<PAGE>
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the Registrant /X/
Filed by a party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/ / Definitive Proxy Statement
/X/ Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
SANTA FE PACIFIC PIPELINE PARTNERS, L.P.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
SANTA FE PACIFIC PIPELINE PARTNERS, L.P.
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------------------
<PAGE>
SANTA FE PACIFIC PIPELINE PARTNERS, L.P.
February 25, 1998
To the Common Unit Holders of Santa Fe Pacific Pipeline Partners, L.P.
("Santa Fe"):
The attached Form 8-K of Santa Fe dated January 8, 1998 and press
release of Kinder Morgan Energy Partners, L.P. ("KMEP") dated January 15,
1998 are being mailed to you in anticipation of the Special Meeting of Common
Unit Holders of Santa Fe to be held March 6, 1998. You should already have
received formal notice of this meeting and the accompanying Joint Proxy
Statement/Prospectus of KMEP and Santa Fe (the "Proxy Statement").
The Proxy Statement (on pages 66-70) describes the opinion of Smith
Barney Inc. ("Smith Barney"), financial advisor to the Special Committee of
the board of directors of Santa Fe Pacific Pipelines, Inc. ("SF General
Partner"), the general partner of Santa Fe. A copy of the opinion of Smith
Barney is attached as Annex C to the Proxy Statement. Smith Barney has
advised Santa Fe that it was aware of the financial information contained in
the KMEP press release and the Santa Fe press release attached as an exhibit
to the enclosed Form 8-K at the time it rendered its opinion, and it
considered that financial information in rendering its opinion.
The foregoing information is being disseminated to Common Unit holders
of Santa Fe in connection with a Memorandum of Understanding to settle
certain litigation brought by certain Common Unit Holders of Santa Fe in
connection with the proposed Transaction described in the Proxy Statement.
That litigation is generally described at pages 70-71 of the Proxy Statement.
Subsequent to the mailing of the Proxy Statement, counsel for the parties
entered into arms' length negotiations that resulted in an agreement to
settle the litigation. The disclosures herein are being made pursuant to that
agreement. It is anticipated that the parties will enter into a formal
Stipulation of Settlement to be presented to the Superior Court of the State
of California for approval. Thereafter, Common Unit Holders of Santa Fe will
receive a Formal Notice of Settlement, advising them of the date and time of
a settlement hearing, their right to object to the proposed settlement and
other material information. If the settlement is approved, the parties would
then seek dismissal of the actions pending in the Delaware Court of Chancery.
If a person other than you is the beneficial holder of the Common Units
of Santa Fe to which this notice refers, you are requested to forward this
notice to the beneficial owner. Additional copies of the notice will be made
available to you for this purpose upon request directed to Georgeson &
Company, Inc., at 1-800-223-2064.
Sincerely yours,
/s/ Irvin Toole, Jr.
- --------------------------------------------------
IRVIN TOOLE, JR.
CHAIRMAN, PRESIDENT AND CHIEF EXECUTIVE OFFICER OF
SANTA FE PACIFIC PIPELINES, INC.
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): JANUARY 8, 1998
------------------------
SANTA FE PACIFIC PIPELINE PARTNERS, L.P.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
Delaware 1-10066 95-4191066
(State of incorporation) (Commission File Number) (I.R.S. Employer
Identification
No.)
</TABLE>
1100 Town & Country Road
Orange, California 92868
(Address of principal executive offices, including zip code)
(714) 560-4400
(Registrant's telephone number, including area code)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
SANTA FE PACIFIC PIPELINE PARTNERS, L.P.
ITEM 5. OTHER EVENTS
Santa Fe Pacific Pipeline Partners, L.P. (the "Partnership") announced its
fourth quarter and full year 1997 earnings in a January 8, 1998 press release
(the "Press Release"), which press release is attached as Exhibit 99 and is
hereby incorporated by reference.
As previously reported, the Partnership, along with its general partner,
Santa Fe Pacific Pipelines, Inc. (the "General Partner"), and SFP Pipeline
Holdings, Inc. have entered into a definitive Purchase Agreement with Kinder
Morgan Energy Partners, L.P. and Kinder Morgan G.P., Inc. (collectively, "Kinder
Morgan") pursuant to which Kinder Morgan and its affiliates would acquire the
Partnership's limited partner interest in the Partnership's operating
partnership subsidiary, SFPP, L.P., as well as the General Partner's general
partner interest in the Partnership, and approximately one-half of the General
Partner's general partner interest in SFPP, L.P. would be redeemed (the
"Transaction").
The Partnership has previously distributed to the holders of its Common
Units a Joint Proxy Statement/Prospectus dated February 4, 1998 (the "Proxy
Statement") relating to the Transaction. The Proxy Statement (on pages 66-70)
describes the opinion of Smith Barney Inc. ("Smith Barney"), financial advisor
to the Special Committee of the board of directors of the General Partner. A
copy of the opinion of Smith Barney is attached as Annex C to the Proxy
Statement. Smith Barney has advised the Partnership that it was aware of the
financial information contained in the Press Release and the Kinder Morgan press
release dated January 15, 1998 (relating to fourth quarter and full year 1997
earnings of Kinder Morgan Energy Partners, L.P.) at the time it rendered its
opinion, and it considered that financial information in rendering its opinion.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(c) Exhibits:
99 Press release dated January 8, 1998.
SIGNATURE
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, thereunto duly authorized.
<TABLE>
<S> <C> <C>
SANTA FE PACIFIC PIPELINE PARTNERS, L.P.
(REGISTRANT)
By: SANTA FE PACIFIC PIPELINES, INC., AS
GENERAL PARTNER
By: /s/ BARRY R. PEARL
------------------------------------------
Barry R. Pearl
SENIOR VICE PRESIDENT, TREASURER
AND CHIEF FINANCIAL OFFICER
Date: February 24, 1998 (ON BEHALF OF THE REGISTRANT)
</TABLE>
<PAGE>
Exhibit 99
SANTA FE PACIFIC PIPELINE PARTNERS, L.P.
----------------------------------------------------------------------
1100 Town & Country Road
Orange, California 92868
714/560-4620
714/560-4629 (FAX)
- --------------------------------------------------------------------------------
Contact: Thomas L. Lambert
Manager, Investor Relations
News Release
New York Stock Exchange (SFL)
--------------------------------
98-1
January 8, 1998
SANTA FE PACIFIC PIPELINE PARTNERS, L.P.
ANNOUNCES FOURTH QUARTER EARNINGS
FOR IMMEDIATE RELEASE . . . . . . . Santa Fe Pacific Pipeline Partners, L.P.
(NYSE:SFL) announced fourth quarter net income of $21.9 million, or $1.10 per
unit, 10 percent above net income of $19.9 million, or $1.01 per unit, for the
same period last year, excluding charges in the current quarter totaling $4.3
million for potential FERC reparations and costs associated with the proposed
sale of the Partnership to Kinder Morgan Energy Partners, L.P. and a $15 million
litigation provision recorded in 1996. Including the charges, fourth quarter net
income was $17.7 million, or $0.89 per unit.
For the year ended December 31, 1997, net income, excluding litigation
provisions and transaction costs totaling $10.3 million, was $79.4 million, or
$4.01 per unit, 7 percent above net income of $74.5 million, or $3.76 per unit
in 1996, excluding litigation provisions totaling $23 million. Including the
provisions and costs, net income for 1997 was $69.4 million, or $3.51 per unit.
The fourth quarter charges included $2.0 million to reflect potential
reparations for the quarter, consistent with the Administrative Law Judge's
Initial Decision issued in September 1997, in the rate proceeding at the Federal
Energy Regulatory Commission challenging the Partnership's rates for
transportation of refined petroleum products to Arizona from El Paso, Texas and
Los Angeles, California. In addition, $2.3 million was recorded to reflect
fourth quarter costs associated with the proposed sale of the Partnership to
Kinder Morgan.
The Partnership also announced a cash distribution of 75 cents per unit for
the fourth quarter of 1997. The distribution is payable February 13, 1998 to
unitholders of record as of January 30, 1998.
Fourth quarter revenues of $61.8 million and total year revenues of $244.4
million both exceeded the respective prior year periods by 2 percent. Total
volumes delivered during the fourth quarter were essentially even with
deliveries in the prior year quarter. For the year, volumes delivered exceeded
one million barrels per day for the first time, 1 percent above 1996 deliveries.
Volume growth was achieved in virtually all commercial markets served by the
Partnership, with the 2 percent commercial growth rate tempered by reduced short
haul deliveries to certain Northern and Southern California locations. Military
volumes were lower at most facilities, with a significant reduction in San
Francisco Bay Area deliveries attributed to a change in military supply sources.
Excluding provisions and charges, fourth quarter operating expenses of $31.7
million were essentially even with the prior year quarter and total year
operating expenses of $130.1 million increased less than 1 percent above 1996,
with higher field operating expenses offset by lower legal expenses and
facilities costs.
Capital expenditures were $10.1 million for the fourth quarter and $24.9
million for the year. Capital expenditures in 1996 totaled $27.7 million.
Santa Fe Pacific Pipeline Partners, L.P. is one of the largest independent
refined petroleum products pipelines in the United States. The Partnership
serves six Western states with approximately 3,300 miles of common carrier
pipeline and 13 truck loading terminals.
* * *
<PAGE>
SANTA FE PACIFIC PIPELINE PARTNERS, L.P.
CONSOLIDATED STATEMENT OF INCOME
AND OPERATING HIGHLIGHTS
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER UNIT AND PER BARREL AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED TWELVE MONTHS ENDED
DECEMBER 31, DECEMBER 31,
-------------------- ----------------------
1997 1996 1997 1996
--------- --------- ---------- ----------
<S> <C> <C> <C> <C>
Operating revenues
Trunk revenues................................................... $ 48,336 $ 47,518 $ 192,031 $ 189,207
Storage and terminaling revenues................................. 10,002 9,650 39,121 38,302
Other revenues................................................... 3,456 3,260 13,263 12,633
--------- --------- ---------- ----------
Total operating revenues..................................... 61,794 60,428 244,415 240,142
--------- --------- ---------- ----------
Operating expenses
Field operating expenses......................................... 10,789 10,653 44,924 37,375
General and administrative expenses.............................. 7,260 7,168 26,495 30,260
Depreciation and amortization.................................... 5,259 5,242 21,351 21,080
Power costs...................................................... 5,285 5,506 20,674 21,062
Facilities costs................................................. 3,082 3,307 16,661 19,244
Provisions for litigation costs.................................. 2,000 15,000 8,000 23,000
--------- --------- ---------- ----------
Total operating expenses..................................... 33,675 46,876 138,105 152,021
--------- --------- ---------- ----------
Operating income................................................... 28,119 13,552 106,310 88,121
Interest expense................................................... 8,999 9,144 35,922 36,518
Kinder Morgan transaction costs.................................... 2,300 -- 2,300 --
Other income, net.................................................. 1,472 1,188 3,674 2,415
--------- --------- ---------- ----------
Net income before minority interest................................ 18,292 5,596 71,762 54,018
Less minority interest in net income............................... (590) (181) (2,315) (1,743)
--------- --------- ---------- ----------
Net income......................................................... $ 17,702 $ 5,415 $ 69,447 $ 52,275
--------- --------- ---------- ----------
--------- --------- ---------- ----------
Net income excluding special items*................................ $ 21,863 $ 19,932 $ 79,415 $ 74,533
--------- --------- ---------- ----------
--------- --------- ---------- ----------
PER UNIT AMOUNTS (19,148,148 UNITS)................................
Net income per unit................................................ $ 0.89 $ 0.27 $ 3.51 $ 2.64
--------- --------- ---------- ----------
--------- --------- ---------- ----------
Net income per unit excluding special items*....................... $ 1.10 $ 1.01 $ 4.01 $ 3.76
--------- --------- ---------- ----------
--------- --------- ---------- ----------
Cash distributions declared per unit............................... $ 0.75 $ 0.75 $ 3.00 $ 3.00
--------- --------- ---------- ----------
--------- --------- ---------- ----------
OPERATING DATA
Barrels delivered.................................................. 91,710 91,776 369,845 365,377
Barrel miles (millions)............................................ 13,417 13,008 53,046 51,828
Total revenue per barrel........................................... $ 0.67 $ 0.66 $ 0.66 $ 0.66
</TABLE>
- ------------------------
* These alternative computations exclude the provisions for litigation costs
and Kinder Morgan transaction costs reflected above.
<PAGE>
SANTA FE PACIFIC PIPELINE PARTNERS, L.P.
CONDENSED CONSOLIDATED BALANCE SHEET
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1997 1996
------------ ------------
<S> <C> <C>
ASSETS
Current assets..................................................................... $ 78,054 $ 77,909
Property, plant and equipment, net................................................. 629,365 628,694
Other assets....................................................................... 19,303 19,215
------------ ------------
Total assets..................................................................... $ 726,722 $ 725,818
------------ ------------
------------ ------------
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities................................................................ $ 38,675 $ 35,545
Long-term debt..................................................................... 355,000 355,000
Other long-term liabilities........................................................ 58,767 71,351
Minority interest.................................................................. 1,342 1,007
Partners' capital.................................................................. 272,938 262,915
------------ ------------
Total liabilities and partners' capital.......................................... $ 726,722 $ 725,818
------------ ------------
------------ ------------
</TABLE>
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED TWELVE MONTHS ENDED
DECEMBER 31, DECEMBER 31,
-------------------- ----------------------
1997 1996 1997 1996
--------- --------- ---------- ----------
<S> <C> <C> <C> <C>
Cash flows operating activities:
Net income....................................................... $ 17,702 $ 5,415 $ 69,447 $ 52,275
Depreciation, working capital and other adjustments.............. (4,501) 13,011 15,644 34,972
--------- --------- ---------- ----------
Net cash provided by operating activities...................... 13,201 18,426 85,091 87,247
--------- --------- ---------- ----------
Cash flows from investing activities:
Capital expenditures............................................. (10,099) (7,476) (24,934) (27,686)
Proceeds from property sales..................................... -- 2,749 -- 2,749
--------- --------- ---------- ----------
Net cash used by investing activities.......................... (10,099) (4,727) (24,934) (24,937)
--------- --------- ---------- ----------
Cash flows from financing activities:
Cash distributions............................................... (15,351) (15,351) (61,407) (61,407)
--------- --------- ---------- ----------
Increase (decrease) in cash and cash equivalents................... (12,249) (1,652) (1,250) 903
Cash and cash equivalents:
Beginning of period.............................................. 53,121 43,774 42,122 41,219
--------- --------- ---------- ----------
End of period.................................................... $ 40,872 $ 42,122 $ 40,872 $ 42,122
--------- --------- ---------- ----------
--------- --------- ---------- ----------
</TABLE>
<PAGE>
[LOGO]
CAROL HASKINS
(713) 844-9500
DEBRA LAUDEN
(713) 844-9500
WWW.ENPNET.COM
KINDER MORGAN ENERGY PARTNERS, L.P. INCREASES
QUARTERLY DISTRIBUTION TO $.5625; FOURTH QUARTER NET
INCOME INCREASES BY 43%
FOR IMMEDIATE RELEASE: THURSDAY, JANUARY 15, 1998
HOUSTON -- Kinder Morgan Energy Partners, L.P. (NYSE: "ENP") today reported
a 43 percent increase in fourth quarter 1997 net income to $7.69 million,
compared to 1996 fourth quarter net income of $5.39 million. Net income for all
of 1997 was $17.74 million, compared to $11.9 million for 1996, an increase of
49 percent. The results for 1996 included a non-recurring gain of $2.5 million,
attributable to Chevron's buyout of certain utilizations at the Painter, Wyoming
processing facility. The company also announced an increase in its quarterly
distribution from $.50 to $.5625 per unit, effective with the distribution for
the fourth quarter, payable on February 17, 1998 to unitholders of record as of
January 31, 1998.
After accounting for the general partner's incentive distribution, net
income per unit was $.41, equivalent to the fourth quarter of 1996. For the
year, net income per unit increased to $1.02 from $.90 in 1996. Revenues for the
quarter were $21.38 million compared to $23.73 million in the fourth quarter of
1996.
1301 McKinney Suite 3450 Box 67 Houston, Texas
77010 713/844-9500 713/844-9571 FAX
<PAGE>
"We are very pleased with our results for the fourth quarter and full year
1997, which significantly improved over the same periods of 1996 and constitute
the highest net income in the history of the company," said Richard D. Kinder,
Chairman and Chief Executive Officer of Kinder Morgan. "We have reevaluated our
quarterly distribution level and are pleased to raise it to an annual indicated
level of $2.25 from $2.00, a 12.5% increase. This increase is the third in the
past year and reflects our continuing growth in cash flow and earnings, as well
as management's confidence that this growth will continue."
Progress on our proposed acquisition of the assets of Santa Fe Pacific
Pipeline Partners, L.P. has been excellent", said Kinder. "We expect to receive
all required regulatory approvals by the end of January, and to mail proxies to
both sets of unitholders within the next few days setting unitholder meetings to
approve the merger approximately 20 business days thereafter."
"For the full year 1997, all of our continuing businesses showed increased
earnings," said Kinder. "Our coal terminals increased their net earnings by 81
percent, primarily as a result of increased volumes and the addition of the
Grand Rivers Terminal. Our coal services business unit, Red Lightning, also
contributed positive earnings as we continue to expand the services we offer our
customers. Earnings on our Central Basin CO(2) Pipeline increased by 16 percent,
with the increase driven by higher throughput. Increased throughput on our
Cypress pipeline, due to the impact of our 25,000 barrel per day expansion which
came on-line in late November, led to an increase in earnings of 9 percent for
that unit. Earnings on the North System increased by 3 percent with higher
average tariffs more than offsetting a slight decline in throughput. Our cost
reduction efforts continue to be successful, with 1997 operation and maintenance
and general and administrative costs down by $4.1 million, or 15 percent,
notwithstanding higher volumes on most of our assets."
"Earnings from our interest in the Mt. Belvieu fractionator increased by 13
percent. The fractionator results include benefits associated with the
liquidation of the corporate entity holding Kinder Morgan's interest in this
asset, offset in part by a reserve established for a contested product loss at
the fractionator. Future fractionator results will also be favorably impacted by
this elimination of a layer of corporate income tax," said Kinder.
Kinder Morgan Energy Partners, L.P., which has an enterprise value of over
$600 million, owns and operates two interstate common carrier natural gas
liquids (NGL) pipeline systems, one carbon dioxide (CO(2)) pipeline system, and
two modern high speed rail-to-barge coal transfer facilities; and also owns an
indirect interest in an NGL fractionator. On October 20, 1997, Kinder Morgan
announced a definitive agreement to purchase all of the assets of Santa Fe
Pacific Pipeline Partners, L.P. for in excess of $1 billion, forming the largest
pipeline MLP in the United States.
THIS PRESS RELEASE INCLUDES FORWARD LOOKING STATEMENTS WITHIN THE MEANING OF
SECTION 27A OF THE SECURITIES ACT OF 1933 AND SECTION 21E OF THE SECURITIES
EXCHANGE ACT OF 1934. ALTHOUGH THE PARTIES BELIEVE THAT THEIR EXPECTATIONS ARE
BASED ON REASONABLE ASSUMPTIONS THEY CAN GIVE NO ASSURANCE THAT SUCH ASSUMPTIONS
WILL MATERIALIZE.
<PAGE>
KINDER MORGAN ENERGY PARTNERS, L.P.
CONSOLIDATED STATEMENT OF INCOME
(Unaudited)
(In thousands except net income per unit)
<TABLE>
<CAPTION>
THREE MOS. ENDED DEC TWELVE MOS. ENDED DEC
31 31
---------------------- ----------------------
1997 1996 1997 1996
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Revenues.......................................................... $ 21,379 $ 23,729 $ 73,932 $ 71,250
---------- ---------- ---------- ----------
Costs and Expenses
Costs of Products Sold.......................................... $ 1,847 $ 3,693 $ 7,154 $ 7,874
Operations and Maintenance...................................... 4,236 5,202 15,039 18,880
Fuel and Power.................................................. 1,880 1,782 5,636 4,916
Depreciation and Amortization................................... 2,270 2,564 10,067 9,908
General and Administration...................................... 2,298 2,329 8,862 9,132
Taxes, Other Than Income Taxes.................................. 659 1,018 2,943 3,467
---------- ---------- ---------- ----------
Total Costs and Expenses.......................................... 13,190 16,588 49,701 54,177
---------- ---------- ---------- ----------
Operating Income.................................................. 8,189 7,141 24,231 17,073
Equity in Earnings of Partnerships................................ 1,540 1,891 5,724 5,675
Reserve for Contested Product Loss................................ (626) 0 (626) 0
Interest Expense.................................................. (3,039) (3,230) (12,605) (12,634)
Other............................................................. 54 140 452 3,250
Minority Interest................................................. (78) (55) (179) (121)
---------- ---------- ---------- ----------
Income Before Income Taxes........................................ 6,040 5,887 16,997 13,243
Income Tax Benefit/(Expense)...................................... 1,649 (496) 740 (1,343)
---------- ---------- ---------- ----------
Net Income........................................................ $ 7,689 $ 5,391 $ 17,737 $ 11,900
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
General Partner's Interest in Net Income.......................... 1,959 79 4,074 217
Limited Partner's Interest in Net Income.......................... 5,730 5,312 13,663 11,683
---------- ---------- ---------- ----------
Net Income........................................................ $ 7,689 $ 5,391 $ 17,737 $ 11,900
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Per Unit Net Income............................................... 0.41 0.41 1.02 0.90
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Number of Units Used in Computation............................... 14,111 13,020 13,411 13,020
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</TABLE>
<PAGE>
KINDER MORGAN ENERGY PARTNERS, L.P.
EARNINGS CONTRIBUTION BY BUSINESS UNIT
(Unaudited)
(In thousands except net income per unit)
<TABLE>
<CAPTION>
THREE MOS. ENDED DEC TWELVE MOS. ENDED DEC
31 31
---------------------- ----------------------
1997 1996 1997 1996
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
NORTH SYSTEM...................................................... 4,821 6,359 12,001 11,613
CYPRESS........................................................... 1,119 1,067 4,163 3,816
CBPL.............................................................. 2,209 1,575 7,720 6,642
KM NGL............................................................ 1,901 1,181 4,066 3,596
COAL TERMINALS.................................................... 1,790 882 7,992 4,422
RED LIGHTNING..................................................... 855 -- 2,716 --
PAINTER........................................................... 117 (161) (447) 3,183
MOBIL GAS PROCESSING.............................................. -- (32) (21) (109)
GENERAL/ADMIN..................................................... (2,298) (2,329) (8,862) (9,132)
DEBT COSTS........................................................ (2,747) (3,096) (11,412) (12,010)
Less Minority Interest............................................ (78) (55) (179) (121)
---------- ---------- ---------- ----------
Net Income........................................................ 7,689 5,391 17,737 11,900
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
General Partner's Interest in Net Income.......................... 1,959 79 4,074 217
Limited Partner's Interest in Net Income.......................... 5,730 5,312 13,663 11,683
---------- ---------- ---------- ----------
Net Income........................................................ $ 7,689 $ 5,391 $ 17,737 $ 11,900
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Per Unit Net Income............................................... 0.41 0.41 1.02 0.90
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</TABLE>
VOLUME HIGHLIGHTS
<TABLE>
<CAPTION>
THREE MOS. ENDED DEC TWELVE MOS. ENDED DEC
31 31
---------------------- ----------------------
1997 1996 1997 1996
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
North System
Delivery Volumes (MBbl)......................................... 10,307 12,222 32,850 34,745
Cypress
Delivery Volumes (MBbl)......................................... 3,869 3,170 13,458 11,856
Central Basin Pipeline
Delivery Volumes (MMcf/d)....................................... 239 197 207 171
Coal Terminals
Transport (M Tons).............................................. 2,910 1,653 9,087 6,090
</TABLE>
