<PAGE> 1
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, 2000
[ ] 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)
<TABLE>
<S> <C>
Delaware 76-0424520
---------------------------------------- ----------------------------------------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
2000 W. Sam Houston Parkway S.
Suite 400
Houston, Texas 77042
---------------------------------------- ----------------------------------------
(Address of principal executive offices) (Zip Code)
</TABLE>
(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
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EOTT ENERGY PARTNERS, L.P.
TABLE OF CONTENTS
<TABLE>
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Page
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PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
Condensed Consolidated Statements of Operations (Unaudited) -
Three Months Ended September 30, 2000 and 1999 and Nine Months
Ended September 30, 2000 and 1999..................................................................3
Condensed Consolidated Balance Sheets (Unaudited) -
September 30, 2000 and December 31, 1999...........................................................4
Condensed Consolidated Statements of Cash Flows (Unaudited) -
Nine Months Ended September 30, 2000 and 1999......................................................5
Condensed Consolidated Statement of Partners' Capital (Unaudited) -
Nine Months Ended September 30, 2000...............................................................6
Notes to Condensed Consolidated Financial Statements..................................................7
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.........................................................12
ITEM 3. Quantitative and Qualitative Disclosures about Market Risk.....................................19
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings..............................................................................20
ITEM 6. Exhibits and Reports on Form 8-K...............................................................20
</TABLE>
2
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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)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------------------- --------------------------
2000 1999 2000 1999
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenue .............................. $ 3,143,529 $ 2,315,464 $ 8,340,159 $ 6,007,924
Cost of Sales ........................ 3,084,634 2,258,404 8,162,201 5,842,371
----------- ----------- ----------- -----------
Gross Margin ......................... 58,895 57,060 177,958 165,553
Expenses
Operating expenses ................ 40,217 40,700 118,884 115,515
Depreciation and amortization ..... 8,423 8,250 25,282 24,740
----------- ----------- ----------- -----------
Total ........................... 48,640 48,950 144,166 140,255
----------- ----------- ----------- -----------
Operating Income ..................... 10,255 8,110 33,792 25,298
Other Income (Expense)
Interest income ................... 489 120 1,111 440
Interest and related charges ...... (7,481) (7,650) (22,823) (21,470)
Other, net ........................ (252) (30) (1,960) 998
----------- ----------- ----------- -----------
Total ........................... (7,244) (7,560) (23,672) (20,032)
----------- ----------- ----------- -----------
Net Income Before Cumulative
Effect of Accounting Change ....... 3,011 550 10,120 5,266
Cumulative Effect of Accounting Change -- -- -- 1,747
----------- ----------- ----------- -----------
Net Income ........................... $ 3,011 $ 550 $ 10,120 $ 7,013
=========== =========== =========== ===========
Basic Net Income Per Unit
Common ............................ $ 0.11 $ 0.02 $ 0.36 $ 0.26
=========== =========== =========== ===========
Subordinated ...................... $ 0.11 $ 0.02 $ 0.36 $ 0.33
=========== =========== =========== ===========
Diluted Net Income Per Unit .......... $ 0.11 $ 0.02 $ 0.36 $ 0.29
=========== =========== =========== ===========
Number of Units Outstanding
for Diluted Computation ........... 27,476 24,052 27,476 24,002
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated financial statements.
3
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EOTT ENERGY PARTNERS, L.P.
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
2000 1999
------------- ------------
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents ................................ $ 34,346 $ 17,525
Trade and other receivables, net of allowance for doubtful
accounts of $1,720 and $1,732 respectively ............ 1,034,602 966,422
Inventories .............................................. 47,108 120,306
Other .................................................... 16,373 29,191
---------- ----------
Total current assets .................................. 1,132,429 1,133,444
---------- ----------
Property, Plant & Equipment, at cost ......................... 549,094 544,723
Less: Accumulated depreciation ........................... 161,329 140,228
---------- ----------
Net property, plant & equipment ....................... 387,765 404,495
---------- ----------
Other Assets, net of amortization ............................ 17,362 20,722
---------- ----------
Total Assets ................................................. $1,537,556 $1,558,661
========== ==========
LIABILITIES AND PARTNERS' CAPITAL
Current Liabilities
Trade and other accounts payable ......................... $1,107,513 $1,096,088
Accrued taxes payable .................................... 14,199 11,947
Repurchase agreements .................................... 47,804 74,055
Other .................................................... 20,281 15,432
---------- ----------
Total current liabilities ............................. 1,189,797 1,197,522
---------- ----------
Long-Term Liabilities
11% Senior notes ......................................... 235,000 235,000
Other .................................................... -- 3,475
---------- ----------
Total long-term liabilities ........................... 235,000 238,475
---------- ----------
Commitments and Contingencies (Note 3)
Additional Partnership Interests ............................. 9,318 2,547
---------- ----------
Partners' Capital
Common Unitholders ....................................... 53,910 73,570
Subordinated Unitholders ................................. 42,103 38,855
General Partner .......................................... 7,428 7,692
---------- ----------
Total Partners' Capital ............................... 103,441 120,117
---------- ----------
Total Liabilities and Partners' Capital ...................... $1,537,556 $1,558,661
========== ==========
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated financial statements.
4
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EOTT ENERGY PARTNERS, L.P.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
---------------------------
2000 1999
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Reconciliation of net income to net cash
provided by (used in) operating activities -
Net income ........................................ $ 10,120 $ 7,013
Depreciation ...................................... 24,490 23,619
Amortization of intangible assets ................. 792 1,121
Gains on disposal of assets ....................... (555) (548)
Changes in components of working capital -
Receivables .................................... (68,180) (453,443)
Inventories .................................... 73,198 (9,070)
Other current assets ........................... 12,818 (17,285)
Trade accounts payable ......................... 17,346 437,006
Accrued taxes payable .......................... 2,252 5,062
Other current liabilities ...................... (1,072) (672)
Other assets and liabilities ...................... 463 38
--------- ---------
Net Cash Provided By (Used In) Operating Activities ... 71,672 (7,159)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of property, plant and equipment 1,100 549
Acquisitions ...................................... -- (33,000)
Additions to property, plant and equipment ........ (9,704) (16,380)
Other, net ........................................ 29 --
--------- ---------
Net Cash Used In Investing Activities ................. (8,575) (48,831)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Increase in short-term borrowings - affiliate ..... -- 55,903
Decrease in bridge loan - affiliate ............... -- (42,000)
Increase (decrease) in repurchase agreements ...... (26,251) 6,784
Issuance of Common Units .......................... -- 52,920
Contribution from General Partner ................. -- 535
Distributions to Unitholders ...................... (26,796) (21,426)
Issuance of Additional Partnership Interests ...... 6,771 2,547
Other, net ........................................ -- (281)
--------- ---------
Net Cash Provided By (Used In) Financing Activities ... (46,276) 54,982
--------- ---------
Increase (Decrease) In Cash and Cash Equivalents ...... 16,821 (1,008)
Cash and Cash Equivalents, Beginning of Period ........ 17,525 3,033
--------- ---------
Cash and Cash Equivalents, End of Period .............. $ 34,346 $ 2,025
========= =========
Supplemental Cash Flow Information:
Interest paid ..................................... $ 15,985 $ 20,891
========= =========
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated financial statements.
5
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EOTT ENERGY PARTNERS, L.P.
CONDENSED CONSOLIDATED STATEMENT OF PARTNERS' CAPITAL
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
COMMON SUBORDINATED GENERAL
UNITHOLDERS UNITHOLDERS PARTNER
----------- ------------ --------
<S> <C> <C> <C>
Partners' Capital at December 31, 1999 $ 73,570 $ 38,855 $ 7,692
Net income ............................ 6,670 3,248 202
Cash distributions .................... (26,330) -- (466)
-------- -------- --------
Partners' Capital at September 30, 2000 $ 53,910 $ 42,103 $ 7,428
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated financial statements.
6
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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, 2000 and December 31, 1999 for the Partnership, the results of
operations for the three and nine months ended September 30, 2000 and 1999, cash
flows for the nine months ended September 30, 2000 and 1999, and changes in
partners' capital for the nine months ended September 30, 2000. For the three
and nine months ended September 30, 2000 and 1999, traditional net income (loss)
and comprehensive income (loss) are the same.
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 25% subordinated limited partner interest. Enron, through its
ownership of EOTT Common Units, directly holds an approximate 12% interest in
the Partnership.
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, 1999 filed with the SEC.
Earlier this year, the Partnership identified certain systems integration
issues relating to its new computerized marketing and accounting system, and the
Partnership immediately commenced an extensive review and analysis of the
implementation of the new system. As a result of these efforts, the Partnership
identified and quantified the impacts of the systems integration issues relating
to its new computerized marketing and accounting system and recorded appropriate
financial statement adjustments for the first quarter of 2000. The Partnership
has implemented and continues to implement additional control processes and
procedures that it believes are sufficient to permit the preparation of timely
and accurate financial information, including additional preventative and
monitoring controls to ensure the integrity and reliability of financial
information generated by the system as well as additional system training for
users.
Certain reclassifications have been made to prior period amounts to conform
with the current period presentation.
7
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EOTT ENERGY PARTNERS, L.P.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
2. EARNINGS PER UNIT
Net income shown in the tables below excludes the approximate two percent
interest of the General Partner. Earnings per unit are calculated as follows (in
thousands, except per unit amounts):
<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPTEMBER 30,
------------------------------------------------------------------------------
2000 1999
------------------------------------ -------------------------------------
Wtd. Wtd.
Net Average Per Net Average Per
Income Units Unit Income Units Unit
------ ------- -------- ------ ------- --------
<S> <C> <C> <C> <C> <C> <C>
Basic (1)
Common $1,985 18,476 $ 0.11 $ 347 15,052 $ 0.02
Subordinated $ 966 9,000 $ 0.11 $ 192 9,000 $ 0.02
Diluted (2) $2,951 27,476 $ 0.11 $ 539 24,052 $ 0.02
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
------------------------------------------------------------------------------
2000 1999
------------------------------------ -------------------------------------
Wtd. Wtd.
Net Average Per Net Average Per
Income Units Unit Income Units Unit
------ ------- -------- ------ ------- --------
<S> <C> <C> <C> <C> <C> <C>
Basic (1)
Common $6,670 18,476 $ 0.36 $3,912 15,002 $ 0.26
Subordinated $3,248 9,000 $ 0.36 $2,941 9,000 $ 0.33
Diluted (2) $9,918 27,476 $ 0.36 $6,853 24,002 $ 0.29
</TABLE>
(1) Net income, excluding the two percent General Partner interest, has
been apportioned to each class of Unitholder based on the ownership of
total Units outstanding which is also reflected on the Statement of
Partners' Capital, and Special Units are considered Common Units
during the periods in which they were outstanding. Due to a negative
capital account balance for the Common Unitholders during the second
and third quarters of 1998, the loss allocated to the Common
Unitholders attributable to these periods was reallocated to the
remaining Unitholders based on their ownership percentage. The
allocated loss was fully recouped by the Unitholders allocated the
additional losses in the first quarter of 1999.
(2) The diluted income (loss) per unit calculation assumes the conversion
of Subordinated Units into Common Units. The disproportionate income
(loss) allocation between the Unitholders has no effect on the diluted
computation.
EOTT issued 3,500,000 Common Units to the public on September 29, 1999.
Per unit information related to the net income before cumulative effect of
accounting change and cumulative effect of the change in accounting principle
for the nine months ended September 30, 1999 is as follows:
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30, 1999
------------------------------------------------
Basic
-------------------------------
Common Subordinated Diluted
------------- ------------- -------------
<S> <C> <C> <C>
Net Income Before Cumulative Effect
of Accounting Change............................ $ 0.19 $ 0.26 $ 0.22
Cumulative Effect of Accounting Change............. 0.07 0.07 0.07
------------- ------------- -------------
Net Income......................................... $ 0.26 $ 0.33 $ 0.29
============= ============= =============
</TABLE>
8
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EOTT ENERGY PARTNERS, L.P.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
3. 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
business 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 Partnership's initial public offering.
The Partnership believes that the ultimate resolution of litigation,
individually and in the aggregate, will not have a material 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, 1999.
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.
4. NEW ACCOUNTING STANDARDS
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activities." The Statement establishes accounting and
reporting standards requiring that every derivative instrument (including
certain derivative instruments embedded in other contracts) be recorded in the
balance sheet as either an asset or liability measured at its fair value. The
Statement requires that changes in the derivative's fair value be recognized
currently in earnings unless specific hedge accounting criteria are met. Special
accounting for qualifying hedges allows a derivative's gains and losses to
offset related results on the hedged item in the income statement and requires
that a company must formally document, designate, and assess the effectiveness
of transactions that receive hedge accounting. SFAS No. 133, as amended, is
effective for fiscal years beginning after June 15, 2000. The standard cannot be
applied retroactively, but early adoption is permitted. EOTT has conducted an
inventory of its contracts and is currently assessing the applicability of SFAS
No. 133 to these contracts. Although EOTT has not yet determined the impact of
adopting SFAS No. 133, this standard could increase volatility in earnings and
partners' capital.
5. BUSINESS SEGMENT INFORMATION
EOTT has three reportable segments, which management believes are necessary
to make decisions about resources to be allocated and assess its performance:
North American Crude Oil - East of Rockies, Pipeline Operations and West Coast
Operations. The North American Crude Oil - East of Rockies segment primarily
purchases, gathers, transports and markets crude oil. The Pipeline Operations
segment operates approximately 7,400 active miles of common carrier pipelines in
12 states. The West Coast Operations include crude oil gathering and marketing,
refined products marketing and a natural gas liquids business.
The accounting policies of the segments are the same as those described in
the summary of significant accounting policies as discussed in Note 2 included
in the Partnership's Annual Report on Form 10-K for the year ended December 31,
1999. EOTT evaluates performance based on operating income (loss). EOTT accounts
for intersegment revenue and transfers between North American Crude Oil - East
of Rockies and West Coast Operations as if the sales or transfers were to third
parties, that is, at current market prices. Intersegment revenues for Pipeline
Operations are based on published pipeline tariffs.
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EOTT ENERGY PARTNERS, L.P.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FINANCIAL INFORMATION BY BUSINESS SEGMENT
(In Thousands)
<TABLE>
<CAPTION>
NORTH
AMERICAN WEST CORPORATE
CRUDE OIL PIPELINE COAST AND
- EOR OPERATIONS OPERATIONS OTHER (b) CONSOLIDATED
----------- ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
THREE MONTHS ENDED SEPTEMBER 30, 2000
Revenue from external customers ............... $ 2,882,325 $ 6,885 $ 254,319 $ -- $ 3,143,529
Intersegment revenue (a) ...................... -- 28,785 -- (28,785) --
----------- ----------- ----------- ----------- -----------
Total revenue .............................. 2,882,325 35,670 254,319 (28,785) 3,143,529
----------- ----------- ----------- ----------- -----------
Gross margin .................................. 18,125 35,357 5,413 -- 58,895
----------- ----------- ----------- ----------- -----------
Operating income (loss) ....................... (1,842) 17,687 (147) (5,443) 10,255
Other expense ................................. -- -- -- (7,244) (7,244)
----------- ----------- ----------- ----------- -----------
Net income (loss) ............................. (1,842) 17,687 (147) (12,687) 3,011
----------- ----------- ----------- ----------- -----------
Depreciation and amortization ................. 1,821 5,299 685 618 8,423
----------- ----------- ----------- ----------- -----------
------------------------------------------------------------------------------------------------------------------------------------
THREE MONTHS ENDED SEPTEMBER 30, 1999
Revenue from external customers ............... $ 2,120,192 $ 8,837 $ 186,435 $ -- $ 2,315,464
Intersegment revenue (a) ...................... 7,706 23,389 3,027 (34,122) --
----------- ----------- ----------- ----------- -----------
Total revenue .............................. 2,127,898 32,226 189,462 (34,122) 2,315,464
----------- ----------- ----------- ----------- -----------
Gross margin .................................. 19,072 30,975 7,013 -- 57,060
----------- ----------- ----------- ----------- -----------
Operating income (loss) ....................... (1,154) 13,405 1,683 (5,824) 8,110
Other expense ................................. -- -- -- (7,560) (7,560)
----------- ----------- ----------- ----------- -----------
Net income (loss) ............................. (1,154) 13,405 1,683 (13,384) 550
----------- ----------- ----------- ----------- -----------
Depreciation and amortization ................. 1,906 5,414 497 433 8,250
----------- ----------- ----------- ----------- -----------
------------------------------------------------------------------------------------------------------------------------------------
NINE MONTHS ENDED SEPTEMBER 30, 2000
Revenue from external customers ............... $ 7,703,823 $ 21,802 $ 614,534 $ -- $ 8,340,159
Intersegment revenue (a) ...................... 5,671 81,979 -- (87,650) --
----------- ----------- ----------- ----------- -----------
Total revenue .............................. 7,709,494 103,781 614,534 (87,650) 8,340,159
----------- ----------- ----------- ----------- -----------
Gross margin .................................. 58,417 104,430 15,111 -- 177,958
----------- ----------- ----------- ----------- -----------
Operating income (loss) ....................... (508) 52,314 (1,635) (16,379) 33,792
Other expense ................................. -- -- -- (23,672) (23,672)
----------- ----------- ----------- ----------- -----------
Net income (loss) ............................. (508) 52,314 (1,635) (40,051) 10,120
----------- ----------- ----------- ----------- -----------
Depreciation and amortization ................. 5,649 15,839 2,017 1,777 25,282
----------- ----------- ----------- ----------- -----------
------------------------------------------------------------------------------------------------------------------------------------
NINE MONTHS ENDED SEPTEMBER 30, 1999
Revenue from external customers ............... $ 5,543,118 $ 18,907 $ 445,913 $ (14) $ 6,007,924
Intersegment revenue (a) ...................... 39,101 65,861 17,360 (122,322) --
----------- ----------- ----------- ----------- -----------
Total revenue .............................. 5,582,219 84,768 463,273 (122,336) 6,007,924
----------- ----------- ----------- ----------- -----------
Gross margin .................................. 61,050 82,982 21,569 (48) 165,553
----------- ----------- ----------- ----------- -----------
Operating income (loss) ....................... (222) 37,730 6,085 (18,295) 25,298
Other expense ................................. -- -- -- (20,032) (20,032)
----------- ----------- ----------- ----------- -----------
Net income (loss) before cumulative
effect of accounting change ................ (222) 37,730 6,085 (38,327) 5,266
----------- ----------- ----------- ----------- -----------
Depreciation and amortization ................. 6,652 15,298 1,488 1,302 24,740
----------- ----------- ----------- ----------- -----------
------------------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS AT SEPTEMBER 30, 2000 ............ $ 1,055,137 $ 300,832 $ 120,532 $ 61,055 $ 1,537,556
----------- ----------- ----------- ----------- -----------
TOTAL ASSETS AT DECEMBER 31, 1999 ............. 1,084,613 306,321 129,461 38,266 1,558,661
----------- ----------- ----------- ----------- -----------
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Intersegment revenue for North American Crude Oil - EOR and West Coast
Operations is made at prices comparable to those received from
external customers. Intersegment revenue for Pipeline Operations is
transportation costs charged to North American Crude Oil - EOR for the
transport of crude oil at published pipeline tariffs.
(b) Corporate and Other also includes intersegment eliminations.
10
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EOTT ENERGY PARTNERS, L.P.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
6. NONRECURRING ITEMS
In the fourth quarter of 1999, EOTT recorded a $7.8 million charge for the
theft of NGL product, concealment of commercial activities and other
unauthorized actions by a former employee. EOTT filed an insurance claim to
recover the losses related to the theft of NGL product and received $2.5 million
in the second quarter of 2000. In the third quarter of 2000, EOTT recorded an
additional charge of $0.9 million in connection with the closing of the
remaining contract related to the mid-continent NGL activities.
7. SUBSEQUENT EVENTS
On October 20, 2000, the Board of Directors of EOTT Energy Corp., as
General Partner, declared the Partnership's regular quarterly cash distribution
of $0.475 for all Common Units for the period July 1, 2000 through September 30,
2000. In addition, a cash distribution of $0.20 per Unit ($1.8 million) was
declared for all Subordinated Units for the period July 1, 2000 through
September 30, 2000. The third quarter distribution of $10.8 million will be paid
on November 14, 2000 to the General Partner and all Common and Subordinated
Unitholders of record as of October 31, 2000. The distribution will be paid
utilizing Available Cash from the Partnership.
11
<PAGE> 12
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
EOTT ENERGY PARTNERS, L.P.
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." Any forward-looking statements are not guarantees of future
performance and involve significant risks and uncertainties, and actual results
may vary materially from those in the forward-looking statements as a result of
various factors. 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 and maintaining
lease barrels, demands for various grades of crude oil and the resulting changes
in pricing relationships, developments relating to possible acquisitions or
business combination opportunities, industry conditions, the ability of the
Partnership to avoid environmental liabilities, developments relating to
pipeline tariff regulation, the successful resolution of litigation, the success
of the Partnership's risk management activities, and the conditions of the
capital and equity markets during the periods covered by the forward-looking
statements. Although the Partnership believes that its expectations regarding
future events are based on reasonable assumptions, it can give no assurance that
these are all the factors that could cause actual results to vary materially
from the forward-looking statements or that its expectations regarding future
developments will prove to be correct.
OVERVIEW
Through its affiliated limited partnerships, EOTT Energy Operating Limited
Partnership, EOTT Energy Canada Limited Partnership, and EOTT Energy Pipeline
Limited Partnership, EOTT is engaged in the purchasing, gathering, transporting,
marketing, storage and resale of crude oil and other petroleum products and
related activities. EOTT's principal business segments are North American Crude
Oil - East of Rockies, Pipeline Operations and West Coast Operations (see Note 5
to the Condensed Consolidated Financial Statements for certain financial
information by business segment).
Gathering and Marketing Operations
In general, as EOTT purchases crude oil in its gathering and marketing
operations, EOTT establishes a margin by selling crude oil for physical delivery
to third party users, such as independent refiners or major oil companies, or by
entering into a future delivery obligation with respect to futures contracts on
the NYMEX, thereby minimizing or reducing exposure to price fluctuations.
Through these transactions, EOTT seeks to maintain positions that are
substantially balanced between crude oil purchases and sales or future delivery
obligations. As a result, changes in the absolute price level for crude oil do
not necessarily impact the margin from gathering and marketing.
Although EOTT generally maintains a balanced position in terms of overall
volumes, some risks cannot be fully hedged, such as a portion of certain basis
risks. Basis risk arises when crude oil is acquired by a purchase or exchange
that does not meet the specifications of the crude oil EOTT is contractually
obligated to deliver, whether in terms of geographic location, grade or delivery
schedule. EOTT seeks to limit price risk and maintain margins through a
combination of physical sales, NYMEX hedging activities and exchanges of crude
oil with third parties. It is EOTT's policy not to acquire and hold crude oil,
futures contracts or other derivative products for the purpose of speculating on
crude oil price changes.
EOTT's operating results are sensitive to a number of factors including:
grades or types of crude oil, individual refinery demand for specific grades of
crude oil, area market price structures for the different grades of crude oil,
location of customers, availability of transportation facilities, and timing and
costs (including storage) involved in delivering crude oil to the appropriate
customer.
12
<PAGE> 13
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
EOTT ENERGY PARTNERS, L.P.
Gross margin from gathering, marketing and pipeline operations varies from
period-to-period, depending to a significant extent upon changes in the supply
and demand of crude oil and the resulting changes in United States crude oil
inventory levels. The gross margin from gathering and marketing operations is
generated by the difference between the price of crude oil at the point of
purchase and the price of crude oil at the point of sale, minus the associated
costs of gathering and transportation. In addition to purchasing crude oil at
the wellhead, EOTT purchases crude oil in bulk at major pipeline terminal points
and major marketing points and enters into exchange transactions with third
parties. These bulk and exchange transactions are characterized by large volumes
and narrow profit margins on purchase and sales transactions, and the absolute
price levels for crude oil do not necessarily bear a relationship to gross
margin, although such price levels significantly impact revenues and cost of
sales. Because period-to-period variations in revenues and cost of sales are not
generally meaningful in analyzing the variation in gross margin for gathering
and marketing operations such changes are not addressed in the following
discussion.
EOTT operates the business differently as market conditions change. During
periods when the demand for crude oil is weak, the market for crude oil is often
in contango, meaning that the price of crude oil in a given month is less than
the price of crude oil in a subsequent month. In a contango market, storing
crude oil is favorable, because storage owners at major trading locations can
simultaneously purchase production at low current prices for storage and sell at
higher prices for future delivery. When there is a higher demand than supply of
crude oil in the near term, the market is backwardated, meaning that the price
of crude oil in a given month exceeds the price of crude oil in a subsequent
month. A backwardated market has a positive impact on marketing margins because
crude oil gatherers can capture a premium for prompt deliveries.
Pipeline Operations
Pipeline revenues and gross margins are primarily a function of the level
of throughput and storage activity and are generated by the difference between
the regulated published tariff and the fixed and variable costs of operating the
pipeline. A majority of the pipeline revenues are generated by transporting
crude oil at published pipeline tariffs for the North American Crude Oil - East
of Rockies business segment. Approximately 76.5% of the tariff revenues of the
Pipeline Operations business segment for the nine months ended September 30,
2000, were generated from tariffs charged to the North American Crude Oil - East
of Rockies business segment. Changes in revenues and pipeline operating costs,
therefore, are relevant to the analysis of financial results of the pipeline
operations and are addressed in the following discussion of pipeline operations.
The Partnership does not directly employ any persons responsible for
managing or operating the Partnership or for providing services relating to
day-to-day business affairs. The General Partner provides such services or
obtains such services from third parties and is reimbursed for substantially all
of its direct and indirect costs and expenses including compensation and benefit
costs. The General Partner recently entered into an agreement with Enron
Pipeline Services Company ("EPSC"), a wholly owned subsidiary of Enron Corp., to
provide certain operating and administrative services to the General Partner
effective October 1, 2000. These services were previously performed directly by
the General Partner. The agreement provides that the General Partner will
reimburse EPSC for its costs and expenses in rendering the services. The General
Partner will in turn be reimbursed by the Partnership. The arrangement is not
expected to increase the costs and expenses borne by the Partnership.
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. Unless the context otherwise requires, the term
"EOTT" hereafter refers to the Partnership and its affiliated partnerships.
13
<PAGE> 14
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
EOTT ENERGY PARTNERS, L.P.
RESULTS OF OPERATIONS
EOTT reported net income of $3.0 million or $0.11 per diluted Unit for the
third quarter of 2000 compared to net income of $0.5 million or $0.02 per
diluted Unit for the third quarter of 1999. EOTT reported net income of $3.9
million or $0.14 per diluted Unit for the third quarter of 2000 excluding a
nonrecurring charge of $0.9 million relating to the closing of the remaining
contract for the mid-continent NGL activities. The increase in third quarter
2000 results compared to the third quarter of 1999 is primarily a result of
increased volumes moved and revenues generated from the Pipeline Operations
segment combined with slight decreases in total operating expenses due to
overall lower repair and maintenance costs and lower interest costs due to
reduced levels of inventory during the period.
Selected financial data for EOTT's business segments are summarized below,
in millions:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------------------- -------------------------
2000 1999 2000 1999
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues:
North American Crude Oil - East of Rockies........ $ 2,882.3 $ 2,127.9 $ 7,709.5 $ 5,582.2
Pipeline Operations............................... 35.7 32.2 103.8 84.8
West Coast Operations............................. 254.3 189.4 614.5 463.2
Corporate and Other............................... -- -- -- --
Intersegment Eliminations......................... (28.8) (34.1) (87.6) (122.3)
----------- ---------- ----------- -----------
Total............................................. $ 3,143.5 $ 2,315.4 $ 8,340.2 $ 6,007.9
=========== ========== =========== ===========
Gross margin:
North American Crude Oil - East of Rockies (1)... $ 18.1 $ 19.1 $ 58.4 $ 61.1
Pipeline Operations............................... 35.4 31.0 104.4 83.0
West Coast Operations............................. 5.4 7.0 15.1 21.5
Corporate and Other............................... -- -- -- --
----------- ---------- ----------- -----------
Total............................................. $ 58.9 $ 57.1 $ 177.9 $ 165.6
=========== ========== =========== ===========
Operating income (loss):
North American Crude Oil - East of Rockies (1)... $ (1.9) $ (1.2) $ (0.5) $ (0.2)
Pipeline Operations ............................. 17.7 13.4 52.3 37.7
West Coast Operations ........................... (0.2) 1.7 (1.6) 6.1
Corporate and Other............................... (5.4) (5.8) (16.4) (18.3)
----------- ---------- ----------- -----------
Total............................................. $ 10.2 $ 8.1 $ 33.8 $ 25.3
=========== ========== =========== ===========
</TABLE>
(1) Includes intersegment transportation costs from the Pipeline
Operations segment for the transport of crude oil at published
pipeline tariffs and purchases of crude oil inventory from the
Pipeline Operations segment. Intersegment transportation costs and
purchases of crude oil inventory from the Pipeline Operations segment
were $28.8 million and $82.0 million for the three and nine months
ended September 30, 2000, respectively. For the three and nine months
ended September 30, 1999, intersegment transportation costs from the
Pipeline Operations segment were $23.4 million and $65.9 million,
respectively.
THREE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED WITH THREE MONTHS ENDED
SEPTEMBER 30, 1999.
North American Crude Oil - East of Rockies: The North American Crude Oil -
East of Rockies segment had an operating loss of $1.9 million for the third
quarter of 2000, compared to an operating loss of $1.2 million
14
<PAGE> 15
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
EOTT ENERGY PARTNERS, L.P.
for the same period in 1999. Gross margin decreased $1.0 million to $18.1
million in the third quarter of 2000 due to increased costs related to grade
differentials. Crude oil lease volumes averaged 417,700 barrels per day for the
three months ended September 30, 2000 compared to an average of 402,700 barrels
per day for the three months ended September 30, 1999. Operating expenses of
$20.0 million for the third quarter of 2000 were $0.3 million lower than in the
third quarter of 1999 due primarily to lower repair and maintenance costs.
Pipeline Operations: Pipeline Operations had operating income of $17.7
million for the third quarter of 2000 compared to operating income of $13.4
million for the same period in 1999. Revenues for the third quarter of 2000
increased $3.5 million to $35.7 million due to an increase in volumes
transported on pipelines primarily in West Texas / New Mexico, Oklahoma and
Kansas and sales of crude oil by the Pipeline Operations segment to the North
American Crude Oil - East of Rockies segment. Pipeline volumes averaged 584,000
barrels per day for the three months ended September 30, 2000 compared to
562,200 barrels per day for the three months ended September 30, 1999.
Approximately $28.8 million and $23.4 million of revenues for the three months
ended September 30, 2000 and 1999, respectively, were generated from tariffs
charged to the North American Crude Oil - East of Rockies segment and sales of
crude oil inventory to North American Crude Oil - East of Rockies. Operating
expenses of $17.7 million for the third quarter of 2000 were $0.1 million higher
than the third quarter of 1999 due primarily to an increase in environmental
expenses offset by a reduction in repair and maintenance costs.
West Coast Operations: West Coast Operations had an operating loss of $0.2
million for the third quarter 2000, which includes a $0.9 million non-recurring
charge related to the one remaining contract for the mid-continent NGL
activities, compared to operating income of $1.7 million for the same period in
1999. Excluding the non-recurring charge, the decrease in operating income is
due primarily to lower margins associated with the crude oil blending operations
as a result of increasing competitive pressures. Operating expenses of $5.6
million for the third quarter of 2000 were $0.3 million higher than in the third
quarter of 1999 due primarily to higher plant fuel costs offset by lower repair
and maintenance costs.
Corporate and Other: Corporate and Other costs were $5.4 million for the
third quarter of 2000 compared to $5.8 million in the third quarter of 1999. The
decrease is due primarily to lower system operating costs and employee related
costs. Interest and related charges in the third quarter of 2000 were $7.5
million compared to $7.6 million for the same period in 1999. The charges
primarily relate to interest on borrowings for the financing of the acquisitions
of assets from Koch and Texas-New Mexico Pipeline Company. Other income
(expense), net, consisting primarily of discount fees on the sale of
receivables, gains (losses) on transactions denominated in foreign currency and
gains (losses) on sales of fixed assets, was an expense of $0.3 million in the
third quarter 2000 compared to breakeven for the same period in 1999 primarily
due to discount fees on the sale of receivables incurred in 2000.
NINE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED WITH NINE MONTHS ENDED
SEPTEMBER 30, 1999.
North American Crude Oil - East of Rockies: The North American Crude Oil -
East of Rockies segment had an operating loss of $0.5 million for the first nine
months of 2000, compared to an operating loss of $0.2 million for the same
period in 1999. Excluding the impact of mark-to-market accounting for certain
energy contracts, the North American Crude Oil - East of Rockies segment had
operating income of $2.0 million in the first nine months of 2000 compared to an
operating loss of $1.3 million for the same period in 1999. Gross margin
decreased $2.7 million to $58.4 million in the first nine months of 2000 due
primarily to unrealized mark-to-market losses being recorded in the first nine
months of 2000 for certain energy contracts. Crude oil lease volumes averaged
414,400 barrels per day for the nine months ended September 30, 2000 compared to
an average of 409,500 barrels per day for the nine months ended September 30,
1999. Operating expenses of $58.9 million for the first nine months of 2000 were
$2.4 million lower than in the first nine months of 1999 due primarily to lower
employee related costs and lower repair and maintenance costs.
15
<PAGE> 16
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
EOTT ENERGY PARTNERS, L.P.
Pipeline Operations: Pipeline Operations had operating income of $52.3
million for the first nine months of 2000 compared to operating income of $37.7
million for the same period in 1999. Revenues for the first nine months of 2000
increased $19.0 million to $103.8 million due to increased activity related to
the acquisition of pipelines from Texas-New Mexico Pipeline Company in May 1999,
an increase in volumes transported on pipelines primarily in West Texas / New
Mexico, Oklahoma and Kansas and sales of crude oil by the Pipeline Operations
segment to the North American Crude Oil - East of Rockies segment. Approximately
$82.0 million and $65.9 million of revenues for the nine months ended September
30, 2000 and 1999, respectively, were generated from tariffs charged to the
North American Crude Oil - East of Rockies segment and sales of crude oil
inventory to North American Crude Oil - East of Rockies. Pipeline volumes
averaged 589,700 barrels per day for the nine months ended September 30, 2000
compared to 486,500 barrels per day for the nine months ended September 30,
1999. Operating expenses of $52.1 million for the first nine months of 2000 were
$6.8 million higher than in the first nine months of 1999 due to higher employee
related costs, environmental and utility costs and amortization associated with
the acquisition of assets from Texas-New Mexico Pipeline Company partially
offset by lower repair and maintenance costs on the pipelines.
West Coast Operations: West Coast Operations had an operating loss of $1.6
million for the first nine months of 2000, compared to operating income of $6.1
million for the same period in 1999. The operating loss of $1.6 million for the
first nine months of 2000 includes a nonrecurring gain of $2.5 million
attributable to reimbursements received in the second quarter of 2000 in
connection with an insurance claim filed by EOTT related to the theft of NGL
product by a former employee offset by a $0.9 million nonrecurring charge
related to the one remaining contract for the mid-continent NGL activity. The
decline in gross margin, excluding nonrecurring items, is primarily due to lower
margins associated with the crude oil blending operations primarily as a result
of increasing competitive pressures. Operating expenses of $16.7 million for the
first nine months of 2000 were $1.3 million higher than in the first nine months
of 1999 due to higher third party truck transportation costs and plant fuel
costs partially offset by lower utility costs and repair and maintenance costs.
Corporate and Other: Corporate and Other costs were $16.4 million for the
first nine months of 2000 compared to $18.3 million in the first nine months of
1999. The decrease is due primarily to lower system operating costs and
insurance costs partially offset by nonrecurring severance charges related to a
former officer. Interest and related charges in the first nine months 2000 were
$22.8 million compared to $21.5 million for the same period in 1999. The
increase is due primarily to higher interest rates on borrowings for the
financing of the acquisitions of assets from Koch and Texas-New Mexico Pipeline
Company. Other income (expense), net, consisting primarily of discount fees on
the sale of receivables, gains (losses) on transactions denominated in foreign
currency and gains (losses) on sales of fixed assets, was an expense of $2.0
million in the first nine months of 2000 compared to income of $1.0 million for
the same period in 1999 primarily due to a net loss on transactions denominated
in Canadian dollars and discount fees on the sale of receivables in 2000.
LIQUIDITY AND CAPITAL RESOURCES
General
Management anticipates that short-term liquidity as well as sustaining
capital expenditures for the foreseeable future will be funded primarily by cash
generated from operations in addition to lines of credit provided by Enron and
commodity repurchase agreements.
16
<PAGE> 17
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
EOTT ENERGY PARTNERS, L.P.
Cash Flows From Operating Activities
Net cash provided by operating activities totaled $71.7 million for the
first nine months of 2000 compared to net cash used in operating activities of
$7.2 million for the same period in 1999 which is primarily attributable to
reduced inventory levels during 2000 due to the market being backwardated.
Cash Flows From Investing Activities
Net cash used in investing activities totaled $8.6 million for the first
nine months of 2000 compared to $48.8 million for the same period in 1999. Cash
additions to property, plant, and equipment of $9.7 million in 2000 primarily
include $3.8 million for information systems hardware and software and $3.5
million for pipeline, storage tank and related facility improvements. Proceeds
from asset sales were $1.1 million in the first nine months of 2000 compared to
$0.5 million in the first nine months of 1999. Acquisitions of $33.0 million
during 1999 primarily reflect the purchase of assets from Texas-New Mexico
Pipeline Company.
Cash Flows From Financing Activities
Net cash used in financing activities totaled $46.3 million for the first
nine months of 2000 compared to net cash provided of $55.0 million for the same
period in 1999. The 2000 amount primarily represents a reduction of repurchase
agreements outstanding and distributions paid to all Common Unitholders for the
period October 1, 1999 through June 30, 2000. In September 1999, EOTT issued 3.5
million Common Units for net proceeds of $52.9 million, which was used to repay
debt related to previous asset acquisitions in the fourth quarter of 1999.
OTHER MATTERS
Earlier this year, the Partnership identified certain systems integration
issues relating to its new computerized marketing and accounting system, and the
Partnership immediately commenced an extensive review and analysis of the
implementation of the new system. As a result of these efforts, the Partnership
identified and quantified the impacts of the systems integration issues relating
to its new computerized marketing and accounting system and recorded appropriate
financial statement adjustments for the first quarter of 2000. The Partnership
has implemented and continues to implement additional control processes and
procedures that it believes are sufficient to permit the preparation of timely
and accurate financial information, including additional preventative and
monitoring controls to ensure the integrity and reliability of financial
information generated by the system as well as additional system training for
users.
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activities". The Statement establishes accounting and
reporting standards requiring that every derivative instrument (including
certain derivative instruments embedded in other contracts) be recorded in the
balance sheet as either an asset or liability measured at its fair value. The
Statement requires that changes in the derivative's fair value be recognized
currently in earnings unless specific hedge accounting criteria are met. Special
accounting for qualifying hedges allows a derivative's gains and losses to
offset related results on the hedged item in the income statement and requires
that a company must formally document, designate, and assess the effectiveness
of transactions that receive hedge accounting. SFAS No. 133, as amended, is
effective for fiscal years beginning after June 15, 2000. The standard cannot be
applied retroactively but early adoption is permitted. EOTT has conducted an
inventory of its contracts and is currently assessing the applicability of SFAS
No. 133 to these contracts. Although EOTT has not yet determined the impact of
adopting SFAS No. 133, this standard could increase volatility in earnings and
partners' capital.
17
<PAGE> 18
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
EOTT ENERGY PARTNERS, L.P.
As previously disclosed, EOTT was engaged in discussions with a third party
relating to a possible acquisition of pipeline, gathering and/or storage assets.
The third party has decided not to sell these assets.
EOTT and Koch Petroleum Group, L.P. (Koch) modified a 15-year contract
between the parties, which began December 1, 1998, whereby EOTT supplies crude
oil to Koch at market based prices. Due to changes in market conditions, Koch
and EOTT amended the supply volume price for six months, beginning September 1,
2000.
OUTLOOK
EOTT will continue to pursue attractive acquisition or business combination
opportunities to increase the scale of its business, add cash flow, and reduce
earnings variability. Acquisitions that result in increased lease purchase
volumes should help to enhance EOTT's gathering and marketing opportunities.
EOTT's management is committed to continually improving internal business
processes in all operational, marketing, and administrative areas and thereby
achieve improvements in productivity.
The North American Crude Oil - East of Rockies results of operations for
the third quarter of 2000 decreased from the second quarter of 2000 due to
increased costs related to grade differentials. However, EOTT's management
anticipates that market conditions in the fourth quarter of 2000 will be
favorable if crude oil prices remain strong. In addition, gross margins in the
first nine months of 2000 for the West Coast Operations were lower when compared
to the first nine months of 1999 as a result of increasing competitive
conditions. These competitive conditions will continue to put pressure on gross
margins for the West Coast Operations for the remainder of 2000.
Historically, the crude oil gathering and marketing business has been very
competitive with thin and variable profit margins. Market conditions and the
amount of crude oil produced cannot be projected with certainty. EOTT will pay a
cash distribution of $0.475 to all its Common Unitholders and a cash
distribution of $0.20 to all its Subordinated Unitholders on November 14, 2000
without any distribution support from Enron. The Partnership intends to continue
to pay MQDs to all its Common Unitholders; however, due to the changing market
conditions which affects operating results, it is possible that distribution
support from Enron may be needed to pay MQDs to Common Unitholders in the
future. Enron has committed to provide total cash distribution support in an
amount necessary to pay MQDs up to $29 million ($19.7 million of which remains
available) to the Common Unitholders through the fourth quarter 2001.
18
<PAGE> 19
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
EOTT ENERGY PARTNERS, L.P.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The information contained in Item 3 updates, and should be read in
conjunction with, information set forth in Part II, Item 7A in EOTT's Annual
Report on Form 10-K for the year ended December 31, 1999, in addition to the
interim condensed consolidated financial statements and accompanying notes
presented in Items 1 and 2 of this Form 10-Q.
There are no material changes in market risks faced by the Company from
those reported in EOTT's Annual Report on Form 10-K for the year ended December
31, 1999.
19
<PAGE> 20
PART II. OTHER INFORMATION
EOTT ENERGY PARTNERS, L.P.
ITEM 1. Legal Proceedings
See Part I. Item 1, Note 3 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.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<S> <C>
10.32 Form of Executive Employment Agreement between EOTT Energy
Corp. and Dana R. Gibbs
10.33 Form of Executive Employment Agreement between EOTT Energy
Corp. and Lawrence Clayton, Jr.
*10.34 Letter Agreement dated September 14, 2000 amending Crude
Oil Supply and Terminalling Agreement
27 Financial Data Schedule
</TABLE>
----------
* Confidential treatment has been requested with respect to certain
portions of this exhibit.
(b) Reports on Form 8-K.
None.
20
<PAGE> 21
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, 2000 By: EOTT ENERGY CORP. as
General Partner
/s/ LORI L. MADDOX
---------------------------------
Lori L. Maddox
Controller
(Principal Accounting Officer)
21
<PAGE> 22
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<S> <C>
10.32 Form of Executive Employment Agreement between EOTT Energy
Corp. and Dana R. Gibbs
10.33 Form of Executive Employment Agreement between EOTT Energy
Corp. and Lawrence Clayton, Jr.
*10.34 Letter Agreement dated September 14, 2000 amending Crude
Oil Supply and Terminalling Agreement
27 Financial Data Schedule
</TABLE>
----------
* Confidential treatment has been requested with respect to certain
portions of this exhibit.
