure or the failure of our consultants to properly identify deficient
systems;
. the failure of the selected remedial action to adequately address any
deficiencies;
. our failure or the failure of our consultants to complete the remediation
in a timely manner, due to shortages of qualified labor or other factors;
. unforeseen expenses related to the remediation of existing systems or the
transition to replacement systems; and
. the failure of third parties to become compliant or to adequately notify us
of potential non-compliance.
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QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS
We are exposed to various market risks, including volatility in crude oil
commodity prices and interest rates. To manage such exposure, we monitor our
inventory levels, current economic conditions and our expectations of future
commodity prices and interest rates when making decisions with respect to risk
management. We do not enter into derivative transactions for speculative trading
purposes. Substantially all of our derivative contracts are exchanged or traded
with major financial institutions and the risk of credit loss is considered
remote.
Commodity Price Risk. The fair value of outstanding derivative commodity
instruments and the change in fair value that would be expected from a 10
percent adverse price change are shown in the table below:
<TABLE>
<CAPTION>
Change in Fair
Fair Value from 10%
At September 30, 1999 Value Adverse Price Change
- ------------------------------------ -------------- ---------------------------
(in millions)
<S> <C> <C>
Crude Oil:
Swaps $ (2.3) $ (0.8)
Futures and options contracts 0.8 (12.0)
</TABLE>
Interest Rate Risk. Our debt instruments are sensitive to market fluctuations
in interest rates. The table below presents principal payments and the related
weighted average interest rates by expected maturity dates for debt outstanding
at September 30, 1999. Our variable rate debt bears interest at LIBOR plus the
applicable margin. The average interest rates presented below are based upon
rates in effect at September 30, 1999. The carrying value of variable rate bank
debt approximates fair value as interest rates are variable, based on prevailing
market rates.
<TABLE>
<CAPTION>
Expected Year of Maturity
-------------------------------------------------------------------------- Fair
1999 2000 2001 2002 2003 Thereafter Total Value
--------- --------- --------- --------- --------- ---------- --------- ---------
(dollars in millions)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Liabilities:
Short-term debt - variable rate $ 30.3 $ - $ - $ - $ - $ - $ 30.3 $ 30.3
Average interest rate 6.88% 6.88%
Long-term debt - variable rate - 15.0 0.7 8.7 0.7 298.7 323.8 323.8
Average interest rate - 8.26% 8.47% 9.19% 8.47% 7.75% 7.82%
</TABLE>
Interest rate swaps and collars are used to hedge the interest rate on
underlying debt obligations. These instruments hedge the interest rate on
specific debt issuances and qualify for hedge accounting. The interest rate
differential is reflected as an adjustment to interest expense over the life of
the instruments. At September 30, 1999, we had interest rate swap and collar
arrangements for an aggregate notional principal amount of $215 million. We
would pay approximately $0.3 million if such arrangements were terminated as of
such date.
FORWARD-LOOKING STATEMENTS AND ASSOCIATED RISKS
All statements, other than statements of historical fact, included in this
report are forward-looking statements, including, but not limited to, statements
identified by the words "anticipate", "believe", "estimate", "plan", "intend",
and "forecast" and similar expressions and statements regarding our business
strategy, plans and objectives of our management for future operations. These
statements reflect our current views and that of our general partner with
respect to future events, based on what we believe are reasonable assumptions.
These statements, however, are subject to certain risks, uncertainties and
assumptions, including, but not limited to (i) the availability of adequate
supplies of and demand for crude oil in the areas in which we operate, (ii) the
impact of crude oil price fluctuations, (iii) the effects of competition, (iv)
the success of our risk management activities, (v) the availability (or lack
thereof) of acquisition or combination opportunities, (iv) the impact of current
and future laws and governmental regulations, (vii) environmental liabilities
that are not covered by an indemnity or insurance, (viii) general economic,
market or business conditions and (ix) uncertainties inherent in the year 2000
issue. If one or more of these risks or uncertainties materialize, or if
underlying assumptions prove incorrect, actual results may vary materially from
those in the forward-looking statements. Except as required by applicable
securities laws, we do not intend to update these forward-looking statements and
information.
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PART II. OTHER INFORMATION
ITEMS 1, 2, 3, 4 & 5 ARE NOT APPLICABLE AND HAVE BEEN OMITTED.
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
A. Exhibits
10.21 Second Amendment dated as of August 19,1999 to Plains Scurlock Credit
Agreement between Plains Scurlock Permian, L.P., Bank Boston, N.A. and
certain financial institutions (incorporated by reference to Exhibit
10.21 to Registration Statement on Form S-1, file no. 333-86907).
10.22 Second Amendment dated September 24, 1999, to Credit Agreement among
All American Pipeline, L.P., Plains Marketing, L.P., Plains All
American Pipeline, L.P. and BankBoston, N.A. and certain other banks.
10.23 Second Amendment dated September 24, 1999, to Amended and Restated
Credit Agreement among Plains Marketing, L.P., Plains All American
Pipeline, L.P., All American Pipeline, L.P., BankBoston, N.A. and
certain other banks.
27. Financial Data Schedule
B. Reports on Form 8-K
Amendment No. 2 to Current Report was filed on September 16, 1999, on
Form 8-K/A which amends the financial statements, exhibits or other portions
of the Current Report on Form 8-K filed with the Securities and Exchange
Commission on May 27, 1999, with respect to the Partnership's acquisition of
Scurlock Permian LLC and certain other pipeline assets from Marathon Ashland
Petroleum LLC.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned and thereunto duly authorized.
PLAINS ALL AMERICAN PIPELINE, L.P.
By: PLAINS ALL AMERICAN INC.
Its General Partner
Date: November 15, 1999 By: /s/ Cynthia A. Feeback
-------------------------------------
Cynthia A. Feeback, Treasurer
(Principal Accounting Officer) of the
General Partner
<PAGE>
EXHIBIT 10.22
[ALL AMERICAN]
SECOND AMENDMENT TO CREDIT AGREEMENT
THIS SECOND AMENDMENT TO CREDIT AGREEMENT (this "Amendment") dated as of
the 24th day of September, 1999, by and among ALL AMERICAN PIPELINE, L.P.
("Borrower"), PLAINS MARKETING, L.P. ("Marketing"), PLAINS ALL AMERICAN
PIPELINE, L.P. ("Plains MLP"), and BANKBOSTON, N.A., as Administrative Agent (in
such capacity, "Administrative Agent"), and the Lenders party hereto.
W I T N E S S E T H:
WHEREAS, Borrower, Marketing, Plains MLP, Administrative Agent, and Lenders
entered into that certain Credit Agreement dated as of November 17, 1998 (as
amended, restated, or supplemented to the date hereof, the "Original Agreement")
for the purposes and consideration therein expressed, pursuant to which Lenders
became obligated to make and made loans to Borrower as therein provided; and
WHEREAS, Borrower, Marketing, Plains MLP, Administrative Agent, and Lenders
desire to amend the Original Agreement for the purposes described herein;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements contained herein and in the Original Agreement, in consideration
of the loans which may hereafter be made by Lenders to Borrower, and for other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto do hereby agree as follows:
ARTICLE I. -- Definitions and References
(S) 1.1. Terms Defined in the Original Agreement. Unless the context
otherwise requires or unless otherwise expressly defined herein, the terms
defined in the Original Agreement shall have the same meanings whenever used in
this Amendment.
(S) 1.2. Other Defined Terms. Unless the context otherwise requires, the
following terms when used in this Amendment shall have the meanings assigned to
them in this (S) 1.2.
"Amendment" means this Second Amendment to Credit Agreement.
"Credit Agreement" means the Original Agreement as amended hereby.
ARTICLE II. -- Amendments and Consent
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<PAGE>
(S) 2.1. Amendments.
(a) Clause (e) of the definition of "Permitted Investments" in Section 1.1
of the Original Agreement is hereby amended to read as as follows:
"(e) Investments directly or indirectly by Restricted Persons in
Unrestricted Subsidiaries in an aggregate amount not to exceed, at any one
time outstanding, the sum of (i) $50,000,000, plus (ii) the amount of net
proceeds from sales by Plains MLP of additional Partnership Interests (as
such term is defined in the Partnership Agreement) made after September 15,
1999."
(b) The following clause (e) is hereby added to Section 7.2 of the Original
Agreement:
"(e) Liens under or with respect to accounts with brokers or
counterparties with respect to Hedging Contracts consisting of cash,
commodities or futures contracts, options, securities, instruments, and
other like assets securing only Hedging Contracts permitted under Section
7.1;"
(c) Clauses (e) through (m), inclusive, of Section 7.2 of the Original
Agreement are hereby re-lettered as clauses (f) through (n), respectively.
(d) The clause in Section 7.3(b)(v)(A) of the Original Agreement reading
"long-term unsecured and unenhanced debt obligations rated AA or Aa2 or better,"
is hereby amended to read in its entirety as follows:
"long-term unsecured and unenhanced debt obligations rated A or A2 or
better,"
(S) 2.2. Consent. Administrative Agent and each Lender hereby (i) approve
the establishment by Marketing of a brokerage account with Cargill Investor
Services, Inc. pursuant to Section 7.3(b) of the Credit Agreement and (ii)
permit the execution, delivery, and performance by Marketing of Hedging
Contracts with Enron Capital & Trade Resource Corp.
ARTICLE III. -- Conditions of Effectiveness
(S) 3.1. Effective Date. This Amendment shall become effective as of the
date first above written when and only when Administrative Agent shall have
received, at Administrative Agent's office: (a) a counterpart of this Amendment
executed and delivered by Borrower, Marketing, Plains MLP, Administrative Agent,
and Majority Lenders, and (b) a certificate of a duly authorized officer of
General Partner to the effect that all of the representations and warranties set
forth in Article IV hereof are true and correct at and as of the time of such
effectiveness.
ARTICLE IV. -- Representations and Warranties
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<PAGE>
(S) 4.1. Representations and Warranties of Plains MLP and Borrower. In
order to induce Administrative Agent and Lenders to enter into this Amendment,
Plains MLP and Borrower represent and warrant to Administrative Agent and each
Lender that:
(a) The representations and warranties contained in Article V of the
Original Agreement are true and correct at and as of the time of the
effectiveness hereof, except to the extent that such representation and
warranty was made as of a specific date.
(b) Each Restricted Person is duly authorized to execute and deliver
this Amendment, and Borrower is and will continue to be duly authorized to
borrow and perform its obligations under the Credit Agreement. Each
Restricted Person has duly taken all corporate action necessary to
authorize the execution and delivery of this Amendment and to authorize the
performance of their respective obligations hereunder.
(c) The execution and delivery by each Restricted Person of this
Amendment, the performance by each Restricted Person of its respective
obligations hereunder, and the consummation of the transactions
contemplated hereby, do not and will not conflict with any provision of
law, statute, rule or regulation or of the constituent documents of any
Restricted Person, or of any material agreement, judgment, license, order
or permit applicable to or binding upon any Restricted Person, or result in
the creation of any lien, charge or encumbrance upon any assets or
properties of any Restricted Person, except in favor of Administrative
Agent for the benefit of Lenders and other Permitted Liens. Except for
those which have been duly obtained, no consent, approval, authorization or
order of any court or governmental authority or third party is required in
connection with the execution and delivery by any Restricted Person of this
Amendment or to consummate the transactions contemplated hereby.
(d) When this Amendment has been duly executed and delivered, each of
the Loan Documents, as amended by this Amendment, will be a legal and
binding instrument and agreement of each Restricted Person, enforceable in
accordance with its terms, (subject, as to enforcement of remedies, to
applicable bankruptcy, insolvency and similar laws applicable to creditors'
rights generally and to general principles of equity).
ARTICLE V. -- Miscellaneous
(S) 5.1. Ratification of Agreements. The Original Agreement, as hereby
amended, is hereby ratified and confirmed in all respects. The Loan Documents
(including but not limited to each Guaranty), as they may be amended or affected
by this Amendment, are hereby ratified and confirmed in all respects by each
Restricted Person to the extent a party thereto. Any reference to the Credit
Agreement in any Loan Document shall be deemed to refer to this Amendment also.
The execution, delivery and effectiveness of this Amendment shall not, except as
expressly provided herein, operate as a waiver of any right, power or remedy of
Administrative Agent or any Lender under the Credit Agreement or any other Loan
Document nor constitute a waiver of any provision of the Credit Agreement or any
other Loan Document.
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<PAGE>
(S) 5.2. Ratification of Security Documents. Restricted Persons,
Administrative Agent, and Lenders each acknowledge and agree that any and all
indebtedness, liabilities or obligations arising under or in connection with the
Notes are Obligations and are secured indebtedness under, and are secured by,
each and every Security Document to which any Restricted Person is a party. Each
Restricted Person hereby re-pledges, re-grants and re-assigns a security
interest in and lien on every asset of the such Restricted Person described as
Collateral in any Security Document.
(S) 5.3. Survival of Agreements. All representations, warranties,
covenants and agreements of the Restricted Persons herein shall survive the
execution and delivery of this Amendment and the performance hereof, including
without limitation the making or granting of each Loan, and shall further
survive until all of the Obligations are paid in full. All statements and
agreements contained in any certificate or instrument delivered by any
Restricted Person hereunder or under the Credit Agreement to Administrative
Agent or any Lender shall be deemed to constitute representations and warranties
by, or agreements and covenants of, such Restricted Person under this Amendment
and under the Credit Agreement.
(S) 5.4. Loan Documents. This Amendment is a Loan Document, and all
provisions in the Credit Agreement pertaining to Loan Documents apply hereto.
(S) 5.5. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK AND ANY APPLICABLE LAWS OF
THE UNITED STATES OF AMERICA IN ALL RESPECTS, INCLUDING CONSTRUCTION, VALIDITY
AND PERFORMANCE.
(S) 5.6. Counterparts. This Amendment may be separately executed in
counterparts and by the different parties hereto in separate counterparts, each
of which when so executed shall be deemed to constitute one and the same
Amendment.
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<PAGE>
IN WITNESS WHEREOF, this Amendment is executed as of the date first above
written.
ALL AMERICAN PIPELINE, L.P.
By: PLAINS ALL AMERICAN INC.,
its general partner
By: /s/ Michael R. Patterson
-----------------------------
Name: Michael R. Patterson
Title: Senior Vice President
PLAINS ALL AMERICAN PIPELINE, L.P.
By: PLAINS ALL AMERICAN INC.,
its general partner
By: /s/ Michael R. Patterson
-----------------------------
Name: Michael R. Patterson
Title: Senior Vice President
PLAINS MARKETING, L.P.
By: PLAINS ALL AMERICAN INC.,
its general partner
By: /s/ Michael R. Patterson
-----------------------------
Name: Michael R. Patterson
Title: Senior Vice President
<PAGE>
BANKBOSTON, N.A.,
Administrative Agent, LC Issuer and Lender
By: /s/ Terrence Ronan
-----------------------------
Terrence Ronan
Director
<PAGE>
ING (U.S.) CAPITAL LLC, Lender
By: /s/
----------------------------------
Name:
Title:
<PAGE>
FIRST UNION NATIONAL BANK, Lender
By: /s/ Robert R. Wetteroff
-----------------------------------
Name: Robert R. Wetteroff
Title: Senior Vice President
<PAGE>
DEN NORSKE BANK ASA, Lender
By: /s/
-----------------------------------
Name:
Title:
By: /s/
-----------------------------------
Name:
Title:
<PAGE>
MEESPIERSON CAPITAL CORP., Lender
By: /s/ Karel Louman
-----------------------------------
Name: Karel Louman
Title: Managing Director
By: /s/ Deirdre Sanborn
-----------------------------------
Name: Deirdre Sanborn
Title: Vice President
<PAGE>
BANK OF SCOTLAND, Lender
By: /s/ Annie Glynn
-----------------------------------
Name: Annie Glynn
Title: Senior Vice President
<PAGE>
CREDIT AGRICOLE INDOSUEZ, Lender
By: /s/ Dusine Gaspari
-----------------------------------
Name: Dustin Gaspari
Title: Assistant Vice President
By: /s/ Damien Meiburger
-----------------------------------
Name: Damien Meiburger
Title: Senior Vice President
<PAGE>
UNION BANK OF CALIFORNIA, N.A., Lender
By:
-----------------------------------
Name:
Title:
By:
-----------------------------------
Name:
Title:
<PAGE>
HIBERNIA NATIONAL BANK, Lender
By: /s/ David R. Reid
-----------------------------------
Name: David R. Reid
Title: Senior Vice President
<PAGE>
WELLS FARGO BANK (TEXAS),
NATIONAL ASSOCIATION, Lender
By: /s/ Ann M. Rhoads
-----------------------------------
Name: Ann M. Rhoads
Title: Vice President
15
<PAGE>
EXHIBIT 10.23
[MARKETING]
SECOND AMENDMENT TO CREDIT AGREEMENT
THIS SECOND AMENDMENT TO CREDIT AGREEMENT (this "Amendment") dated as of
the 24th day of September, 1999, by and among PLAINS MARKETING, L.P.
("Borrower"), ALL AMERICAN PIPELINE, L.P. ("All American"), PLAINS ALL AMERICAN
PIPELINE, L.P. ("Plains MLP"), and BANKBOSTON, N.A., as Administrative Agent (in
such capacity, "Administrative Agent"), and the Lenders party hereto.
W I T N E S S E T H:
WHEREAS, Borrower, All American, Plains MLP, Administrative Agent, and
Lenders entered into that certain Amended and Restated Credit Agreement dated as
of November 17, 1998 (as amended, restated, or supplemented to the date hereof,
the "Original Agreement") for the purposes and consideration therein expressed,
pursuant to which Lenders became obligated to make and made loans to Borrower as
therein provided; and
WHEREAS, Borrower, All American, Plains MLP, Administrative Agent, and
Lenders desire to amend the Original Agreement for the purposes described
herein;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements contained herein and in the Original Agreement, in consideration
of the loans which may hereafter be made by Lenders to Borrower, and for other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto do hereby agree as follows:
ARTICLE I. -- Definitions and References
(S) 1.1. Terms Defined in the Original Agreement. Unless the context
otherwise requires or unless otherwise expressly defined herein, the terms
defined in the Original Agreement shall have the same meanings whenever used in
this Amendment.
(S) 1.2. Other Defined Terms. Unless the context otherwise requires, the
following terms when used in this Amendment shall have the meanings assigned to
them in this (S) 1.2.
"Amendment" means this Second Amendment to Credit Agreement.
"Credit Agreement" means the Original Agreement as amended hereby.
ARTICLE II. -- Amendments and Consent
-1-
<PAGE>
(S) 2.1. Amendment.
(a) Clause (e) of the definition of "Permitted Investments" in Section 1.1
of the Original Agreement is hereby amended to read as follows:
"(e) Investments directly or indirectly by Restricted Persons in
Unrestricted Subsidiaries in an aggregate amount not to exceed, at any one
time outstanding, the sum of (i) $50,000,000, plus (ii) the amount of net
proceeds from sales by Plains MLP of additional Partnership Interests (as
such term is defined in the Partnership Agreement) made after September 15,
1999."
(b) The clause in Section 7.3(b)(v)(A) of the Original Agreement reading
"long-term unsecured and unenhanced debt obligations rated AA or Aa2 or better,"
is hereby amended to read in its entirety as follows:
"long-term unsecured and unenhanced debt obligations rated A or A2 or
better,"
(S) 2.2. Consent. Administrative Agent and each Lender hereby (i) approve
the establishment by Borrower of a brokerage account with Cargill Investor
Services, Inc. pursuant to Section 7.3(b) of the Credit Agreement and (ii)
permit the execution, delivery, and performance by Borrower of Hedging Contracts
with Enron Capital & Trade Resource Corp.
ARTICLE III. -- Conditions of Effectiveness
(S) 3.1. Effective Date. This Amendment shall become effective as of the
date first above written when and only when Administrative Agent shall have
received, at Administrative Agent's office: (a) a counterpart of this Amendment
executed and delivered by Borrower, All American, Plains MLP, Administrative
Agent, and Majority Lenders, and (b) a certificate of a duly authorized officer
of General Partner to the effect that all of the representations and warranties
set forth in Article IV hereof are true and correct at and as of the time of
such effectiveness.
ARTICLE IV. -- Representations and Warranties
(S) 4.1. Representations and Warranties of Plains MLP and Borrower. In
order to induce Administrative Agent and Lenders to enter into this Amendment,
Plains MLP and Borrower represent and warrant to Administrative Agent and each
Lender that:
(a) The representations and warranties contained in Article V of the
Original Agreement are true and correct at and as of the time of the
effectiveness hereof, except to the extent that such representation and
warranty was made as of a specific date.
(b) Each Restricted Person is duly authorized to execute and deliver
this Amendment, and Borrower is and will continue to be duly authorized to
borrow and perform its obligations under the Credit Agreement. Each
Restricted Person has duly taken all corporate action necessary to
authorize the execution and delivery of this Amendment and to authorize the
performance of their respective obligations hereunder.
-2-
<PAGE>
(c) The execution and delivery by each Restricted Person of this
Amendment, the performance by each Restricted Person of its respective
obligations hereunder, and the consummation of the transactions
contemplated hereby, do not and will not conflict with any provision of
law, statute, rule or regulation or of the constituent documents of any
Restricted Person, or of any material agreement, judgment, license, order
or permit applicable to or binding upon any Restricted Person, or result in
the creation of any lien, charge or encumbrance upon any assets or
properties of any Restricted Person, except in favor of Administrative
Agent for the benefit of Lenders and other Permitted Liens. Except for
those which have been duly obtained, no consent, approval, authorization or
order of any court or governmental authority or third party is required in
connection with the execution and delivery by any Restricted Person of this
Amendment or to consummate the transactions contemplated hereby.
(d) When this Amendment has been duly executed and delivered, each of
the Loan Documents, as amended by this Amendment, will be a legal and
binding instrument and agreement of each Restricted Person, enforceable in
accordance with its terms, (subject, as to enforcement of remedies, to
applicable bankruptcy, insolvency and similar laws applicable to creditors'
rights generally and to general principles of equity).
ARTICLE V. -- Miscellaneous
(S) 5.1. Ratification of Agreements. The Original Agreement, as hereby
amended, is hereby ratified and confirmed in all respects. The Loan Documents
(including but not limited to each Guaranty), as they may be amended or affected
by this Amendment, are hereby ratified and confirmed in all respects by each
Restricted Person to the extent a party thereto. Any reference to the Credit
Agreement in any Loan Document shall be deemed to refer to this Amendment also.
The execution, delivery and effectiveness of this Amendment shall not, except as
expressly provided herein, operate as a waiver of any right, power or remedy of
Administrative Agent or any Lender under the Credit Agreement or any other Loan
Document nor constitute a waiver of any provision of the Credit Agreement or any
other Loan Document.
(S) 5.2. Ratification of Security Documents. Restricted Persons,
Administrative Agent, and Lenders each acknowledge and agree that any and all
indebtedness, liabilities or obligations arising under or in connection with the
Notes are Obligations and are secured indebtedness under, and are secured by,
each and every Security Document to which any Restricted Person is a party. Each
Restricted Person hereby re-pledges, re-grants and re-assigns a security
interest in and lien on every asset of the such Restricted Person described as
Collateral in any Security Document.
(S) 5.3. Survival of Agreements. All representations, warranties,
covenants and agreements of the Restricted Persons herein shall survive the
execution and delivery of this Amendment and the performance hereof, including
without limitation the making or granting of each Loan, and shall further
survive until all of the Obligations are paid in full. All statements and
agreements contained in any certificate or instrument delivered by any
Restricted Person hereunder or under the Credit Agreement to Administrative
Agent or any Lender shall be deemed to constitute representations and warranties
by, or agreements and covenants of, such Restricted Person under this Amendment
and under the Credit Agreement.
-3-
<PAGE>
(S) 5.4. Loan Documents. This Amendment is a Loan Document, and all
provisions in the Credit Agreement pertaining to Loan Documents apply hereto.
(S) 5.5. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK AND ANY APPLICABLE LAWS OF
THE UNITED STATES OF AMERICA IN ALL RESPECTS, INCLUDING CONSTRUCTION, VALIDITY
AND PERFORMANCE.
(S) 5.6. Counterparts. This Amendment may be separately executed in
counterparts and by the different parties hereto in separate counterparts, each
of which when so executed shall be deemed to constitute one and the same
Amendment.
-4-
<PAGE>
IN WITNESS WHEREOF, this Amendment is executed as of the date first above
written.
PLAINS MARKETING, L.P.
By: PLAINS ALL AMERICAN INC.,
its general partner
By: /s/ Michael R. Patterson
--------------------------------
Name: Michael R. Patterson
Title: Senior Vice President
PLAINS ALL AMERICAN PIPELINE, L.P.
By: PLAINS ALL AMERICAN INC.,
its general partner
By: /s/ Michael R. Patterson
--------------------------------
Name: Michael R. Patterson
Title: Senior Vice President
ALL AMERICAN PIPELINE, L.P.
By: PLAINS ALL AMERICAN INC.,
its general partner
By: /s/ Michael R. Patterson
--------------------------------
Name: Michael R. Patterson
Title: Senior Vice President
<PAGE>
BANKBOSTON, N.A.,
Administrative Agent, LC Issuer and Lender
By: /s/ Terrence Ronan
--------------------------------------
Terrence Ronan
Director
<PAGE>
ING (U.S.) CAPITAL LLC, Lender
By:
--------------------------------------
Name:
Title:
<PAGE>
BANK OF AMERICA, N.A., Lender
By: /s/ Leonard L. Russo
--------------------------------------
Name: Leonard L. Russo
Title: Managing Director
<PAGE>
BANK OF SCOTLAND, Lender
By: /s/ Annie Glynn
--------------------------------------
Name: Annie Glynn
Title: Senior Vice President
<PAGE>
COMERICA BANK-TEXAS, Lender
By: /s/ Daniel G. Steele
--------------------------------------
Name: Daniel G. Steele
Title: Senior Vice President
<PAGE>
DEN NORSKE BANK ASA, Lender
By:
--------------------------------------
Name:
Title:
By:
--------------------------------------
Name:
Title:
<PAGE>
FIRST UNION NATIONAL BANK, Lender
By: /s/ Robert R. Wetteroff
--------------------------------------
Name: Robert R. Wetteroff
Title: Senior Vice President
<PAGE>
HIBERNIA NATIONAL BANK, Lender
By: /s/ David R. Reid
--------------------------------------
Name: David R. Reid
Title: Senior Vice President
<PAGE>
MEESPIERSON CAPITAL CORP., Lender
By: /s/ Deirdre Sanborn
--------------------------------------
Name: Deirdre Sanborn
Title: Vice President
By: /s/ Karel Louman
--------------------------------------
Name: Karel Louman
Title: Managing Director
<PAGE>
U.S. BANK, NATIONAL ASSOCIATION, Lender
By: /s/ Monte E. Deckerd
--------------------------------------
Name: Monte E. Deckerd
Title: Vice President
<PAGE>
UNION BANK OF CALIFORNIA, N.A., Lender
By: /s/ Dustin Gaspari
--------------------------------------
Name: Dustin Gaspari
Title: Assistant Vice President
By: /s/ Damien Meiburger
--------------------------------------
Name: Damien Meiburger
Title: Senior Vice President
<PAGE>
WELLS FARGO BANK (TEXAS),
NATIONAL ASSOCIATION, Lender
By: /s/ Ann M. Rhoads
--------------------------------------
Name: Ann M. Rhoads
Title: Vice President
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM PLAINS ALL
AMERICAN PIPELINE, L.P. CONSOLIDATED BALANCE SHEET AS OF SEPTEMBER 30, 1999 AND
CONSOLIDATED STATEMENT OF INCOME FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999,
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0001070423
<NAME> PLAINS ALL AMERICAN PIPELINE, L.P.
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 3,187
<SECURITIES> 0
<RECEIVABLES> 423,786
<ALLOWANCES> 0
<INVENTORY> 92,200
<CURRENT-ASSETS> 522,234
<PP&E> 553,473
<DEPRECIATION> 10,507
<TOTAL-ASSETS> 1,148,333
<CURRENT-LIABILITIES> 507,469
<BONDS> 0
0
0
<COMMON> 282,663
<OTHER-SE> 23,041
<TOTAL-LIABILITY-AND-EQUITY> 1,148,333
<SALES> 2,579,092
<TOTAL-REVENUES> 2,579,707
<CGS> 2,499,748
<TOTAL-COSTS> 2,527,746
<OTHER-EXPENSES> 1,947
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 14,533
<INCOME-PRETAX> 35,481
<INCOME-TAX> 0
<INCOME-CONTINUING> 35,481
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 35,481
<EPS-BASIC> 1.13
<EPS-DILUTED> 1.13
</TABLE>
