<PAGE>
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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 MARCH 31, 2000
OR
[_] TRANSITION REPORT PURSUANT TO SECITON 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER: 0-9808
PLAINS RESOURCES INC.
(Exact name of Registrant as Specified in Its Charter)
Delaware 13-2898764
(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 [_]
17,979,237 shares of common stock $0.10 par value, issued and outstanding at
May 9, 2000.
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<PAGE>
PLAINS RESOURCES INC. AND SUBSIDIARIES
TABLE OF CONTENTS
Page
PART I. FINANCIAL INFORMATION
CONSOLIDATED FINANCIAL STATEMENTS:
Consolidated Balance Sheets:
March 31, 2000 and December 31, 1999................. 3
Consolidated Statements of Operations:
For the three months ended March 31, 2000 and 1999... 4
Consolidated Statements of Cash Flows:
For the three months ended March 31, 2000 and 1999... 5
Notes to Consolidated Financial Statements................ 6
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.................. 17
PART II. OTHER INFORMATION................................ 26
2
<PAGE>
PLAINS RESOURCES INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
--------------- ---------------
(unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 17,626 $ 68,228
Accounts receivable and other 525,612 521,948
Inventory 59,649 78,349
Assets held for sale (Note 4) - 103,615
----------- -----------
Total current assets 602,887 772,140
----------- -----------
PROPERTY AND EQUIPMENT
Oil and natural gas properties - full cost method
Subject to amortization 686,152 671,928
Not subject to amortization 53,140 52,031
Crude oil pipeline, gathering and terminal assets 460,698 458,502
Other property and equipment 6,455 7,706
----------- -----------
1,206,445 1,190,167
Less allowance for depreciation, depletion and amortization (410,591) (402,514)
----------- -----------
795,854 787,653
----------- -----------
OTHER ASSETS 105,324 129,767
----------- -----------
$ 1,504,065 $ 1,689,560
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and other current liabilities $ 541,604 $ 546,393
Notes payable and other current obligations 511 109,880
----------- -----------
Total current liabilities 542,115 656,273
BANK DEBT 135,800 137,300
BANK DEBT OF A SUBSIDIARY 159,100 259,450
SUBORDINATED DEBT 277,822 277,909
OTHER LONG-TERM DEBT 2,044 2,044
OTHER LONG-TERM LIABILITIES AND DEFERRED CREDITS 14,533 21,107
----------- -----------
1,131,414 1,354,083
----------- -----------
MINORITY INTEREST 176,580 156,045
----------- -----------
CUMULATIVE CONVERTIBLE PREFERRED STOCK,
STATED AT LIQUIDATION PREFERENCE 138,813 138,813
----------- -----------
NON-REDEEMABLE PREFERRED STOCK, COMMON STOCK
AND OTHER STOCKHOLDERS' EQUITY
Series D Cumulative Convertible Preferred Stock, $1.00 par value,
46,600 shares authorized, issued and outstanding, 23,300 23,300
Common Stock, $0.10 par value, 50,000,000 shares authorized;
issued and outstanding 17,951,856 and 17,924,050 shares at
March 31, 2000 and December 31, 1999, respectively 1,795 1,792
Additional paid-in capital 130,268 130,027
Accumulated deficit (98,105) (114,500)
----------- -----------
57,258 40,619
----------- -----------
$ 1,504,065 $ 1,689,560
=========== ===========
</TABLE>
See notes to consolidated financial statements.
3
<PAGE>
PLAINS RESOURCES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
----------------------------
2000 1999
------------- -------------
(restated)
<S> <C> <C>
REVENUES
Oil and natural gas sales $ 33,292 $ 21,142
Marketing, transportation, storage and terminalling
revenues 998,928 455,760
Gain on sale of assets (Note 4) 48,188 -
Interest and other income 4,814 69
----------- ---------
1,085,222 476,971
----------- ---------
EXPENSES
Production expenses 15,495 11,563
Marketing, transportation, storage and terminalling expenses 962,766 436,565
Unauthorized trading losses and related expenses (Note 3) - 21,205
General and administrative 11,081 4,062
Depreciation, depletion and amortization 15,212 7,170
Interest expense 15,874 8,753
----------- ---------
1,020,428 489,318
----------- ---------
Income (loss) before income taxes,
minority interest and extraordinary item 64,794 (12,347)
Minority interest 29,584 (4,289)
----------- ---------
Income (loss) before income taxes and extraordinary item 35,210 (8,058)
Deferred income tax expense (benefit) 13,732 (2,897)
----------- ---------
Income (loss) before extraordinary item 21,478 (5,161)
Extraordinary item, net of tax benefit
and minority interest (1,365) -
----------- ---------
NET INCOME (LOSS) 20,113 (5,161)
Less: cumulative preferred stock dividends 3,718 2,361
----------- ---------
NET INCOME (LOSS) AVAILABLE TO COMMON STOCKHOLDERS $ 16,395 $ (7,522)
=========== =========
Basic earnings (loss) per share:
Income (loss) before extraordinary item $ 0.99 $ (0.45)
Extraordinary item (0.08) -
----------- ---------
Net income (loss) $ 0.91 $ (0.45)
=========== =========
Diluted earnings (loss) per share:
Income (loss) before extraordinary item $ 0.73 $ (0.45)
Extraordinary item (0.05) -
----------- ---------
Net income (loss) $ 0.68 $ (0.45)
=========== =========
</TABLE>
See notes to consolidated financial statements.
4
<PAGE>
PLAINS RESOURCES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-----------------------------
2000 1999
------------- --------------
(restated)
<S>
CASH FLOWS FROM OPERATING ACTIVITIES <C> <C>
Net income (loss) $ 20,113 $ (5,161)
Items not affecting cash flows from operating activities:
Depreciation, depletion and amortization 15,212 7,170
Gain on sale of assets (Note 4) (48,188)
Minority interest in income of a subsidiary 27,677 (4,289)
Deferred income taxes 12,859 (2,897)
Other noncash items (3,834) 390
Change in assets and liabilities from operating activities:
Accounts receivable and other (28,711) (36,485)
Inventory (19,312) 13,863
Pipeline linefill - (2,490)
Accounts payable and other current liabilities (11,966) 33,747
--------- --------
Net cash provided by (used in) operating activities (36,150) 3,848
--------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Payments for crude oil pipeline, gathering and terminal
assets (2,198) (2,702)
Payments for acquisition, exploration and development
costs (12,764) (27,936)
Payments for additions to other property and assets (137) (532)
Proceeds from sale of assets (Note 4) 219,100 -
--------- --------
Net cash provided by (used in) investing activities 204,001 (31,170)
--------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from long-term debt 66,100 78,300
Proceeds from short-term debt 20,000 4,250
Principal payments of long-term debt (192,100) (47,500)
Principal payments of short-term debt (105,219) (9,900)
Distributions to unitholders of subsidiary (7,234) (2,525)
Other - (958)
--------- --------
Net cash provided by (used in) financing activities (218,453) 21,667
--------- --------
Net decrease in cash and cash equivalents (50,602) (5,655)
Cash and cash equivalents, beginning of period 68,228 6,544
--------- --------
Cash and cash equivalents, end of period $ 17,626 $ 889
========= ========
</TABLE>
See notes to consolidated financial statements.
5
<PAGE>
PLAINS RESOURCES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 -- ORGANIZATION AND ACCOUNTING POLICIES
The consolidated financial statements include the accounts of Plains Resources
Inc., our wholly-owned subsidiaries and Plains All American Pipeline, L.P.
("PAA"), in which we have an approximate 54% ownership interest. Plains All
American Inc., one of our wholly-owned subsidiaries, serves as PAA's sole
general partner. For financial statement purposes, the assets, liabilities and
earnings of PAA are included in our consolidated financial statements, with the
public unitholders' interest reflected as a minority interest.
The accompanying consolidated financial statements and related notes present
our consolidated financial position as of March 31, 2000 and December 31, 1999
and the results of our operations and cash flows for the three months ended
March 31, 2000 and 1999. The financial statements have been prepared in
accordance with the instructions to interim reporting as prescribed by the
Securities and Exchange Commission ("SEC"). For further information, refer to
our Form 10-K for the year ended December 31, 1999, filed with the SEC.
The 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 months ended
March 31, 2000 are not necessarily indicative of the final results to be
expected for the full year. Certain reclassifications have been made to the
prior period to conform to the current period presentation. We evaluate the
capitalized costs of our oil and natural gas properties on an ongoing basis and
have utilized the most recently available information to estimate our reserves
at March 31, 2000, in order to determine the realizability of such capitalized
costs. Future events, including drilling activities, product prices and
operating costs, may affect future estimates of such reserves.
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 the fair value of an asset, liability, or firm commitment, changes in the
fair value of the derivative instrument will generally be offset in the income
statement by changes in the fair value of the hedged item. 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 impact of adopting SFAS 133; however, this
standard could increase volatility in earnings and retained earnings (deficit)
through comprehensive income.
NOTE 2 -- INVENTORY AND OTHER ASSETS
Inventory consists of the following (in thousands):
March 31, December 31,
2000 1999
--------- ------------
Crude oil $54,887 $73,535
Materials and supplies 4,762 4,814
------- -------
$59,649 $78,349
======= =======
6
<PAGE>
Other assets consist of the following (in thousands):
March 31, December 31,
2000 1999
--------- ------------
Pipeline linefill $ 17,633 $ 17,633
Deferred tax asset 54,515 67,366
Land 8,853 8,853
Debt issue costs 27,981 35,101
Other 11,600 10,965
-------- --------
120,582 139,918
Accumulated amortization (15,258) (10,151)
-------- --------
$105,324 $129,767
======== ========
NOTE 3 -- UNAUTHORIZED TRADING LOSSES AND RESTATED FINANCIAL STATEMENTS
In November 1999, we discovered that a former employee of PAA had engaged in
unauthorized trading activity, resulting in losses of approximately $162.0
million ($174.0 million, including estimated associated costs and legal
expenses). A full investigation into the unauthorized trading activities by
outside legal counsel and independent accountants and consultants determined
that the vast majority of the losses occurred primarily from March through
November 1999, and that the impact warranted a restatement of previously
reported financial information for 1999 and 1998. Because the financial
statements of PAA are consolidated with our financial statements, adverse
effects on the financial statements of PAA directly affect our consolidated
financial statements. Consequently, the consolidated financial statements for
1999 appearing in this report were previously restated to reflect the
unauthorized trading losses.
NOTE 4 -- ASSET DISPOSITIONS
We initiated the sale of approximately 5.2 million barrels of crude oil
linefill from the All American Pipeline in November 1999. This sale was
completed in March 2000. The linefill was 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 Goodyear in July 1998. Proceeds from the sale of the linefill were
approximately $100.0 million, net of associated costs, and were used (1) to
repay outstanding indebtedness under PAA's $65.0 million senior secured term
credit facility entered into in December 1999 to fund short-term working capital
requirements resulting from the unauthorized trading losses and (2) for general
working capital purposes. We recognized a total gain of $44.6 million, of which
$16.5 million was recorded in the fourth quarter of 1999.
On March 24, 2000, we completed the sale of the above referenced segment of
the All American Pipeline to a unit of El Paso Energy Corporation for proceeds
of approximately $124.0 million, which are net of associated transaction costs
and estimated costs to remove certain equipment. We recognized a gain of
approximately $20.1 million in connection with the sale in the first quarter of
2000. Proceeds from the sale were used to permanently reduce the all American
Pipeline, L.P. term loan facility. As a result, $3.1 million of unamortized net
gains realized upon termination of interest rate swaps, were recognized in the
first quarter of 2000 and are included in interest and other income.
NOTE 5 -- ACQUISITIONS
Scurlock Acquisition
On May 12, 1999, PAA completed the acquisition of Scurlock Permian LLC and
certain other pipeline assets from Marathon Ashland Petroleum LLC. Including
working capital adjustments and closing and financing costs, the cash purchase
price was approximately $141.7 million.
7
<PAGE>
Pro Forma Results for the Scurlock Acquisition
The following unaudited pro forma data is presented to show pro forma
revenues, net loss and basic and diluted net loss per share as if the Scurlock
acquisition, which was effective May 1, 1999, had occurred on January 1, 1999
(in thousands, except per share data):
Three Months
Ended
March 31, 1999
--------------
Revenues $749,020
========
Net loss $ (1,734)
========
Net loss per share available to common
stockholders:
Basic and diluted $ (0.24)
========
NOTE 6 -- EARNINGS PER SHARE
The following is a reconciliation of the numerators and the denominators of
the basic and diluted earnings per share computations for income (loss) from
continuing operations before extraordinary item for the three months ended March
31, 2000 and 1999 (in thousands, except per share amounts):
<TABLE>
<CAPTION>
For the Three Months Ended March 31,
--------------------------------------------------------------------
2000 1999 (restated)
--------------------------------- ----------------------------------
Income Shares Per Income Shares Per
(Numera- (Denomi- Share (Numera- (Denomi- Share
tor) nator) Amount tor) nator) Amount
------------ ---------- --------- ------------ ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Net income (loss) before
extraordinary item $ 21,478 $ (5,161)
Less: preferred stock dividends (3,718) (2,361)
-------- --------
Income (loss) available to
common stockholders 17,760 17,947 $ 0.99 (7,522) 16,890 $ (0.45)
====== =======
Effect of dilutive securities:
Convertible preferred stock 3,718 10,935 - -
Employee stock options and warrants - 670 - -
-------- ------ -------- ------
Income (loss) available to common
stockholders assuming dilution $ 21,478 29,552 $ 0.73 $ (7,522) 16,890 $ (0.45)
======== ====== ====== ======== ====== ========
</TABLE>
NOTE 7 -- EXTRAORDINARY ITEM
During the quarter ended March 31, 2000, we recognized an extraordinary loss
of $4.1 million, $1.4 million net of minority interest and taxes, related to the
early extinguishment of debt. The loss is related to the permanent reduction of
the All American Pipeline, L.P. term loan facility with proceeds from the sale
of the segment of the All American Pipeline (see Note 4).
8
<PAGE>
NOTE 8 -- OPERATING SEGMENTS
Our operations consist of two operating segments: (1) Upstream Operations -
engages in the acquisition, exploitation, development, exploration and
production of crude oil and natural gas and (2) Midstream Operations - engages
in pipeline transportation, purchases and resales of crude oil at various points
along the distribution chain and the leasing of certain terminalling and storage
assets. We evaluate performance based on gross margin, gross profit and income
(loss) before income taxes and minority interest.
<TABLE>
<CAPTION>
(in thousands) (unaudited) Upstream Midstream Total
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
For the Three Months Ended March 31, 2000
Revenues:
External Customers $ 33,292 $ 998,928 $ 1,032,220
Intersegment (a) - 390 390
Gain on sale of assets - 48,188 48,188
Other income (expense) (2,696) 7,510 4,814
-------- ----------- -----------
Total revenues of reportable segments $ 30,596 $ 1,055,016 $ 1,085,612
======== =========== ===========
Segment gross margin (b) $ 17,797 $ 36,162 $ 53,959
Segment gross profit (c) 15,367 27,511 42,878
Segment income before income taxes,
minority interest and extraordinary item 769 64,025 64,794
Total assets 423,604 1,080,461 1,504,065
- -----------------------------------------------------------------------------------------------------------
For the Three Months Ended March 31, 1999 (restated)
Revenues:
External Customers $ 21,142 $ 455,760 $ 476,902
Intersegment (a) - 327 327
Interest income (28) 97 69
-------- --------- ---------
Total revenues of reportable segments $ 21,114 $ 456,184 $ 477,298
======== ========= =========
Segment gross margin (b) $ 9,579 $ (2,010) $ 7,569
Segment gross profit (c) 7,968 (4,461) 3,507
Segment loss before income taxes and
minority interest (1,959) (10,388) (12,347)
- -----------------------------------------------------------------------------------------------------------
</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.
NOTE 9 -- PREFERRED STOCK DIVIDENDS
On April 1, 2000, we paid cash dividends of approximately $6.0 million on our
Series D, F and G preferred stock. The dividends on the Series D and F preferred
stock are for the period from October 1, 1999 through March 31, 2000. The Series
F preferred stock was issued on December 15, 1999 and such dividend covers the
period from that date through March 31, 2000.
NOTE 10 -- SUBSEQUENT EVENTS
On May 8, 2000, PAA entered into new bank credit agreements. The borrower
under the new facilities is Plains Marketing, L.P. PAA is a guarantor of the
obligations under the credit facilities. The obligations are also guaranteed by
the subsidiaries of Plains Marketing, L.P. PAA entered into the credit
agreements in order to:
. refinance the existing bank debt of Plains Marketing, L.P. and Plains
Scurlock Permian, L.P. in conjunction with the merger of these subsidiaries;
. refinance existing bank debt of All American Pipeline, L.P.;
. repay us up to $114.0 million plus accrued interest of subordinated debt, and
. provide additional flexibility for working capital, capital expenditures, and
for other general corporate purposes.
9
<PAGE>
PAA's new bank credit agreements consist of:
. a $400 million senior secured revolving credit facility. At closing, PAA had
$256.0 million outstanding under the revolving credit facility. The revolving
credit facility is secured by substantially all of PAA's assets and matures
in April 2004. No principal is scheduled for payment prior to maturity. The
revolving credit facility bears interest at PAA's option at either the base
rate, as defined, plus an applicable margin, or LIBOR plus an applicable
margin. PAA incurs a commitment fee on the unused portion of the revolving
credit facility.
. A $300 million senior secured letter of credit and borrowing facility, the
purpose of which is to provide standby 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. The letter of
credit facility is secured by substantially all of PAA's assets and has a
sublimit for cash borrowings of $100 million to purchase crude oil which has
been hedged against future price risk. The letter of credit facility expires
in April 2003. 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 our current assets and current
liabilities, primarily accounts receivable and accounts payable related to
the purchase and sale of crude oil. At closing, there were letters of credit
of approximately $173.8 million and borrowings of approximately $20.3 million
outstanding under this facility.
PAA's bank credit agreements prohibit distributions on, or purchases or
redemptions of, units if any default or event of default is continuing. In
addition, the agreements contain various covenants limiting PAA's ability to,
among other things:
. incur indebtedness;
. grant liens;
. sell assets;
. enter into hedging contracts;
. make investments;
. extend credit;
. engage in transactions with affiliates;
. enter into prohibited contracts; and
. enter into a merger or consolidation.
PAA's bank credit agreements treat a change of control as an event of default
and also require PAA to maintain:
. a current ratio (as defined) of 1.0 to 1.0;
. a debt coverage ratio which is not greater that 4.0 to 1.0 for the period
from March 31, 2000 to March 31, 2002 and subsequently 3.75 to 1.0;
. an interest coverage ratio which is not less than 2.75 to 1.0; and
. a debt to capital ratio of not greater than 0.65 to 1.0.
At March 31, 2000, there were letters of credit of approximately $192.9
million and borrowings of $159.1 million outstanding under the credit facilities
which were refinanced. Due to the refinancing, we reclassified the current
portion of PAA's existing bank debt of $24.2 million at March 31, 2000, to
long-term.
NOTE 11 -- CONSOLIDATING FINANCIAL STATEMENTS
The following financial information presents consolidating financial
statements which include:
. the parent company only ("Parent");
. the guarantor subsidiaries on a combined basis ("Guarantor Subsidiaries");
. the nonguarantor subsidiaries on a combined basis ("Nonguarantor
Subsidiaries");
. elimination entries necessary to consolidate the Parent, the Guarantor
Subsidiaries and the Nonguarantor Subsidiaries; and
. Plains Resources Inc. on a consolidated basis.
These statements are presented because our Series A-E subordinated notes are
not guaranteed by PAA and our consolidated financial statements include the
accounts of PAA.
10
<PAGE>
PLAINS RESOURCES INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING BALANCE SHEET (unaudited) (in thousands)
MARCH 31, 2000
<TABLE>
<CAPTION>
Guarantor Nonguarantor Intercompany
Parent Subsidiaries Subsidiaries Eliminations Consolidated
--------------- --------------- --------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 6,062 $ 312 $ 11,252 $ - $ 17,626
Accounts receivable and other 6,920 15,798 502,894 - 525,612
Inventory - 6,801 52,848 - 59,649
--------- --------- ----------- ---------- -----------
Total current assets 12,982 22,911 566,994 - 602,887
--------- --------- ----------- ---------- -----------
PROPERTY AND EQUIPMENT 235,575 509,446 461,424 - 1,206,445
Less allowance for depreciation,
depletion and amortization (216,087) (124,242) (14,876) (55,386) (410,591)
--------- --------- ----------- ---------- -----------
19,488 385,204 446,548 (55,386) 795,854
--------- --------- ----------- ---------- -----------
INVESTMENTS IN SUBSIDIARIES AND
INTERCOMPANY ADVANCES 441,302 (227,636) (43,774) (169,892) -
OTHER ASSETS 23,368 15,038 66,918 - 105,324
--------- --------- ----------- ---------- -----------
$ 497,140 $ 195,517 $ 1,036,686 $ (225,278) $ 1,504,065
========= ========= =========== ========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and other current liabilities 18,929 40,034 482,636 5 $ 541,604
Notes payable and other current obligations - 511 - - 511
--------- --------- ----------- ---------- -----------
Total current liabilities 18,929 40,545 482,636 5 542,115
BANK DEBT 135,800 - - - 135,800
BANK DEBT OF A SUBSIDIARY - - 159,100 - 159,100
SUBORDINATED DEBT 277,822 - 105,000 (105,000) 277,822
OTHER LONG-TERM DEBT - 2,044 - - 2,044
OTHER LONG-TERM LIABILITIES 2,016 - 12,517 - 14,533
--------- --------- ----------- ---------- -----------
434,567 42,589 759,253 (104,995) 1,131,414
--------- --------- ----------- ---------- -----------
MINORITY INTEREST (70,037) - 246,525 92 176,580
--------- --------- ----------- ---------- -----------
CUMULATIVE CONVERTIBLE
PREFERRED STOCK, STATED
AT LIQUIDATION PREFERENCE 138,813 - - - 138,813
--------- --------- ----------- ---------- -----------
NON-REDEEMABLE PREFERRED STOCK,
COMMON STOCK AND
OTHER STOCKHOLDERS' EQUITY
Series D Cumulative Convertible Preferred Stock 23,300 - - - 23,300
Common Stock 1,795 78 - (78) 1,795
Additional paid-in capital 130,268 3,951 43,393 (47,344) 130,268
Retained earnings (accumulated deficit) (161,566) 148,899 (12,485) (72,953) (98,105)
--------- --------- ----------- ---------- -----------
(6,203) 152,928 30,908 (120,375) 57,258
--------- --------- ----------- ---------- -----------
$ 497,140 $ 195,517 $ 1,036,686 $ (225,278) $ 1,504,065
========= ========= =========== ========== ===========
</TABLE>
11
<PAGE>
PLAINS RESOURCES INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING BALANCE SHEET (in thousands)
DECEMBER 31, 1999
<TABLE>
<CAPTION>
Guarantor Nonguarantor Intercompany
Parent Subsidiaries Subsidiaries Eliminations Consolidated
----------- ------------ ------------- ------------- --------------
<S> <C> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 9,241 $ 5,134 $ 53,853 $ - $ 68,228
Accounts receivable and other 1,808 11,221 508,919 - 521,948
Inventory - 5,652 72,697 - 78,349
Assets held for sale - - 103,615 - 103,615
--------- --------- ---------- --------- ----------
Total current assets 11,049 22,007 739,084 - 772,140
--------- --------- ---------- --------- ----------
PROPERTY AND EQUIPMENT 235,158 494,279 460,730 - 1,190,167
Less allowance for depreciation,
depletion and amortization (215,463) (120,016) (11,649) (55,386) (402,514)
--------- --------- ---------- --------- ----------
19,695 374,263 449,081 (55,386) 787,653
--------- --------- ---------- --------- ----------
INVESTMENTS IN SUBSIDIARIES AND
INTERCOMPANY ADVANCES 440,115 (224,598) (45,683) (169,834) -
OTHER ASSETS 40,337 14,752 74,678 - 129,767
--------- --------- ---------- --------- ----------
$ 511,196 $ 186,424 $1,217,160 $(225,220) $1,689,560
========= ========= ========== ========= ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and other current liabilities $ 23,700 $ 35,457 $ 487,212 $ 24 $ 546,393
Notes payable and other current obligations - 511 109,369 - 109,880
--------- --------- ---------- --------- ----------
Total current liabilities 23,700 35,968 596,581 24 656,273
BANK DEBT 137,300 - - - 137,300
BANK DEBT OF A SUBSIDIARY - - 259,450 - 259,450
SUBORDINATED DEBT 277,909 - 105,000 (105,000) 277,909
OTHER LONG-TERM DEBT - 2,044 - - 2,044
OTHER LONG-TERM LIABILITIES 1,954 - 19,153 - 21,107
--------- --------- ---------- --------- ----------
440,863 38,012 980,184 (104,976) 1,354,083
--------- --------- ---------- --------- ----------
MINORITY INTEREST (70,037) - 226,082 - 156,045
--------- --------- ---------- --------- ----------
CUMULATIVE CONVERTIBLE
PREFERRED STOCK, STATED
AT LIQUIDATION PREFERENCE 138,813 - - - 138,813
--------- --------- ---------- --------- ----------
NON-REDEEMABLE PREFERRED STOCK,
COMMON STOCK AND
OTHER STOCKHOLDERS' EQUITY
Series D Cumulative Convertible Preferred Stock 23,300 - - - 23,300
Common Stock 1,792 78 - (78) 1,792
Additional paid-in capital 130,027 3,952 43,261 (47,213) 130,027
Retained earnings (accumulated deficit) (153,562) 144,382 (32,367) (72,953) (114,500)
--------- --------- ---------- --------- ----------
1,557 148,412 10,894 (120,244) 40,619
--------- --------- ---------- --------- ----------
$ 511,196 $ 186,424 $1,217,160 $(225,220) $1,689,560
========= ========= ========== ========= ==========
</TABLE>
12
<PAGE>
PLAINS RESOURCES INC. AND SUBSIDIARIES
CONSOLIDATING STATEMENT OF OPERATIONS (unaudited) (in thousands)
THREE MONTHS ENDED MARCH 31, 2000
<TABLE>
<CAPTION>
Guarantor Nonguarantor Intercompany
Parent Subsidiaries Subsidiaries Eliminations Consolidated
-------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
REVENUES
Oil and natural gas sales $ - $ 32,901 $ - $ 391 $ 33,292
Marketing, transportation, storage and terminalling - - 999,319 (391) 998,928
Gain on sale of assets - - 48,188 - 48,188
Interest and other income (loss) (582) 42 7,510 (2,156) 4,814
------- ------- --------- ------ ---------
(582) 32,943 1,055,017 (2,156) 1,085,222
------- ------- --------- ------ ---------
EXPENSES
Production expenses - 15,495 - - 15,495
Marketing, transportation, storage and terminalling - - 962,766 - 962,766
General and administrative 502 1,928 8,651 - 11,081
Depreciation, depletion and amortization 814 4,226 10,172 - 15,212
Interest expense 3,817 5,200 9,013 (2,156) 15,874
------- ------- --------- ------ ---------
5,133 26,849 990,602 (2,156) 1,020,428
------- ------- --------- ------ ---------
Income (loss) before income taxes,
minority interest and extraordinary item (5,715) 6,094 64,415 - 64,794
Minority interest - - 29,584 - 29,584
------- ------- --------- ------ ---------
Income (loss) before income taxes (5,715) 6,094 34,831 - 35,210
Deferred income tax expense (benefit) (1,429) 1,577 13,584 - 13,732
------- ------- --------- ------ ---------
Income (loss) before extraordinary item (4,286) 4,517 21,247 - 21,478
Extraordinary item, net of tax benefit
and minority interest - - (1,365) - (1,365)
------- ------- --------- ------ ---------
NET INCOME (LOSS) (4,286) 4,517 19,882 - 20,113
Less: cumulative preferred stock dividends 3,718 - - - 3,718
------- ------- --------- ------ ---------
NET INCOME (LOSS) AVAILABLE
TO COMMON STOCKHOLDERS $(8,004) $ 4,517 $ 19,882 $ - $ 16,395
======= ======= ========= ====== =========
</TABLE>
13
<PAGE>
PLAINS RESOURCES INC. AND SUBSIDIARIES
CONSOLIDATING STATEMENT OF OPERATIONS (unaudited) (in thousands)
THREE MONTHS ENDED MARCH 31, 1999
<TABLE>
<CAPTION>
Guarantor Nonguarantor Intercompany
Parent Subsidiaries Subsidiaries Eliminations Consolidated
--------- ------------ ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
REVENUES
Oil and natural gas sales $ - $20,815 $ - $ 327 $ 21,142
Marketing, transportation, storage and terminalling - - 455,760 - 455,760
Interest and other income (loss) (39) 12 96 - 69
------- ------- -------- -------- --------
(39) 20,827 455,856 327 476,971
------- ------- -------- -------- --------
EXPENSES
Production expenses - 11,563 - - 11,563
Marketing, transportation, storage and terminalling - - 436,238 327 436,565
Unauthorized trading losses and related expenses - - 21,205 - 21,205
General and administrative 383 1,228 2,451 - 4,062
Depreciation, depletion and amortization 622 3,717 2,831 - 7,170
Interest expense 1,030 4,530 3,193 - 8,753
------- ------- -------- -------- --------
2,035 21,038 465,918 327 489,318
------- ------- -------- -------- --------
Loss before income taxes and minority interest (2,074) (211) (10,062) - (12,347)
Minority interest - - (4,289) - (4,289)
------- ------- -------- -------- --------
Loss before income taxes (2,074) (211) (5,773) - (8,058)
Deferred income tax expense (benefit) 680 (1,326) (2,251) - (2,897)
------- ------- -------- -------- --------
NET INCOME (LOSS) (2,754) 1,115 (3,522) - (5,161)
Less: cumulative preferred stock dividends 2,361 - - - 2,361
------- ------- -------- -------- --------
NET INCOME (LOSS) AVAILABLE
TO COMMON STOCKHOLDERS $(5,115) $ 1,115 $ (3,522) $ - $ (7,522)
======= ======= ======== ======== ========
</TABLE>
14
<PAGE>
PLAINS RESOURCES INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS (unaudited) (in thousands)
THREE MONTHS ENDED MARCH 31, 2000
<TABLE>
<CAPTION>
Guarantor Nonguarantor Intercompany
Parent Subsidiaries Subsidiaries Eliminations Consolidated
---------- ------------- ------------- ------------ --------------
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ (4,286) $ 4,517 $ 19,882 $ - $ 20,113
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation, depletion, and amortization 814 4,226 10,172 - 15,212
Gain on sale of assets (Note 4) - - (48,188) - (48,188)
Minority interest in income of a subsidiary - - 27,677 - 27,677
Deferred income tax (1,429) 1,577 12,711 - 12,859
Other noncash items (873) - (2,961) - (3,834)
Change in assets and liabilities resulting from
operating activities:
Accounts receivable and other (5,112) (5,624) (17,975) - (28,711)
Inventory - (1,149) (18,163) - (19,312)
Accounts payable and other current liabilities (4,771) 2,666 (9,861) - (11,966)
-------- ------- --------- ----------- ---------
NET CASH FLOWS PROVIDED BY
(USED IN) OPERATING ACTIVITIES (15,657) 6,213 (26,706) - (36,150)
-------- ------- --------- ----------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Payments for crude oil pipeline, gathering
and terminal assets - - (2,198) - (2,198)
Payments for acquisition, exploration,
and development costs (339) (12,425) - - (12,764)
Payments for additions to other property and assets (78) (59) - - (137)
Proceeds from sale of assets (Note 4) - - 219,100 - 219,100
-------- ------- --------- ----------- ---------
NET CASH PROVIDED BY
(USED IN) INVESTING ACTIVITIES (417) (12,484) 216,902 - 204,001
-------- ------- --------- ----------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Advances/investments with affiliates 10,445 1,449 (11,894) - -
Proceeds from long-term debt 54,100 - 12,000 - 66,100
Proceeds from short-term debt - - 20,000 - 20,000
Principal payments of long-term debt (55,600) - (136,500) - (192,100)
Principal payments of short-term debt - - (105,219) - (105,219)
Distribution to unitholders 3,950 - (11,184) - (7,234)
-------- ------- --------- ----------- ---------
NET CASH PROVIDED BY
(USED IN) FINANCING ACTIVITIES 12,895 1,449 (232,797) - (218,453)
-------- ------- --------- ----------- ---------
Net decrease in cash and cash equivalents (3,179) (4,822) (42,601) - (50,602)
Cash and cash equivalents, beginning of period 9,241 5,134 53,853 - 68,228
-------- ------- --------- ----------- ---------
Cash and cash equivalents, end of period $ 6,062 $ 312 $ 11,252 $ - $ 17,626
======== ======= ========= =========== =========
</TABLE>
15
<PAGE>
PLAINS RESOURCES INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS (unaudited) (in thousands)
THREE MONTHS ENDED MARCH 31, 1999
<TABLE>
<CAPTION>
Guarantor Nonguarantor Intercompany
Parent Subsidiaries Subsidiaries Eliminations Consolidated
------------- ------------- ------------ -------------- ---------------
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ (2,754) $ 1,115 $ (3,522) $ - $ (5,161)
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation, depletion, and amortization 622 3,717 2,831 - 7,170
Minority interest in income of a subsidiary - - (4,289) - (4,289)
Deferred income tax 680 (1,326) (2,251) - (2,897)
Other noncash items 280 - 110 - 390
Change in assets and liabilities resulting from
operating activities:
Accounts receivable and other (757) 668 (36,396) - (36,485)
Inventory - 547 13,316 - 13,863
Pipeline linefill - - (2,490) - (2,490)
Accounts payable and other current liabilities (5,993) 2,774 36,966 - 33,747
-------- -------- -------- ----------- --------
NET CASH FLOWS PROVIDED BY
(USED IN) OPERATING ACTIVITIES (7,922) 7,495 4,275 - 3,848
-------- -------- -------- ----------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Payments for crude oil pipeline, gathering
and terminal assets - - (2,702) - (2,702)
Payments for acquisition, exploration,
and development costs (959) (26,977) - - (27,936)
Payments for additions to other property and assets (343) (100) (89) - (532)
-------- -------- -------- ----------- --------
NET CASH USED IN INVESTING ACTIVITIES (1,302) (27,077) (2,791) - (31,170)
-------- -------- -------- ----------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Advances/investments with affiliates (17,736) 19,655 (1,156) (763) -
Proceeds from long-term debt 64,200 - 14,100 - 78,300
Proceeds from short-term debt - - 4,250 - 4,250
Principal payments of long-term debt (39,400) - (8,100) - (47,500)
Principal payments of short-term debt - - (9,900) - (9,900)
Distribution to unitholders 3,401 - (5,926) - (2,525)
Other (958) - - - (958)
-------- -------- -------- ----------- --------
NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES 9,507 19,655 (6,732) (763) 21,667
-------- -------- -------- ----------- --------
Net increase (decrease) in cash and cash equivalents 283 73 (5,248) (763) (5,655)
Cash and cash equivalents, beginning of period 142 194 6,408 (200) 6,544
-------- -------- -------- ----------- --------
Cash and cash equivalents, end of period $ 425 $ 267 $ 1,160 $ (963) $ 889
======== ======== ======== =========== ========
</TABLE>
16
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
General
We are an independent energy company that acquires, exploits, develops,
explores and produces crude oil and natural gas. Through our majority ownership
in Plains All American Pipeline, L.P., ("PAA"), we are engaged in the midstream
activities of marketing, gathering, transportation, terminalling and storage of
crude oil. For financial statement purposes, the assets, liabilities and
earnings of PAA are included in our consolidated financial statements, with the
public unitholders' interest reflected as a minority interest. Our upstream
crude oil and natural gas activities are focused in California (in the Los
Angeles Basin, the Arroyo Grande Field, and the Mt. Poso Field), offshore
California (in the Point Arguello Field), the Sunniland Trend of South Florida
and the Illinois Basin in southern Illinois. Our midstream activities are
concentrated in California, Texas, Oklahoma, Louisiana and the Gulf of Mexico.
2000 ASSET DISPOSITIONS
On March 24, 2000, we completed the sale of the segment of the All American
Pipeline that extends from Emidio, California to McCamey, Texas to a unit of El
Paso Energy Corporation for proceeds of approximately $124.0 million, which are
net of associated transaction costs and estimated costs to remove certain
equipment. We recognized a total gain of $20.1 million in connection with the
sale in the first quarter of 2000. In November 1999, we initiated the sale of
approximately 5.2 million barrels of crude oil linefill from the All American
Pipeline. The sale of the linefill was completed in March 2000. We recognized a
total gain of $44.6 million in connection with the sale of the linefill, of
which $16.5 million was recorded in the fourth quarter of 1999.
UNAUTHORIZED TRADING LOSSES
In November 1999, we discovered that a former employee of PAA had engaged in
unauthorized trading activity, resulting in losses of approximately $162.0
million ($174.0 million, including estimated associated costs and legal
expenses). A full investigation into the unauthorized trading activities by
outside legal counsel and independent accountants and consultants determined
that the vast majority of the losses occurred primarily from March through
November 1999, and that the impact warranted a restatement of previously
reported financial information for 1999 and 1998. Because the financial
statements of PAA are consolidated with our financial statements, adverse
effects on the financial statements of PAA directly affect our consolidated
financial statements. Consequently, the consolidated financial statements for
1999 appearing in this report were previously restated to reflect the
unauthorized trading losses.
RESULTS OF OPERATIONS
For the three months ended March 31, 2000, we reported net income of $20.1
million, or $0.91 per common share ($0.68 per share diluted) on total revenue of
$1.1 billion, as compared with a net loss of $5.2 million, or $0.45 per share on
total revenue of $477.0 million in the first quarter of 1999. Results for the
three months ended March 31, 2000 and 1999 include the following nonrecurring or
notable items:
2000
. a $28.1 million gain on the portion of the All American Pipeline linefill
that was sold in 2000;
. a $20.1 million gain on the sale of the segment of the All American Pipeline
that extends from Emidio, California, to McCamey, Texas;
. $6.8 million of previously deferred gains on interest rate swap terminations
recognized due to the early extinguishment of debt;
. $3.7 million of previously deferred losses on interest rate swap
terminations recognized due to the early extinguishment of debt;
. $0.9 million gain recognized upon the transfer of 69,444 of our units in PAA
to employees of the general partner upon the vesting of transaction unit
grants;
. an extraordinary loss of $1.4 million related to the early extinguishment of
debt (net of minority interest and tax benefit), and
. amortization of $4.6 million of debt issue costs associated with facilities
put in place during the fourth quarter of 1999.
17
<PAGE>
1999
. $21.2 million of unauthorized trading losses and
. restructuring expenses of $0.4 million.
Excluding the above mentioned items we would have reported net income of
approximately $8.4 million and $2.6 million for the three months ended March 31,
2000 and 1999, respectively. EBITDA increased 77% in 2000 to $43.8 million from
the $24.8 million reported in the first quarter of 1999. Cash flow from
operations (net income before noncash items) was $23.8 million and $11.8 million
for the first quarters of 2000 and 1999, respectively. EBITDA and cash flow from
operations also exclude the nonrecurring items discussed above.
Upstream Results
The following table reflects certain of our upstream operating information for
the periods presented:
Three Months Ended
March 31,
-------------------------
2000 1999
---------- ----------
Average Daily Production Volumes:
Barrels of oil equivalent ("BOE")
California onshore (approximately 91% oil) 14.8 14.9
Offshore California (100% oil) 4.0 -
Gulf Coast (100% oil) 1.8 2.9
Illinois Basin (100% oil) 2.8 3.2
------ -------
Total (approximately 94% oil) 23.4 21.0
====== =======
Unit Economics:
Average sales price per BOE $15.61 $ 11.21
Production expense per BOE 7.26 6.13
------ -------
Gross margin per BOE 8.35 5.08
Upstream G&A expense per BOE 1.14 0.85
------ ------
Gross profit per BOE $ 7.21 $ 4.23
====== ======
Total oil equivalent production increased approximately 12% to an average of
23,400 BOE per day as compared to the first quarter 1999 average of 21,000 BOE
per day. The increase is primarily attributable to our ongoing acquisition and
exploitation activities, offset somewhat by decreased production from certain of
our other properties. The offshore California Point Arguello Unit, which we
acquired from Chevron in July 1999, accounted for approximately 4,000 barrels
per day of the increase. Net daily production from our onshore California
properties decreased slightly to 14,800 barrels per day in the first quarter of
2000 from 14,900 barrels per day in the prior period. Net daily production for
our Gulf Coast properties averaged approximately 1,800 barrels per day during
the first quarter of 2000, compared to 2,900 barrels per day in the prior
period. The Gulf Coast production decrease is due to mechanical downtime and the
effects of natural decline. This is our most volatile area in terms of
maintaining production levels. Net daily production in the Illinois Basin
averaged approximately 2,800 barrels per day during the first quarter of 2000, a
decrease of approximately 13% compared to 3,200 barrels per day during the first
quarter of 1999, due primarily to natural decline.
Oil and natural gas revenues were $33.3 million for the first quarter of 2000,
an approximate 57% increase from the 1999 first quarter amount of $21.1 million
due to higher prices and increased production. Our average product price, which
represents a combination of fixed and floating price sales arrangements and
incorporates location and quality discounts from the benchmark NYMEX price, was
$15.61 per BOE, up 39% as compared to the 1999 first quarter average wellhead
price of $11.21 per BOE. The NYMEX benchmark WTI crude oil price averaged $28.77
per barrel during the first quarter of 2000, approximately 120% above the $13.06
per barrel amount in the prior year quarter. We maintained hedges on
approximately 83% and 45% of our crude oil production in the first quarter of
2000 and 1999, respectively. Hedging transactions had the effect of decreasing
our average price by $8.13 per BOE in the first quarter of 2000 and increasing
our average price by $2.21 per BOE in the first quarter of 1999.
Upstream unit gross margin (well-head revenue less production expenses) for
the first quarter of 2000 was $8.35 per BOE, a 64% increase as compared to $5.08
per BOE reported for the first quarter of 1999. Upstream unit gross profit,
which deducts all pre-interest cash costs, was $7.21 per BOE, 70% above the 1999
amount of $4.23 per BOE. The overall
18
<PAGE>
improvement in unit economics was generally due to higher wellhead price
realizations, offset by higher unit production expenses and unit general and
administrative expenses. Unit production expenses averaged $7.26 per BOE for the
first quarter of 2000, an approximate 18% increase over the 1999 first quarter
average of $6.13 per BOE. This increase is due to (1) increased fuel costs for
both gas and electricity, (2) workovers, production and advalorem taxes and (3)
what we believe are nonrecurring high levels of expenses during the quarter.
Total production expenses were $15.5 million, as compared to $11.6 million for
the first quarter of 1999. Unit general and administrative expenses increased to
$1.14 per BOE in the first quarter of 2000, compared to $0.85 per BOE in the
prior year comparative quarter. Total upstream general and administrative
expense was $2.4 million during the first quarter of 2000 compared to $1.6
million in the first quarter of 1999. The increase is primarily attributable to
increased personnel costs and increased legal and consulting expenses.
Upstream depreciation, depletion, and amortization expense ("DD&A") was $4.7
million in the first quarter of 2000, compared to $4.0 million in the 1999
comparative quarter due to a higher per unit DD&A rate and increased production
volumes. DD&A was $2.21 per BOE for the first quarter of 2000 compared to $2.10
per BOE in the 1999 comparative quarter.
Midstream Results
The following table reflects certain of our midstream operating information
for the periods presented (in thousands):
Three Months Ended
March 31,
--------------------------
2000 1999
----------- ------------
(restated)
Operating Results:
Gross margin:
Pipeline $ 13,155 $ 11,882
Gathering and marketing and
terminalling and storage 23,007 7,313
Unauthorized trading losses - (21,205)
-------- --------
Total 36,162 (2,010)
General and administrative expense (8,651) (2,451)
-------- --------
Gross profit $ 27,511 $ (4,461)
======== ========
Average Daily Volumes (barrels):
Pipeline Activities:
All American
Tariff activities 71 126
Margin activities 44 47
Other 115 -
-------- --------
Total 230 173
======== ========
Lease gathering 228 99
Bulk purchases 29 94
-------- --------
Total 257 193
======== ========
Terminal throughput 50 75
======== ========
Storage leased to third parties,
monthly average volumes 820 1,710
======== ========
Pipeline Operations. Gross margin from pipeline operations was $13.2 million
for the quarter ended March 31, 2000 compared to $11.9 million for the prior
year quarter. The increase resulted primarily from the Scurlock and West Texas
gathering systems that were acquired in the second and third quarters of 1999,
and which contributed approximately $2.8 million of pipeline gross margin in the
first quarter of 2000. The increase was partially offset by lower tariff
transport volumes, due to lower production from Exxon's Santa Ynez Field and the
Point Arguello Field, both offshore California, and the sale of the segment of
the All American Pipeline.
The margin between revenue and direct cost of crude purchased was $5.1 million
for the quarter ended March 31, 2000 compared to $5.0 million for the prior year
first quarter. Pipeline tariff revenues were approximately $11.3 million for the
first quarter of 2000 compared to approximately $13.1 million for the same
period in 1999. Pipeline operations and
19
<PAGE>
maintenance expenses were approximately $3.5 million for the first quarter of
2000 compared to $6.1 million for the first quarter of 1999 primarily due to the
sale of the All American Pipeline segment.
Tariff transport volumes on the All American Pipeline decreased from an
average of 126,000 barrels per day for the quarter ended March 31, 1999 to
71,000 barrels per day in the comparable quarter of 2000, primarily due to a
decrease in shipments of offshore California production, which decreased from
87,000 barrels per day to 71,000 barrels per day and the sale of the California
to Texas portion of the line. Barrels associated with our merchant activities on
the All American Pipeline decreased from 47,000 barrels per day in the first
quarter of 1999 to 44,000 barrels per day in the same quarter of 2000 also due
to the sale of the line. Tariff volumes shipped on the Scurlock and West Texas
gathering systems (acquired subsequent to the first quarter of 1999) averaged
115,000 barrels per day during the first quarter of 2000.
The following table sets forth All American Pipeline average deliveries per
day within and outside California for the periods presented (in thousands):
Three Months
Ended
March 31,
-------------
2000 1999
---- ----
Deliveries:
Average daily volumes (barrels):
Within California 115 112
Outside California(1) - 61
--- ---
Total 115 173
=== ===
- ----------
(1) Shipments outside California in 1999 were attributable to the segment of
the pipeline that was sold in 2000.
Gathering and Marketing Activities and Terminalling and Storage Activities.
Gross margin from gathering, marketing, terminalling and storage activities was
approximately $23.0 million for the quarter ended March 31, 2000 compared to
$7.3 million in the prior year quarter (excluding the unauthorized trading
losses). The increase in gross margin is primarily due to an increase in lease
gathering volumes, as a result of the Scurlock acquisition and favorable market
conditions in the current year quarter. Lease gathering volumes increased from
an average of 99,000 barrels per day for the first quarter of 1999 to
approximately 228,000 barrels per day in 2000. Bulk purchase volumes decreased
from approximately 94,000 barrels per day for the first quarter of 1999 to
approximately 29,000 barrels per day in the current period due to the
termination of purchase contracts subsequent to the discovery of the
unauthorized trading losses. Due to a shift in the market from contango to
backwardation, lease capacity decreased to 820,000 barrels per month and use of
tankage for proprietary arbitrage opportunities increased.
In the period immediately following the disclosure of the unauthorized trading
losses, a significant number of our suppliers and trading partners reduced or
eliminated the open credit previously extended to us. Consequently, the amount
of letters of credit we needed to support the level of our crude oil purchases
then in effect increased significantly. In addition, the cost to us of obtaining
letters of credit increased under our amended credit facility. In many instances
we arranged for letters of credit to secure our obligations to purchase crude
oil from our customers, which increased our letter of credit costs and decreased
our unit margins. In other instances, primarily involving lower-margin wellhead
and bulk purchases, our purchase contracts were terminated.
Lease gathering and bulk purchase volumes are down approximately 190,000
barrels per day from the 1999 fourth quarter level. We had previously estimated
that our lease gathering and bulk volumes would be down approximately 150,000
barrels per day. The impact during the quarter was negligible as these barrels
were predominantly thin margin barrels that did not support the additional cost
of a letter of credit.
General and administrative expenses were $8.7 million for the quarter ended
March 31, 2000, compared to $2.5 million for the first quarter in 1999. The
increase in 2000 is primarily due to the Scurlock and West Texas gathering
system acquisitions and the resulting increase in activity and increased
consulting and legal expenses as a result of the unauthorized trading losses.
Midstream depreciation and amortization expense was $10.1 million for the
quarter ended March 31, 2000, compared to $2.8 million for the first quarter of
1999. The increase is primarily due to the Scurlock acquisition and the West
Texas gathering system acquisition during the second and third quarters of 1999.
In addition, during the quarter, we amortized $4.6 million
20
<PAGE>
associated with facilities put in place during the fourth quarter of 1999 due to
the unauthorized trading losses. Such amounts will not be carried forward into
future quarters. These increases were partially offset by decreased depreciation
related to the segment of the All American Pipeline that was sold.
General
Interest expense for the first quarter of 2000 was $15.9 million, an increase
of $7.1 million over last year's first quarter. The increase is primarily due to
(1) interest associated with the debt incurred for the Scurlock acquisition and
West Texas Gathering system acquisition during 1999, (2) increased PAA debt
levels as well as interest rates as a result of the unauthorized trading losses
and (3) increased borrowings related to our acquisition, exploitation,
development and exploration activities. Capitalized interest was approximately
$1.0 million for each of the quarters ended March 31, 2000 and 1999. Based on
current interest rate and debt levels, we estimate that second quarter interest
expense will be approximately $3.0 million lower than the first quarter of this
year.
During the quarter ended March 31, 2000, we recognized an extraordinary loss
of $4.1 million, $1.4 million, net of minority interest and taxes, related to
the early extinguishment of debt. The loss is related to the permanent reduction
of the All American Pipeline, L.P. term loan facility with proceeds from the
sale of the segment of the All American Pipeline.
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 the fair value of an asset, liability, or firm commitment, changes in the
fair value of the derivative instrument will generally be offset in the income
statement by changes in the fair value of the hedged item. 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 impact of adopting SFAS 133; however, this
standard could increase volatility in earnings and retained earnings (deficit)
through comprehensive income.
CAPITAL RESOURCES, LIQUIDITY AND FINANCIAL CONDITION
Asset Dispositions
We initiated the sale of approximately 5.2 million barrels of crude oil
linefill from the All American Pipeline in November 1999. The sale was completed
in March 2000. The linefill was 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
Goodyear in July 1998. Proceeds from the sale of the linefill were approximately
$100.0 million, net of associated costs, and were used (1) to repay outstanding
indebtedness under PAA's $65.0 million senior secured term credit facility
entered into in December 1999 to fund short-term working capital requirements
resulting from the unauthorized trading losses and (2) for general working
capital purposes. We recognized a total gain of $44.6 million, of which $16.5
million was recorded in the fourth quarter of 1999.
On March 24, 2000, we completed the sale of the above referenced segment of
the All American Pipeline to a unit of El Paso Energy Corporation for total
proceeds of approximately $124.0 million, which are net of associated
transaction costs and estimated costs to remove certain equipment. We recognized
a gain of approximately $20.1 million in connection with the sale in the first
quarter of 2000. Proceeds from the sale were used to permanently reduce the all
American Pipeline, L.P. term loan facility. As a result, $3.1 million of
unamortized net gains realized upon the termination of interest rate swaps, were
recognized in the first quarter of 2000 and are included in interest and other
income.
21
<PAGE>
Credit Facilities
Amounts outstanding under our credit agreements before and after refinancing
were as follows (in thousands):
<TABLE>
<CAPTION>
March 31, May 8,
2000 2000
------------- -------------
<S> <C> <C>
Revolving credit facility $ 135,800 $ 27,600
New Plains Marketing, L.P. revolving credit facility - 256,000
New Plains Marketing, L.P. letter of credit and hedged inventory facility - 20,250
All American Pipeline, L.P. bank credit agreement 63,000 -
Plains Scurlock bank credit agreement 82,600 -
Plains Marketing, L.P. letter of credit and borrowing facility 13,500 -
--------- ---------
$ 294,900 $ 303,850
========= =========
</TABLE>
We have a $225.0 million revolving credit facility with a group of banks. The
revolving credit facility is guaranteed by all of our upstream subsidiaries and
is collateralized by our upstream oil and natural gas properties and those of
the guaranteeing subsidiaries and the stock of all upstream subsidiaries. The
borrowing base under the revolving credit facility at March 31, 2000, is $225.0
million and is subject to redetermination from time to time by the lenders in
good faith, in the exercise of the lenders' sole discretion, and in accordance
with customary practices and standards in effect from time to time for crude oil
and natural gas loans to borrowers similar to our company. Our borrowing base
may be affected from time to time by the performance of our oil and natural gas
properties and changes in oil and natural gas prices. We incur a commitment fee
of 3/8% per annum on the unused portion of the borrowing base. The revolving
credit facility, as amended, matures on July 1, 2001, at which time the
remaining outstanding balance converts to a term loan which is repayable in
sixteen equal quarterly installments commencing October 1, 2001, with a final
maturity of July 1, 2005. The revolving credit facility bears interest, at our
option of either LIBOR plus 1 3/8% or Base Rate (as defined therein). At March
31, 2000, letters of credit of $0.6 million and borrowings of approximately
$135.8 million were outstanding under the revolving credit facility. The amount
outstanding under the revolving credit facility was reduced to $27.6 million
with the funds repaid by PAA in May 2000 as further discussed below.
On December 30, 1999, PAA entered into a $65.0 million senior secured term
credit facility to fund short-term working capital requirements resulting from
the unauthorized trading losses. The facility was secured by a portion of the
5.2 million barrels of linefill that was sold and receivables from certain sales
contracts applicable to the linefill. The facility was repaid in March 2000 with
the proceeds from the sale of the linefill securing the facility.
On May 8, 2000, PAA entered into new bank credit agreements. The borrower
under the new facilities is Plains Marketing, L.P. PAA is a guarantor of the
obligations under the credit facilities. The obligations are also guaranteed by
the subsidiaries of Plains Marketing, L.P. PAA entered into the credit
agreements in order to:
. refinance the existing bank debt of Plains Marketing, L.P. and Plains
Scurlock Permian, L.P. in conjunction with the merger of these subsidiaries;
. refinance existing bank debt of All American Pipeline, L.P.;
. repay us up to $114.0 million plus accrued interest of subordinated debt,
and
. provide additional flexibility for working capital, capital expenditures,
and for other general corporate purposes.
PAA's new bank credit agreements consist of:
. a $400 million senior secured revolving credit facility. At closing, PAA had
$256.0 million outstanding under the revolving credit facility. The
revolving credit facility is secured by substantially all of PAA's assets
and matures in April 2004. No principal is scheduled for payment prior to
maturity. The revolving credit facility bears interest at PAA's option at
either the base rate, as defined, plus an applicable margin, or LIBOR plus
an applicable margin. PAA incurs a commitment fee on the unused portion of
the revolving credit facility.
. A $300 million senior secured letter of credit and borrowing facility, the
purpose of which is to provide standby 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. The
letter of credit facility is secured by substantially all of PAA's
assets and has a sublimit for cash borrowings of $100 million to purchase
crude oil which has been hedged against future price risk. The letter of
credit facility expires in April 2003. 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
PAA's current assets and current liabilities, primarily accounts receivable
and accounts payable related to the purchase and sale of crude oil. At
closing, there were letters of credit of approximately $173.8 million and
borrowings of approximately $20.3 million outstanding under this facility.
22
<PAGE>
PAA's bank credit agreements prohibit distributions on, or purchases or
redemptions of, units if any default or event of default is continuing. In
addition, the agreements contain various covenants limiting PAA's ability to,
among other things:
. incur indebtedness;
. grant liens;
. sell assets;
. enter into hedging contracts;
. make investments;
. extend credit;
. engage in transactions with affiliates;
. enter into prohibited contracts; and
. enter into a merger or consolidation.
PAA's bank credit agreements treat a change of control as an event of default
and also require PAA to maintain:
. a current ratio (as defined) of 1.0 to 1.0;
. a debt coverage ratio which is not greater that 4.0 to 1.0 for the period
from March 31, 2000 to March 31, 2002 and subsequently 3.75 to 1.0;
. an interest coverage ratio which is not less than 2.75 to 1.0; and
. a debt to capital ratio of not greater than 0.65 to 1.0.
At March 31, 2000, there were letters of credit of approximately $192.9
million and borrowings of $159.1 million outstanding under the credit facilities
which were refinanced. Due to the refinancing, we reclassified the current
portion of PAA's existing bank debt of $24.2 million at March 31, 2000, to
long-term.
Cash Flows
Three Months Ended
March 31,
--------------------
(in millions) 2000 1999
-------------------------------------------------------
Cash provided by (used in): (restated)
Operating activities $ (36.2) $ 3.8
Investing activities 204.0 (31.2)
Financing activities (218.4) 21.7
-----------------------------------------------------
Operating Activities. Net cash used in operating activities for the first
quarter of 2000 resulted from amounts paid during the first quarter of 2000 for
the 1999 unauthorized trading losses.
Investing Activities. Net cash provided by investing activities for the first
quarter of 2000 included $129.0 million and $90.1 million of proceeds from the
sales of the segment of the All American Pipeline and pipeline linefill,
respectively. The balance of the linefill proceeds of approximately $5.0 million
was received in April 2000.
Financing activities. Cash used in financing activities for the first quarter
of 2000 resulted primarily from net payments of $211.2 million of short-
term and long-term debt. Proceeds used to reduce debt primarily came from the
asset sales discussed above.
Preferred Stock Dividends
On April 1, 2000, we paid cash dividends of approximately $6.0 million on our
Series D, F and G preferred stock. The dividends on the Series D and F preferred
stock are for the period from October 1, 1999 through March 31, 2000. The
Series F preferred stock was issued on December 15, 1999 and such dividend
covers the period from that date through March 31, 2000.
Contingencies
Since our announcement in November 1999 of PAA's losses resulting from
unauthorized trading by a former employee, numerous class action lawsuits have
been filed against PAA, certain of its general partner's officers and directors
and in some of these cases, its general partner and us alleging violations of
the federal securities laws. In
23
<PAGE>
addition, derivative lawsuits were filed in the Delaware Chancery Court against
PAA's general partner, its directors and certain of its officers alleging the
defendants breached the fiduciary duties owed to PAA and its unitholders by
failing to monitor properly the activities of its traders.
While we maintain an extensive inspection program designed to prevent and, as
applicable, to detect and address releases of crude oil into the environment
from our pipeline and storage operations, we may experience such releases in the
future, or discover releases that were previously unidentified. Damages and
liabilities incurred due to any future environmental releases from our assets
may substantially affect our business. See Item 1. - "Legal Proceedings."
CHANGING OIL AND NATURAL GAS PRICES
Our upstream activities are affected by changes in crude oil prices, which
historically have been volatile. The NYMEX benchmark WTI crude oil price
averaged $28.77 per barrel during the first quarter of 2000, approximately 120%
above the $13.06 per barrel in the first quarter of last year. Substantial
future crude oil price declines would adversely affect our overall results, and
therefore our liquidity. Furthermore, low crude oil prices could affect our
ability to raise capital on favorable terms. In order to manage our exposure to
commodity price risk, we have routinely hedged a portion of our crude oil
production and intend to continue this practice. For 2000, we have entered into
various arrangements which provide for us to receive an average minimum NYMEX
WTI price of $16.00 per barrel on 18,500 barrels of oil per day. Approximately
10,000 barrels per day of these volumes will participate in price increases
above the $16.00 per barrel floor price, subject to a ceiling limitation of
$19.75 per barrel. This hedge position is equivalent to approximately 83% of
first quarter 2000 average daily crude oil volumes at an average hedge price of
approximately $18.40 per barrel. For 2001, we have entered into various
arrangements which will provide for us to receive an average minimum NYMEX of
approximately $19.00 per barrel on 12,000 barrels per day (equivalent to 54% of
first quarter 2000 crude oil production levels). Of these volumes, 100% have
full market price participation up to $27.00 per barrel; 50% have price
participation between $27.00 per barrel and $30.00 per barrel and 100% have full
market price participation at prices above $30.00 per barrel. The foregoing
NYMEX WTI crude oil prices are before quality and location differentials.
Management intends to continue to maintain hedging arrangements for a
significant portion of our production. Such contracts may expose us to the risk
of financial loss in certain circumstances.
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 our exposure, we monitor our
inventory levels, 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 that would expose
us to price risk. 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 (in millions):
March 31, 2000 December 31, 1999
-------------------- --------------------
Effect of Effect of
10% 10%
Fair Price Fair Price
Value Change Value Change
--------- ---------- ---------- ---------
Crude oil :
Futures contracts $ 6.4 $ 3.1 $ - $(2.8)
Swaps and options contracts (26.0) (6.0) (21.9) (6.1)
The fair values of the futures contracts are based on quoted market prices
obtained from the NYMEX. The fair value of the swaps are estimated based on
quoted prices from independent reporting services compared to the contract price
of the swap and approximate the gain or loss that would have been realized if
the contracts had been closed out at the dates indicated. All hedge positions
offset physical positions exposed to the cash market; none of these offsetting
physical positions are included in the above table. Price-risk sensitivities
were calculated by assuming an across-the-board 10 percent increase in prices
regardless of term or historical relationships between the contractual price of
the instruments and the underlying commodity price. In the event of an actual 10
percent change in prompt month crude oil prices, the fair value of our
derivative portfolio would typically change less than that shown in the table
due to lower volatility in out-month prices.
24
<PAGE>
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 March 31, 2000. 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 March 31, 2000. The carrying value of variable rate bank debt
approximates fair value as interest rates are variable, based on prevailing
market rates. The fair value of fixed rate debt was based on quoted market
prices based on trades of subordinated debt. The fair value of the Redeemable
Preferred Stock approximates its liquidation value at March 31, 2000.
<TABLE>
<CAPTION>
Expected Year of Maturity
------------------------------------------------------------------------- Fair
2000 2001 2002 2003 2004 Thereafter Total Value
--------- --------- --------- --------- --------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Liabilities:
Short-term debt - variable rate $ 13.5 $ - $ - $ - $ - $ - $ 13.5 $ 13.5
Average interest rate 8.22% 8.22%
Long-term debt - variable rate 10.6 9.1 34.7 34.7 114.0 78.3 281.4 281.4
Average interest rate 8.21% 7.50% 7.42% 7.42% 8.56% 7.97% 8.07%
Long-term debt - fixed rate 0.5 0.5 0.5 0.5 0.5 275.0 277.5 270.7
Average interest rate 8.00% 8.00% 8.00% 8.00% 8.00% 10.25% 10.23%
Redeemable Preferred Stock - - - - - $ 138.8 $138.8 $138.8
</TABLE>
At December, 1999, the carrying value of all variable rate bank debt and the
Redeemable Preferred Stock of $506.1 million and $138.8 million, respectively,
approximated the fair value and liquidation value, at that date.
The carrying value and fair value of the fixed rate debt was $277.5 million and
$270.7 million, respectively, at that date.
Interest rate swaps and collars are used to hedge underlying debt obligations.
These instruments hedge 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 March 31, 2000, we had
interest rate swap and collar arrangements for an aggregate notional principal
amount of $240.0 million, which positions had an aggregate value of
approximately $1.4 million as of such date. These instruments are based on LIBOR
margins and generally provide for a floor of 5% and a ceiling of 6.5% for 90.0
million of debt, a floor of 6% and a ceiling of 8% for 125.0 million of debt and
5.7% for $25.0 million of debt.
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," "expect," "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 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 (1) uncertainties inherent in the exploration for and development and
production of oil and gas and in estimating reserves, (2) unexpected future
capital expenditures (including the amount and nature thereof), (3) impact of
crude oil price fluctuations, (4) the effects of competition, (5) the success of
our risk management activities, (6) the availability (or lack thereof) of
acquisition or combination opportunities, (7) the availability of adequate
supplies of and demand for crude oil in areas of midstream operations, (8) the
impact of current and future laws and governmental regulations, (9)
environmental liabilities that are not covered by an indemnity or insurance and
(10) general economic, market or business conditions. 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.
25
<PAGE>
PART II. OTHER INFORMATION
ITEMS 1. LEGAL PROCEEDINGS
Texas Securities Litigation. On November 29, 1999, a class action lawsuit was
filed in the United States District Court for the Southern District of Texas
entitled Di Giacomo v. Plains All American Pipeline, et al. The suit alleged
that Plains All American Pipeline, L.P. and certain of the general partner's
officers and directors violated federal securities laws, primarily in connection
with unauthorized trading by a former employee. An additional nineteen cases
were filed in the Southern District of Texas, some of which name the general
partner (our wholly-owned subsidiary) and us as additional defendants.
Plaintiffs allege that the defendants are liable for securities fraud violations
under Rule 10b-5 and Section 20(a) of the Securities Exchange Act of 1934 and
for making false registration statements under Sections 11 and 15 of the
Securities Act of 1933. The court has consolidated all subsequently filed cases
under the first filed action described above. On April 27, 2000 the court
appointed two distinct lead plaintiffs to represent two different plaintiff
classes: (1) purchasers of Plains Resources common stock and options and (2)
purchasers of PAA's common units. No answer or responsive pleading is due until
thirty days after the lead plaintiffs have filed a consolidated amended
complaint.
Delaware Derivative Litigation. On December 3, 1999, two derivative lawsuits
were filed in the Delaware Chancery Court, New Castle County, entitled Susser v.
Plains All American Inc., et al and Senderowitz v. Plains All American Inc., et
al. These suits, and three others which were filed in Delaware subsequently,
named the general partner, its directors and certain of its officers as
defendants, and allege that the defendants breached the fiduciary duties that
they owed to Plains All American Pipeline, L.P. and its unitholders by failing
to monitor properly the activities of its employees. The derivative complaints
allege, among other things, that Plains All American Pipeline has been harmed
due to the negligence or breach of loyalty of the officers and directors that
are named in the lawsuits. These cases are currently in the process of being
consolidated. No answer or responsive pleading is due until these cases have
been consolidated and a consolidated complaint has been filed.
We intend to vigorously defend the claims made in the Texas securities
litigation and the Delaware derivative litigation. However, there can be no
assurance that we will be successful in our defense or that these lawsuits will
not have a material adverse effect on our financial position or results of
operation.
We, in the ordinary course of business, are a claimant and/or a defendant in
various other legal proceedings. Management does not believe that the outcome of
these other legal proceedings, individually and in the aggregate, will have a
materially adverse effect on our financial condition or results of operation.
ITEMS 2, 3, 4 & 5 ARE NOT APPLICABLE AND HAVE BEEN OMITTED.
Item 6 - Exhibits and Reports on Form 8-K
A. Exhibits
27. Financial Data Schedule
B. Reports on Form 8-K
None.
26
<PAGE>
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 RESOURCES INC.
Date: May 15, 2000 By: /s/ Cynthia A. Feeback
-----------------------------------------
Cynthia A. Feeback, Vice President -
Accounting and Assistant Treasurer
(Principal Accounting Officer)
27
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM PLAINS
RESOURCES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET AS OF MARCH 31, 2000
AND CONSOLIDATED STATEMENT OF INCOME FOR THE THREE MONTHS ENDED MARCH 31, 2000,
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 17,626
<SECURITIES> 0
<RECEIVABLES> 525,612
<ALLOWANCES> 0
<INVENTORY> 59,649
<CURRENT-ASSETS> 602,887
<PP&E> 1,206,445
<DEPRECIATION> 410,591
<TOTAL-ASSETS> 1,504,065
<CURRENT-LIABILITIES> 542,115
<BONDS> 0
138,813
23,300
<COMMON> 1,795
<OTHER-SE> 32,163
<TOTAL-LIABILITY-AND-EQUITY> 1,504,065
<SALES> 1,032,220
<TOTAL-REVENUES> 1,085,222
<CGS> 978,261
<TOTAL-COSTS> 1,004,554
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 15,874
<INCOME-PRETAX> 35,210
<INCOME-TAX> 13,732
<INCOME-CONTINUING> 21,478
<DISCONTINUED> 0
<EXTRAORDINARY> (1,365)
<CHANGES> 0
<NET-INCOME> 20,113
<EPS-BASIC> 0.91
<EPS-DILUTED> 0.68
</TABLE>
