UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- ---
EXCHANGE ACT OF 1934
For the quarterly period ended SEPTEMBER 30, 1996
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File Number 1-12872
EOTT ENERGY PARTNERS, L.P.
(Exact name of registrant as specified in its charter)
Delaware 47-0424520
- ------------------------------------- -----------------------------------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
1330 Post Oak Blvd.
Suite 2700
Houston, Texas 77056
- -------------------------------------- -----------------------------------
(Address of principal executive offices) (Zip Code)
(713) 993-5200
(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
1
<PAGE>
EOTT ENERGY PARTNERS, L.P.
TABLE OF CONTENTS
PAGE
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
Condensed Consolidated Statements of Operations (unaudited)-
Three Months Ended September 30, 1996 and 1995, and
Nine Months Ended September 30, 1996 and 1995 3
Condensed Consolidated Balance Sheets (unaudited) -
September 30, 1996 and December 31, 1995 4
Condensed Consolidated Statements of Cash Flows (unaudited) -
Nine Months Ended September 30, 1996 and 1995 5
Condensed Consolidated Statement of Partners' Capital (unaudited) -
Nine Months Ended September 30, 1996 6
Notes to Condensed Consolidated Financial Statements 7
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 14
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings 20
ITEM 6. Exhibits and Reports on Form 8-K 20
2
<PAGE>
<TABLE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
EOTT ENERGY PARTNERS, L.P.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER UNIT AMOUNTS)
(UNAUDITED)
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------------------ ----------------------------
1996 1995 1996 1995
-------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Revenue............................................ $ 1,822,369 $ 1,191,314 $ 5,066,885 $ 3,710,259
Cost of Sales...................................... 1,787,227 1,167,320 4,953,122 3,642,624
------------- ------------- ------------- -------------
Gross Margin....................................... 35,142 23,994 113,763 67,635
Expenses
Operating expenses.............................. 24,626 17,701 78,569 53,518
Depreciation and amortization................... 3,048 2,578 11,972 7,814
------------- ------------- ------------- -------------
27,674 20,279 90,541 61,332
------------- ------------- ------------- -------------
Operating Income .................................. 7,468 3,715 23,222 6,303
Other Income (Expense)
Interest income................................. 134 54 386 432
Interest and related charges.................... (850) (539) (2,562) (3,359)
Other, net...................................... 432 378 416 864
-------------- ------------- ------------- --------------
(284) (107) (1,760) (2,063)
-------------- -------------- -------------- --------------
Income From Continuing Operations.................. 7,184 3,608 21,462 4,240
Income (Loss) From
Discontinued Operations (Note 4)................ - 950 - (62,030)
------------- ------------- ------------- --------------
Income (Loss) Before
Extraordinary Item.............................. 7,184 4,558 21,462 (57,790)
Extraordinary Item (Note 11)....................... - - - (1,315)
------------- ------------- ------------- --------------
Net Income (Loss).................................. $ 7,184 $ 4,558 $ 21,462 $ (59,105)
============= ============= ============= ==============
Net Income (Loss) Per Unit
Continuing Operations........................... $ 0.37 $ 0.21 $ 1.12 $ 0.24
Discontinued Operations......................... - 0.05 - (3.57)
Extraordinary Item.............................. - - - (0.08)
------------- ------------- ------------- --------------
Total.............................................. $ 0.37 $ 0.26 $ 1.12 $ (3.41)
============= ============ ============= ==============
Number of Units Outstanding........................ 18,830 17,000 18,830 17,000
============= ============= ============= =============
<FN>
The accompanying notes are an integral part of these condensed
consolidated financial statements.
</FN>
</TABLE>
3
<PAGE>
<TABLE>
EOTT ENERGY PARTNERS, L.P.
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
(UNAUDITED)
SEPTEMBER 30, DECEMBER 31,
1996 1995
------------- --------------
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents....................................................... $ 8,174 $ 2,276
Trade and other receivables, net of allowance for doubtful
accounts of $ 3,096 and $2,397, respectively................................. 594,847 439,619
Inventories..................................................................... 129,967 101,376
Net assets of discontinued operations (Note 4).................................. 5,562 3,460
Other .......................................................................... 6,962 3,877
------------- --------------
Total current assets......................................................... 745,512 550,608
------------- --------------
Property, Plant & Equipment, at cost................................................ 212,431 211,318
Less: Accumulated depreciation.................................................. 82,409 73,753
------------- --------------
Net property, plant & equipment.............................................. 130,022 137,565
------------- --------------
Other Assets, net of amortization................................................... 7,679 7,954
------------- --------------
Total Assets........................................................................ $ 883,213 $ 696,127
============= ==============
LIABILITIES AND PARTNERS' CAPITAL
Current Liabilities
Trade accounts payable ......................................................... $ 672,189 $ 506,764
Accrued taxes payable........................................................... 8,446 5,295
Note payable - affiliate (Note 8)............................................... 24,228 -
Note payable (Note 6)........................................................... - 85,000
Short-term borrowings - affiliate............................................... 43,000 2,200
Short-term borrowings........................................................... 582 5,559
Other........................................................................... 25,739 4,853
------------- --------------
Total current liabilities.................................................... 774,184 609,671
------------- --------------
Long - Term Liabilities............................................................. 1,112 1,546
------------- --------------
Commitments and Contingencies (Note 10)
Additional Partnership Interests (Note 8)........................................... 9,091 9,091
------------- --------------
Partners' Capital
Common Unitholders.............................................................. 30,161 37,992
Special Unitholders............................................................. 29,208 -
Subordinated Unitholders........................................................ 37,388 36,219
General Partner................................................................. 2,069 1,608
------------- --------------
Total Partners' Capital............................................................. 98,826 75,819
------------- --------------
Total Liabilities and Partners' Capital............................................. $ 883,213 $ 696,127
============= ==============
<FN>
The accompanying notes are an integral part of these condensed
consolidated financial statements.
</FN>
</TABLE>
4
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<TABLE>
EOTT ENERGY PARTNERS, L.P.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
NINE MONTHS ENDED
SEPTEMBER 30,
-----------------------------
1996 1995
------------- --------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Reconciliation of net income (loss) to net cash
provided by operating activities -
Net income (loss)............................................................... $ 21,462 $ (59,105)
Depreciation................................................................. 10,449 6,410
Amortization of intangible assets............................................ 1,523 1,404
(Gains) losses on disposal of assets......................................... 80 (475)
Changes in components of working capital -
Receivables................................................................ (155,228) 66,942
Inventories................................................................ (28,591) 30,820
Other current assets....................................................... (3,085) 6,643
Trade payables............................................................. 165,425 (65,687)
Accrued taxes payable...................................................... 3,151 1,653
Other current liabilities.................................................. 11,760 (6,465)
Discontinued operations...................................................... (2,102) 36,300
Other, net................................................................... 348 82
------------- --------------
Net Cash Provided By Operating Activities........................................... 25,192 18,522
------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of property, plant and equipment............................. 880 2,397
Additions to property, plant and equipment...................................... (5,426) (7,300)
Other, net...................................................................... (36) 542
-------------- ---------------
Net Cash Used In Investing Activities............................................... (4,582) (4,361)
-------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES
Decrease in short-term borrowings............................................... (4,977) (42,000)
Increase in short-term borrowings - affiliate................................... 40,800 38,100
Decrease in note payable........................................................ (85,000) -
Increase in note payable - affiliate............................................ 24,228 -
Distributions paid to Unitholders............................................... (19,705) (7,372)
Principal payments under capital lease obligation............................... - (10,290)
Issuance of Common Units........................................................ 29,772 -
Trade partner financing......................................................... - 8,930
Contribution from General Partner............................................... 604 -
Other, net...................................................................... (434) (1,662)
-------------- ---------------
Net Cash Used In Financing Activities............................................... (14,712) (14,294)
-------------- ---------------
Increase (Decrease) In Cash and Cash Equivalents.................................... 5,898 (133)
Cash and Cash Equivalents, Beginning of Period...................................... 2,276 2,020
------------- ---------------
Cash and Cash Equivalents, End of Period............................................ $ 8,174 $ 1,887
============= ===============
<FN>
The accompanying notes are an integral part of these condensed
consolidated financial statements.
</FN>
</TABLE>
5
<PAGE>
<TABLE>
EOTT ENERGY PARTNERS, L.P.
CONDENSED CONSOLIDATED STATEMENT OF PARTNERS' CAPITAL
(IN THOUSANDS)
(UNAUDITED)
COMMON SPECIAL SUBORDINATED GENERAL
UNITHOLDERS UNITHOLDERS UNITHOLDERS PARTNER
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Balance at December 31, 1995.............. $ 37,992 $ - $ 36,219 $ 1,608
Net income................................ 12,530 682 7,819 431
Cash distributions........................ (20,738) (869) (6,650) (574)
Issuance of Common Units.................. 29,772 - - -
Exchange of Common Units for
Special Units (Note 8)............... (29,395) 29,395 - -
Contribution from General Partner......... - - - 604
------------- ------------- ------------- -------------
Balance at September 30, 1996............ $ 30,161 $ 29,208 $ 37,388 $ 2,069
============= ============= ============= =============
<FN>
The accompanying notes are an integral part of these condensed
consolidated financial statements.
</FN>
</TABLE>
6
<PAGE>
EOTT ENERGY PARTNERS, L.P.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
In connection with a reorganization of the business conducted by EOTT
Energy Corp., an indirect wholly-owned subsidiary of Enron Corp. ("Enron"), into
limited partnership form and a concurrent initial public offering of Common
Units of EOTT Energy Partners, L.P. ("EOTT" or the "Partnership") effective
March 24, 1994, the net assets of EOTT Energy Corp., its wholly-owned foreign
subsidiary, EOTT Energy Ltd., and Enron Products Marketing Company ("EPMC") were
acquired by three operating limited partnerships in which the Partnership is
directly or indirectly the 99% limited partner. EOTT Energy Corp., a Delaware
corporation, serves as the General Partner of the Partnership and its related
operating limited partnerships. The accompanying condensed consolidated
financial statements and related notes present the financial position as of
September 30, 1996 and December 31, 1995, the results of operations for the
three and nine months ended September 30, 1996 and 1995, cash flows for the nine
months ended September 30, 1996 and 1995 and changes in partners' capital for
the nine months ended September 30, 1996.
The financial statements included herein have been prepared by the
Partnership without audit pursuant to the rules and regulations of the
Securities and Exchange Commission ("SEC"). Accordingly, they reflect all
adjustments (which consist solely of normal recurring adjustments) which are, in
the opinion of management, necessary for a fair presentation of the financial
results for interim periods. Certain information and notes normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations. However, the Partnership believes that the disclosures are adequate
to make the information presented not misleading. These financial statements
should be read in conjunction with the financial statements and notes thereto
included in the Partnership's Annual Report on Form 10-K for the year ended
December 31, 1995 filed with the Securities and Exchange Commission.
Certain reclassifications have been made to prior period amounts to conform
with the current period presentation.
2. FORMATION AND OFFERING
On March 24, 1994, the General Partner completed an initial public offering
of 10 million Common Units at $20.00 per unit, representing limited partner
interests in the Partnership. In addition to its aggregate approximate 2%
general partner interest in the Partnership, the General Partner owns an
approximate 37% limited partner interest in the Partnership in the form of
Subordinated Units. Enron, through its purchase of EOTT Common Units and Special
Units, more fully described in Note 8, directly holds an approximate 11%
interest in the Partnership.
3. CHANGE IN ACCOUNTING PRINCIPLE
In the second quarter of 1996, the Partnership changed its method of
accounting for inventories from the last-in, first-out ("LIFO") method to the
average cost method. The change did not have a significant effect on the results
of operations for 1996, and it is not expected to be material in future periods
based upon the manner in which the Partnership currently operates. Prior to this
change, the Partnership's inventory costs would not have differed significantly
under the two methods. The change was made to conform the inventory costing
method used for financial reporting purposes to that used by the Partnership to
manage its commercial operations.
7
<PAGE>
EOTT ENERGY PARTNERS, L.P.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
4. DISCONTINUED OPERATIONS
On September 29, 1995, EOTT transferred to Paramount Petroleum Corporation
("PPC") EOTT's West Coast processing and asphalt marketing business (other than
its Arizona asphalt terminals and its asphalt marketing business based out of
those terminals). The transfer was made pursuant to an agreement dated August
15, 1995 between EOTT and certain of its affiliates and PPC and certain of its
affiliates.
EOTT's decision to exit the West Coast business segment was made primarily
due to persistently low crack spreads in 1995 and EOTT's inability to
effectively protect itself against potential future losses due to the volatility
in the crack spread. The crack spread is the difference between the sales price
of refined products and the cost of feedstocks, principally crude oil.
In August 1995, EOTT's Board of Directors approved a formal plan to
dispose of the West Coast business segment. The second quarter 1995 results of
discontinued operations included a charge of $46.8 million, or $2.70 per Unit.
This charge included the repayment of the PPC bank debt at June 30, 1995 ($9.4
million); write-off of leasehold improvements at the refinery ($7.4 million);
estimated third quarter operating losses ($6.0 million); additional expenses
($10.0 million) including transaction fees, lease cancellation costs and working
capital reserves; and a lump-sum settlement ($14.0 million) related to taxes on
the debt repayment and for the assumption of other contractual obligations, none
of which were environmentally related. In the third quarter of 1995, EOTT
recorded a $1.0 million benefit which reflected a settlement at an amount less
than estimated on the PPC bank obligation assumed by EOTT as part of the
agreement with PPC, and in the fourth quarter of 1995, EOTT recorded an
additional charge of $3.8 million associated with the final liquidation of the
processing inventories.
The remaining net assets of discontinued operations of $5.6 million at
September 30, 1996 consist primarily of the Arizona asphalt terminals and
related working capital, less estimated disposition costs. As further discussed
in Note 13, EOTT has entered into an agreement to sell the Arizona asphalt
terminals.
Amounts related to the West Coast Operations discontinued in 1995 are
summarized below (in thousands,):
<TABLE>
Three Months Nine Months
Ended Ended
September 30, September 30,
1995 1995
------------- -------------
<S> <C> <C>
Revenues............................................... $ - $ 315,808
=========== ===========
Gross margin........................................... $ - $ (5,596)
=========== ===========
Loss from discontinued operations...................... $ - $ (16,180)
=========== ===========
Gain (Loss) on disposal of discontinued operations..... $ 950 $ (45,850)
=========== ===========
</TABLE>
The 1995 loss from discontinued operations was due primarily to
significantly lower crack spreads which, on an industry-wide basis, were at
their lowest levels in five years. These operating results also include an
allocation of interest expense based on the ratio of net assets of the
discontinued operations to the sum of consolidated net assets plus consolidated
debt.
8
<PAGE>
EOTT ENERGY PARTNERS, L.P.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
5. ACQUISITION OF PIPELINE ASSETS
On December 29, 1995, but effective January 1, 1996, the Partnership
acquired pipeline and related assets from Amerada Hess Corporation ("Amerada
Hess acquisition"). The acquired assets include a 265 mile crude oil gathering
system and the Mississippi-Alabama pipeline, a 349 mile common carrier crude oil
pipeline extending from a terminal in Mobile, Alabama to Liberty Station in
Southwestern Mississippi, as well as certain associated crude inventories. Tank
storage associated with the acquired systems and the Mobile terminal is
approximately 5.1 million barrels. The purchase price was approximately $54.0
million and was accounted for as an asset purchase. Allocation of the purchase
price to the acquired assets at December 31, 1995 was based upon an independent
estimated appraisal of fair value. Final fair value amounts were not materially
different than the estimate.
At the time of the closing, Enron had assisted the Partnership in the
arrangement of bridge financing for the asset purchase with a commercial bank in
the form of a promissory note issued by the Partnership to the bank due January
3, 1996 carrying an average annual interest rate of 7.2%. On January 3, 1996,
the Partnership and Enron completed transactions to repay the bridge financing,
which are more fully discussed in Note 8.
Detailed below are summarized pro forma results of operations for the
Partnership for the three and nine months ended September 30, 1995 as though the
acquisition had taken place at the beginning of the period. Pro forma
adjustments include additional depreciation expense, elimination of income
taxes, and additional interest expense related to the $24.2 million note issued
to Enron related to the financing of the acquisition more fully discussed in
Note 8.
<TABLE>
(UNAUDITED: IN THOUSANDS, EXCEPT PER UNIT AMOUNTS)
Three Months Ended Nine Months Ended
September 30, September 30,
1995 1995
------------- -------------
<S> <C> <C>
Revenue.................................................. $ 1,236,740 $ 3,854,984
============ ============
Gross margin............................................. $ 27,620 $ 85,072
============ ============
Income from continuing operations........................ $ 5,235 $ 10,264
============ ============
Net income (loss)........................................ $ 6,185 $ (53,081)
============ ============
Income from continuing operations per Unit............... $ 0.27 $ 0.53
============ ============
Net income (loss) per Unit............................... $ 0.32 $ (2.77)
============ ============
Number of Units outstanding (a).......................... 18,830 18,830
============ ============
- ------
(a) Includes 1.8 million Special Units issued to Enron more fully discussed in
Note 8.
The unaudited pro forma results of operations are not intended to be
indicative of actual operating results had the transactions occurred when
indicated, nor do they purport to indicate operating results which may occur in
the future.
</TABLE>
6. CREDIT FACILITIES
On June 30, 1995, Enron agreed to provide credit support (the "Enron
Facility") to the Partnership in the form of guarantees, letters of credit,
loans and letters of indemnity. The total amount of the Enron Facility is $450
million and the facility has a maturity of March 31, 1997, as amended February
19, 1996. The agreement contains sublimits on the availability of the Enron
Facility of $60 million for working capital loans and $150 million for letters
of credit. A fee of .375% per annum is charged on the stated amount of
outstanding letters of credit. Interest on outstanding loans is charged at the
London Interbank Offered Rate ("LIBOR") plus .25% per annum.
9
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EOTT ENERGY PARTNERS, L.P.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The Enron Facility is subject to defined borrowing base limitations
relating to the Partnership's activities and to the maintenance and protection
of the collateral. The Enron Facility permits distributions to Unitholders
subject to certain limitations based on the Partnership's earnings and other
factors. These covenants and restrictions are not expected to materially affect
EOTT's ability to operate the ongoing Partnership business. The Enron Facility
is secured by a first priority lien on and security interest in all receivables
and inventory of the Partnership. The borrowing base is the sum of cash and cash
equivalents, specified percentages of eligible receivables, inventory, and
products contracted for or delivered but not billed. The Enron Facility is
non-recourse to the General Partner and the General Partner's assets. The
Partnership is restricted from entering into additional financing arrangements
without the prior approval of Enron.
At December 31, 1995, EOTT was in technical violation of certain negative
covenants related to the Enron Facility - including Leverage Ratio, Minimum
Working Capital Ratio, and Maximum Fixed Assets - due principally to the
operating losses associated with the exiting of the West Coast processing and
asphalt marketing business and the short-term bridge financing. At September 30,
1996, EOTT was in violation of the Leverage and Minimum Working Capital Ratios.
EOTT received waivers from Enron for each of these periods.
At December 31, 1995, EOTT had $85 million of short-term borrowings
outstanding with a commercial bank. Such borrowings were at an average annual
interest rate of 7.2% and primarily funded the working capital requirements as
well as the bridge financing utilized in the Mississippi-Alabama pipeline
acquisition as discussed in Note 5. Subsequent to year end, as further discussed
in Note 8, the short-term borrowings were repaid.
The General Partner believes that the Enron Facility will be sufficient to
support the Partnership's crude oil and refined product purchasing activities
and working capital requirements. No assurance, however, can be given that the
General Partner will not be required to reduce or restrict the Partnership's
gathering and marketing activities because of limitations on its ability to
obtain credit support and financing for its working capital needs.
The Partnership's ability to obtain letters of credit to support its
purchases of crude oil or refined petroleum products is fundamental to the
Partnership's gathering and marketing activities. Additionally, EOTT has a
significant need for working capital due to the large dollar volume of trading
and marketing transactions in which it engages. Any significant decrease in the
Partnership's financial strength, regardless of the reason for such decrease,
may increase the number of transactions requiring letters of credit or other
financial support, make it more difficult for the Partnership to obtain such
letters of credit, and/or increase the cost of obtaining them. This could in
turn adversely affect the Partnership's ability to maintain or increase the
level of its purchasing and marketing activities or otherwise adversely affect
the Partnership's profitability and Available Cash as defined in the Partnership
Agreement.
The Partnership Agreement authorizes EOTT to issue other equity securities,
the proceeds from which could be used to provide additional funds for
acquisitions or other Partnership needs.
7. SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid for interest expense was $2.3 million and $4.3 million for the
nine months ended September 30, 1996 and 1995, respectively.
Non-cash investing activities during the nine months ended September 30,
1995 include an obligation for approximately $2.1 million to finance ongoing
systems development. At December 31, 1995, the balance of these obligations is
included in short-term borrowings on the Consolidated Balance Sheets. On January
5, 1996, EOTT repaid the outstanding balance of the financing in connection with
the information systems development.
Non cash investing activities during the nine months ended September 30,
1996 include an obligation for approximately $9.1 million to pay distributions
to Unitholders on November 14, 1996 as discussed in Note 12 and, as discussed
further in Note 8, 1,830,011 Common Units issued to Enron in connection with the
Amerada Hess acquisition were exchanged for Special Units.
10
<PAGE>
EOTT ENERGY PARTNERS, L.P.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
8. TRANSACTIONS WITH ENRON AND RELATED PARTIES
<TABLE>
REVENUE AND COST OF SALES. A summary of revenue and cost of sales with
Enron and its affiliates are as follows (in thousands):
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30
-------------------------- --------------------------
1996 1995 1996 1995
----------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
Revenue................................... $ 12,043 $ 543 $ 27,737 $ 3,716
Cost of Sales............................. $ 19,083 $ 20,156 $ 69,416 $ 71,937
</TABLE>
Revenue in 1996 and 1995 consists primarily of crude oil sales to Enron
Reserve Acquisition Corp. Cost of sales consists primarily of crude oil and
condensate purchases from Enron Oil & Gas Company. These transactions, in the
opinion of management, are no less favorable than can be obtained from
unaffiliated third parties.
Related party receivables at September 30, 1996 and December 31, 1995 were
$4.7 million and $.4 million, respectively, and are classified as trade and
other receivables. Related party payables at September 30, 1996 and December 31,
1995 were $7.3 million and $8.3 million, respectively, and are classified as
trade accounts payable.
PURCHASE OF COMMON UNITS. On March 10, 1995 Enron authorized the purchase
of up to $15 million of EOTT Units on the open market. As of November 13, 1996,
Enron had purchased 296,800 EOTT Common Units under the purchase program, in
addition to the 1.8 million Units discussed in (i) under "Financing of Pipeline
Acquisition" below.
ADDITIONAL PARTNERSHIP INTERESTS ("APIs"). On May 15, 1995 and August 14,
1995, Enron paid $4.3 million and $4.8 million, respectively, in support of
EOTT's first and second quarter 1995 distributions to its Common Unitholders and
the General Partner. In exchange for the distribution support, Enron received
APIs in the Partnership. APIs have no voting rights and are non-distribution
bearing; however, APIs will be entitled to be redeemed if, with respect to any
quarter, the Minimum Quarterly Distribution ("MQD") and any Common Unit
Arrearages have been paid, but only to the extent that Available Cash with
respect to such quarter exceeds the amount necessary to pay the MQD on all Units
and any Common Unit Arrearages. Enron has committed to support payment of EOTT
common distributions up to an aggregate of $29.0 million through March 1998, as
necessary.
FINANCING OF PIPELINE ACQUISITION. On January 3, 1996, EOTT and Enron
concluded financing arrangements related to the acquisition discussed in Note 5
in which the Partnership (i) issued and sold to Enron 1,830,011 Common Units for
$29.8 million in cash in a private placement (ii) issued a promissory note to
Enron for $24.2 million originally due at June 30, 1996 and subsequently
extended to March 31, 1997, which carries a per annum interest rate of LIBOR
plus 1% through March 31, 1996, and a rate of LIBOR plus 1.5% through March 31,
1997 and (iii) received a $0.6 million capital contribution related to the
General Partner's approximate 2% interest in the Partnership. The balance of the
purchase price was financed through short-term borrowings with Enron.
Collectively, these proceeds, together with short-term borrowings from Enron,
were used by EOTT to repay the bridge financing discussed in Note 5.
11
<PAGE>
EOTT ENERGY PARTNERS, L.P.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SPECIAL UNITS
Effective July 16, 1996, EOTT created a new class of limited partner
interest designated as Special Units and exchanged the Special Units on a
one-for-one basis for the 1,830,011 Common Units issued January 3, 1996 to Enron
in connection with the financing of the acquisition. The Special Units rank pari
passu with the Common Units in all distributions and upon liquidation and will
vote as a class with the Common Units. The exchange permitted EOTT to avoid the
cost of New York Stock Exchange listing of the Common Units issued to Enron in
connection with the financing of the acquisition, including the cost associated
with seeking Unitholder approval for the listing. The Special Units may become
convertible into Common Units on a one-for-one basis in certain events. The
Special Units will be Common Unit equivalents, and the exchange will have no
adverse impact on EOTT or on income or distributions per Common Unit.
9. OTHER INCOME (EXPENSE), NET
<TABLE>
The components of other income (expense), net are as follows (in
thousands):
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------------ ------------------------
1996 1995 1996 1995
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Gain on foreign currency transactions................ $ 114 $ 130 $ 191 $ 264
Gain (loss) on disposal of fixed assets.............. 55 169 (80) 475
Litigation settlement................................ 203 - 203 -
Other, net........................................... 60 79 102 125
----------- ----------- ----------- -----------
Total............................................ $ 432 $ 378 $ 416 $ 864
=========== =========== =========== ===========
</TABLE>
10. LITIGATION AND OTHER CONTINGENCIES
EOTT is, in the ordinary course of business, a defendant in various
lawsuits, some of which are covered in whole or in part by insurance. The
Partnership is responsible for all litigation and other claims relating to the
businesses acquired from EOTT Energy Corp., although the Partnership will be
entitled to the benefit of certain insurance maintained by Enron covering
occurrences prior to the closing of the initial offering. The Partnership
believes that the ultimate resolution of litigation, individually and in the
aggregate, will not have a materially adverse impact on the Partnership's
financial position or results of operations. Various legal actions have arisen
in the ordinary course of business, the most significant of which are discussed
in "Part I, Item 3. Legal Proceedings" of EOTT's Annual Report filed on Form
10-K for the year ended December 31, 1995 and below.
MCMAHON FOUNDATION AND J. TOM POYNER VS. AMERADA HESS CORPORATION, ET AL.
(INCLUDING EOTT ENERGY OPERATING LIMITED PARTNERSHIP), CIVIL ACTION NO.
H-96-1155; UNITED STATES DISTRICT COURT, SOUTHERN DISTRICT OF TEXAS, HOUSTON
DIVISION (FEDERAL ANTI-TRUST SUIT): This suit was filed on April 10, 1996 as a
class action complaint for violation of the federal antitrust laws. The relevant
area is the entire continental United States, except for Alaska, New York, Ohio,
Pennsylvania, West Virginia and the Wilmington Field at Long Beach, California.
The plaintiffs claim that there is a combination and conspiracy among the
defendant oil companies to fix, depress, stabilize and maintain at artificially
low levels the price paid for the first purchase of lease production oil sold
from leases in which the class members own interests. This was allegedly
accomplished by agreement of the defendants to routinely pay for first purchases
at posted prices rather than competitive market prices and maintain them in a
range below competitive market prices through an undisclosed scheme of using
posted prices in buy/sell transactions among themselves to create the illusion
that posted prices are genuine market prices. The plaintiffs allege violations
from October of 1986 forward. No money amounts were claimed, so it is not
possible to determine any potential exposure until further discovery has been
done. While the petition is vague and discovery has not yet begun, the General
Partner believes the Partnership, as a first purchaser, should be without
liability in this or related matters.
12
<PAGE>
EOTT ENERGY PARTNERS, L.P.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The Partnership believes that it has obtained or has applied for all of the
necessary permits required by federal, state, and local environmental agencies
for the operation of its business. Further, the Partnership believes that there
are no outstanding liabilities or claims relating to environmental matters
individually and in the aggregate, which would have a material adverse impact on
the Partnership's financial position or results of operations.
11. EXTRAORDINARY ITEM
Second quarter 1995 results include a one-time charge of $1.3 million
related to the termination of the credit facility in place prior to obtaining
the Enron Facility as described in Note 6.
12. DISTRIBUTIONS
On September 30, 1996, the Board of Directors of EOTT Energy Corp., as
General Partner, declared and recorded the Partnership's regular quarterly cash
distribution of $.475 per Unit for the period July 1, 1996 through September 30,
1996. The third quarter distribution will be paid on November 14, 1996 to the
General Partner and all other Unitholders of record including the Subordinated
Unitholder as of October 31, 1996.
13. SUBSEQUENT EVENTS
On November 7, 1996, the Partnership entered into an agreement to sell its
Arizona asphalt terminals effective December 1, 1996. Management believes that
the sale of the assets will not have a material impact on the Partnership's
financial statements.
13
<PAGE>
EOTT ENERGY PARTNERS, L.P.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
EOTT Energy Partners, L.P. "EOTT" or (the "Partnership") is one of the
largest independent gatherers and marketers of crude oil in North America, with
operations in Canada and throughout most of the United States. EOTT also
engages, to a lesser extent, in refined products marketing as well as gathering
and marketing of natural gas liquids ("NGLs"), and other crude oil-related
marketing activities. The following review of the results of operations and
financial condition should be read in conjunction with the Condensed
Consolidated Financial Statements and Notes thereto.
RESULTS OF CONTINUING OPERATIONS
EOTT reported income from continuing operations for the third quarter of
1996 of $7.2 million compared to $3.6 million for the third quarter of 1995. The
improved performance is attributable to higher per unit margins and higher
volumes. The increased volumes primarily relate to the pipeline and related
assets acquired from Amerada Hess Corporation ("Amerada Hess acquisition").
Continued favorable market conditions in the third quarter enabled EOTT to
capture higher margins on basis differentials.
<TABLE>
Selected financial data for EOTT's business segments are summarized below,
(in millions):
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
---------------------------- -----------------------------
1996 1995 1996 1995
------------- ------------- -------------- -------------
<S> <C> <C> <C> <C>
Revenues:
North American crude oil................. $ 1,678.5 $ 1,106.2 $ 4,644.5 $ 3,482.9
Refined products marketing............... 143.9 85.1 423.3 227.3
Intersegment revenues .................. - - (0.9) -
------------- ------------- -------------- -------------
Total.................................. $ 1,822.4 $ 1,191.3 $ 5,066.9 $ 3,710.2
============= ============= ============= =============
Gross margin:
North American crude oil................. $ 34.0 $ 23.6 $ 110.1 $ 65.4
Refined products marketing............... 1.1 0.4 3.7 2.2
------------- ------------- ------------- -------------
Total.................................. $ 35.1 $ 24.0 $ 113.8 $ 67.6
============= ============= ============= =============
Operating income (loss):
North American crude oil................. $ 12.6 $ 9.4 $ 41.4 $ 20.9
Refined products marketing............... 0.4 - 1.1 0.6
Corporate................................ (5.5) (5.7) (19.3) (15.2)
-------------- ------------- -------------- -------------
Total.................................. $ 7.5 $ 3.7 $ 23.2 $ 6.3
============= ============= ============= =============
</TABLE>
Gross margin is the difference between the sales prices of crude oil or
other petroleum products and the costs of crude oil and other products
purchased, including costs paid to third parties for transportation and handling
charges. Both of EOTT's business segments are characterized by large volumes and
generally very thin and volatile profit margins on purchase and sale
transactions. The absolute price levels for crude oil and refined products do
not necessarily bear a direct relationship to margins per barrel, although such
price levels significantly impact revenues and cost of sales. As a result,
period-to-period variations in revenues and cost of sales are not meaningful,
and therefore are not discussed.
14
<PAGE>
EOTT ENERGY PARTNERS, L.P.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
<TABLE>
<S> <C>
THREE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED WITH THREE MONTHS ENDED SEPTEMBER 30, 1995.
</TABLE>
NORTH AMERICAN CRUDE OIL: Operating income for the North American Crude Oil
segment was $12.6 million for the third quarter of 1996, compared to $9.4
million for the same period in 1995. Gross margin increased $10.4 million to
$34.0 million in the third quarter of 1996 due primarily to higher volumes
related to the acquisition of pipeline and related assets (see Note 5 to the
Condensed Consolidated Financial Statements), combined with an improvement in
average margins per barrel compared to the same period in 1995. North American
crude lease purchases were up 23% from 245,700 barrels per day ("bpd") for the
third quarter of 1995 to 301,000 bpd in 1996 due primarily to the acquisition of
pipeline and related assets. Operating expenses of $21.4 million for the third
quarter of 1996 were $7.2 million higher than in the third quarter of 1995 due
again to higher operating costs associated with the expanded activities in
Mississippi, Alabama and California as well as higher benefits and other
employee related expenses.
REFINED PRODUCTS MARKETING: Operating income for Refined Products Marketing
increased $0.4 million for the third quarter of 1996 compared to the same period
in 1995. Trade volumes were 60,300 bpd in the third quarter of 1996 compared to
42,900 bpd in 1995. Gross margin increased $.7 million to $1.1 million in the
third quarter of 1996 due primarily to the expansion of products trading in
states west of the Rockies, primarily in California and Oregon. Operating
expenses of $.7 million for the third quarter of 1996 were $.3 million higher
than in the third quarter 1995 due primarily to higher benefits and other
employee related costs.
CORPORATE AND OTHER: Corporate and other costs of $5.5 million for the
third quarter of 1996 were $0.2 million lower compared to the third quarter of
1995 due to lower insurance and legal expenses partially offset by higher
employee related costs and information systems operating costs. Interest and
related charges for the third quarter of 1996 were $0.9 million compared to $0.5
million for the same period in 1995. The increase is due primarily to interest
expense on the promissory note to Enron of $24.2 million related to the Amerada
Hess acquisition. Other income, net, consisting primarily of gains (losses) on
transactions denominated in foreign currency, gains (losses) on the sale of
property, plant and equipment, and litigation settlements was constant for the
third quarter 1996 compared to the same period in 1995.
<TABLE>
<S> <C>
NINE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED WITH NINE MONTHS ENDED SEPTEMBER 30, 1995.
</TABLE>
NORTH AMERICAN CRUDE OIL: Operating income for the North American Crude Oil
segment was $41.4 million for the first nine months of 1996, compared to $20.9
million for the same period in 1995. Gross margin increased $44.7 million to
$110.1 million in the first nine months of 1996 due primarily to higher volumes
related to the acquisition of pipeline and related assets (see Note 5 to the
Condensed Consolidated Financial Statements), combined with an improvement in
average margins per barrel compared to the same period in 1995. North American
crude lease purchases were up 22% from 245,900 bpd for the first nine months of
1995 to 300,200 bpd in 1996 due primarily to the acquisition of pipeline and
related assets. Operating expenses of $68.7 million for the first nine months of
1996 were $24.2 million higher than in the first nine months of 1995 due again
to higher operating costs associated with the expanded activities in
Mississippi, Alabama and California along with higher benefits and other
employee related costs.
REFINED PRODUCTS MARKETING: Operating income for Refined Products Marketing
was $1.1 million for the first nine months of 1996, compared to $0.6 million for
the same period in 1995. Trade volumes were 60,900 bpd in the first nine months
of 1996 compared to 38,100 bpd in 1995. Gross margin increased $1.5 million to
$3.7 million in the first nine months of 1996 due primarily to the expansion of
products trading in states west of the Rockies, primarily California and Oregon.
Operating expenses of $2.6 million for the first nine months of 1996 were $1.0
million higher than in the first nine months of 1995 due primarily to higher
benefits and other employee related costs.
15
<PAGE>
EOTT ENERGY PARTNERS, L.P.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
CORPORATE AND OTHER: Corporate and other costs of $19.3 million for the
first nine months of 1996 were $4.1 million higher compared to the first nine
months of 1995 due primarily to higher benefits and other employee related costs
as well as information systems operating costs. Interest and related charges for
the first nine months of 1996 were $2.6 million compared to $3.4 million for the
same period in 1995. The decrease is due primarily to lower interest expense on
lower short-term borrowings partially offset by interest expense on the
promissory note to Enron of $24.2 million related to the Amerada Hess
acquisition. Other income (expense), net, consisting primarily of gains (losses)
on transactions denominated in foreign currency, gains (losses) on the sale of
property, plant and equipment, and litigation settlements decreased $0.5 million
to $0.4 million in the first nine months of 1996.
DISCONTINUED OPERATIONS
On September 29, 1995, EOTT transferred to Paramount Petroleum Corporation
("PPC") EOTT's West Coast processing and asphalt marketing business (other than
its Arizona asphalt terminals and its asphalt marketing business based out of
those terminals). The transfer was made pursuant to an agreement dated August
15, 1995 between EOTT and certain of its affiliates and PPC and certain of its
affiliates.
EOTT's decision to exit the West Coast business segment was made primarily
due to persistently low crack spreads in 1995 and EOTT's inability to
effectively protect itself against potential future losses due to the volatility
in the crack spread. The crack spread is the difference between the sales price
of refined products and the cost of feedstocks, principally crude oil.
In August 1995, EOTT's Board of Directors approved a formal plan to
dispose of the West Coast business segment. The second quarter 1995 results of
discontinued operations included a charge of $46.8 million, or $2.70 per Unit.
This charge included the repayment of the PPC bank debt at June 30, 1995 ($9.4
million); write-off of leasehold improvements at the refinery ($7.4 million);
estimated third quarter operating losses ($6.0 million); additional expenses
($10.0 million) including transaction fees, lease cancellation costs and working
capital reserves; and a lump-sum settlement ($14.0 million) related to taxes on
the debt repayment and for the assumption of other contractual obligations, none
of which were environmentally related. In the third quarter of 1995, EOTT
recorded a $1.0 million benefit which reflected a settlement at an amount less
than estimated on the PPC bank obligation assumed by EOTT as part of the
agreement with PPC, and in the fourth quarter of 1995, EOTT recorded an
additional charge of $3.8 million associated with the final liquidation of the
processing inventories.
The remaining net assets of discontinued operations of $5.6 million at
September 30, 1996 consist primarily of the Arizona asphalt terminals and
related working capital, less estimated disposition costs. As further discussed
in Note 13, EOTT has entered into an agreement to sell the Arizona asphalt
terminals.
16
<PAGE>
EOTT ENERGY PARTNERS, L.P.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
<TABLE>
Amounts related to the West Coast Operations discontinued in 1995 are
summarized below (in thousands):
Three Months Nine Months
Ended Ended
September 30, September 30,
1995 1995
------------ ------------
<S> <C> <C>
Revenues............................................... $ - $ 315,808
=========== ===========
Gross margin........................................... $ - $ (5,596)
=========== ===========
Loss from discontinued operations...................... $ - $ (16,180)
=========== ===========
Income (Loss) on disposal of discontinued operations... $ 950 $ (45,850)
=========== ===========
</TABLE>
The 1995 loss from discontinued operations was due primarily to
significantly lower crack spreads which, on an industry-wide basis, were at
their lowest levels in five years. These operating results also include an
allocation of interest expense based on the ratio of net assets of the
discontinued operations to the sum of consolidated net assets plus consolidated
debt.
LIQUIDITY AND CAPITAL RESOURCES
GENERAL
Management expects that short-term cash requirements will be met primarily
by cash generated from operations in addition to lines of credit available under
the Enron Facility, more fully described in Note 6 to the Condensed Consolidated
Financial Statements. Management expects cash generated from operations will be
sufficient to fund short-term liquidity as well as fund sustaining capital
expenditures for the foreseeable future.
CASH FLOWS FROM OPERATING ACTIVITIES
Net cash provided by operating activities totaled $25.2 million for the
first nine months of 1996 compared to net cash provided of $18.5 million for the
same period in 1995. The increase is primarily due to higher income from
continuing operations in the first nine months of 1996 as a result of unusually
favorable market conditions enabling higher per barrel margins as well as
increased volumes related to the Amerada Hess acquisition.
CASH FLOWS FROM INVESTING ACTIVITIES
Net cash used in investing activities totaled $4.6 million for the first
nine months of 1996 compared to $4.4 million for the same period in 1995.
Proceeds from asset sales totaled $0.9 million in 1996 primarily from the sale
of surplus transportation equipment. Additions to property, plant, and equipment
of $5.4 million during 1996 include $1.6 million for pipeline connections and
improvements and $1.9 million for information systems development. The
Partnership expects to incur approximately $ 3.1 million in sustaining capital
expenditures for the remainder of 1996.
17
<PAGE>
EOTT ENERGY PARTNERS, L.P.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
CASH FLOWS FROM FINANCING ACTIVITIES
Net cash used in financing activities totaled $14.7 million for the first
nine months of 1996 compared to $14.3 million for the same period of 1995. The
1995 amount primarily represents short-term borrowings to fund working capital
requirements under a prior credit facility. During the first quarter of 1996,
EOTT issued approximately 1.8 million Common Units in exchange for $29.8 million
in a private placement with Enron. EOTT also received $24.2 million in exchange
for a promissory note issued to Enron. These proceeds, together with other short
term borrowings from Enron, were used by EOTT to repay $85 million in bridge
financing related in part to the acquisition of pipeline assets at December 29,
1995. See additional discussion under Note 5 to the Condensed Consolidated
Financial Statements - Acquisition of Pipeline Assets. On July 16, 1996, Enron
and EOTT exchanged the Common Units for Special Units, more fully described in
Note 8.
WORKING CAPITAL AND CREDIT RESOURCES
On June 30, 1995, Enron agreed to provide credit support (the "Enron
Facility") to the Partnership in the form of guarantees, letters of credit,
loans and letters of indemnity. The total amount of the Enron Facility is $450
million and the facility has a maturity of March 31, 1997, as amended February
19, 1996. The agreement contains sublimits on the availability of the Enron
Facility of $60 million for working capital loans and $150 million for letters
of credit. A fee of .375% per annum is charged on the stated amount of
outstanding letters of credit. Interest on outstanding loans is charged at the
London Interbank Offered Rate ("LIBOR") plus .25% per annum.
The Enron Facility is subject to defined borrowing base limitations
relating to the Partnership's activities and to the maintenance and protection
of the collateral. The Enron Facility permits distributions to Unitholders
subject to certain limitations based on the Partnership's earnings and other
factors. These covenants and restrictions are not expected to materially affect
EOTT's ability to operate the ongoing Partnership business. The Enron Facility
is secured by a first priority lien on and security interest in all receivables
and inventory of the Partnership. The borrowing base is the sum of cash and cash
equivalents, specified percentages of eligible receivables, inventory, and
products contracted for or delivered but not billed. The Enron Facility is
non-recourse to the General Partner and the General Partner's assets. The
Partnership is restricted from entering into additional financing arrangements
without the prior approval of Enron.
At December 31, 1995, EOTT was in technical violation of certain negative
covenants related to the Enron Facility - including Leverage Ratio, Minimum
Working Capital Ratio, and Maximum Fixed Assets - due principally to the
operating losses associated with the exiting of the West Coast processing and
asphalt marketing business and the short-term bridge financing. At September 30,
1996, EOTT was in violation of the Leverage and Minimum Working Capital Ratios.
EOTT received waivers from Enron for each of these periods.
At December 31, 1995, EOTT had $85 million of short-term borrowings
outstanding with a commercial bank. Such borrowings were at an average annual
interest rate of 7.2% and primarily funded the working capital requirements as
well as the bridge financing utilized in the Mississippi-Alabama pipeline
acquisition as discussed in Note 5. Subsequent to year end, as further discussed
in Note 8, the short-term borrowings were repaid.
The General Partner believes that the Enron Facility will be sufficient to
support the Partnership's crude oil and refined product purchasing activities
and working capital requirements. No assurance, however, can be given that the
General Partner will not be required to reduce or restrict the Partnership's
gathering and marketing activities because of limitations on its ability to
obtain credit support and financing for its working capital needs.
18
<PAGE>
EOTT ENERGY PARTNERS, L.P.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The Partnership's ability to obtain letters of credit to support its
purchases of crude oil or refined petroleum products is fundamental to the
Partnership's gathering and marketing activities. Additionally, EOTT has a
significant need for working capital due to the large dollar volume of trading
and marketing transactions in which it engages. Any significant decrease in the
Partnership's financial strength, regardless of the reason for such decrease,
may increase the number of transactions requiring letters of credit or other
financial support, make it more difficult for the Partnership to obtain such
letters of credit, and/or increase the cost of obtaining them. This could in
turn adversely affect the Partnership's ability to maintain or increase the
level of its purchasing and marketing activities or otherwise adversely affect
the Partnership's profitability and Available Cash as defined in the Partnership
Agreement.
The Partnership Agreement authorizes EOTT to issue other equity securities,
the proceeds from which could be used to provide additional funds for
acquisitions or other Partnership needs.
OUTLOOK
Based on current earnings and cash flow projections, the Partnership
expects to pay distributions to all Unitholders from Available Cash throughout
the remainder of 1996 without distribution support from Enron.
INFORMATION REGARDING FORWARD-LOOKING INFORMATION
The statements in this Quarterly Report on Form 10-Q that are not
historical information are 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. Such forward looking statements include the discussions in
"Management's Discussion and Analysis of Financial Condition and Results of
Operations." Although the Partnership believes that its expectations regarding
future events are based on reasonable assumptions, it can give no assurance that
its goals will be achieved or that its expectations regarding future
developments will prove to be correct. Important factors that could cause actual
results to differ materially from those in the forward looking statements herein
include the Partnership's success in obtaining additional lease barrels,
developments relating to possible acquisitions or business combination
opportunities, and the success of the Partnership's risk management activities.
19
<PAGE>
EOTT ENERGY PARTNERS, L.P.
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings
See Part I. Item 1, Note 10 to the Condensed Consolidated Financial
Statements entitled "Litigation and Other Contingencies," which is
incorporated herein by reference.
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
Exhibit 27 Financial Data Schedule
(b) Reports on Form 8-K.
None
20
<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 thereunto duly authorized.
EOTT ENERGY PARTNERS, L.P.
(A Delaware Limited Partnership)
Date: November 13, 1996 By: EOTT ENERGY CORP. as
General Partner
/S/ STEVEN A. APPELT
Steven A. Appelt
Vice President, Chief Financial Officer
21
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000917464
<NAME> EOTT ENERGY PARTNERS, L.P.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1996
<CASH> 8,174
<SECURITIES> 0
<RECEIVABLES> 597,943
<ALLOWANCES> 3,096
<INVENTORY> 129,967
<CURRENT-ASSETS> 745,512
<PP&E> 212,431
<DEPRECIATION> 82,409
<TOTAL-ASSETS> 883,213
<CURRENT-LIABILITIES> 774,184
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 98,826
<TOTAL-LIABILITY-AND-EQUITY> 883,213
<SALES> 5,042,655
<TOTAL-REVENUES> 5,066,885
<CGS> 4,953,122
<TOTAL-COSTS> 5,043,663
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,562
<INCOME-PRETAX> 21,462
<INCOME-TAX> 0
<INCOME-CONTINUING> 21,462
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 21,462
<EPS-PRIMARY> 1.12
<EPS-DILUTED> 1.12
<FN>
(1) "Other SE" represents consolidated Partners' Capital.
(2) EPS represents earnings per Common Unit.
</FN>
</TABLE>
