Updates 2017 Full-Year Guidance
Plains All American Pipeline, L.P. (NYSE:PAA) and Plains GP
Holdings (NYSE:PAGP) today reported first-quarter 2017 results.
Plains All American Pipeline, L.P.
Summary Financial
Information (unaudited)
(in millions, except per unit data)
Three Months Ended
March 31,
%
GAAP Results
2017
2016
Change
Net income attributable to PAA
$
444
$ 202 120 %
Diluted net income per common unit
$
0.58
$ 0.07 729 %
Diluted weighted average common units
outstanding
758
399 90 %
Distribution per common unit declared for
the period
$
0.55
$ 0.70 (21.4 )%
Three Months Ended March 31,
%
Non-GAAP Results (1)
2017
2016
Change
Adjusted net income attributable to
PAA
$
224
$
355
(37
)%
Diluted adjusted net income per common
unit
$
0.27
$
0.45
(40
)%
Adjusted EBITDA (2)
$
512
$
633
(19
)%
___________________________________________
(1) See the section of this release entitled
“Non-GAAP Financial Measures and Selected Items Impacting
Comparability” and the tables attached hereto for information
regarding certain selected items that PAA believes impact
comparability of financial results between reporting periods, as
well as for information regarding non-GAAP financial measures (such
as adjusted EBITDA) and their reconciliation to the most directly
comparable measures as reported in accordance with GAAP. (2) Prior
period amounts have been recast to conform to certain changes made
in the fourth quarter of 2016.
“Our first quarter results reflect in-line performance from our
fee-based Transportation and Facilities segments as well as our
margin-based crude oil marketing activities, but were adversely
impacted by weaker than anticipated performance from our NGL
marketing activities, which are included in our Supply and
Logistics segment,” said Greg Armstrong, Chairman and CEO. “NGL
margins were negatively impacted by warmer weather and tighter
differentials between Canada and our US demand markets among other
factors. To address these issues in future periods, we are
modifying the way we manage our inventory and implementing
contractual provisions that will reduce earnings volatility and the
quantity of seasonal NGL inventory we store, in exchange for
partially limiting our upside potential.
“In February, we shared our view that the first six to nine
months of the current year would prove challenging but that we
expected to see strong improvement toward the end of 2017 as
several multi-year capital projects are completed and volume growth
in the Permian advances. Although our cautious outlook for the near
term is proving accurate, we definitely like the way the industry
is shaping up for the latter part of 2017 and beyond.
“Producer activity levels in almost every area are ahead of
levels included in our outlook at the beginning of the year,
especially with respect to the Permian Basin. Well productivity is
increasing as new wells are coming in stronger than previously
modeled. Our outlook continues to incorporate an increasing time
lag between increased drilling activity and increased production
volumes as producers shift to multi-well pad operations.
Accordingly, we continue to expect our transportation volumes to
ramp up in the second half of this year.
“Consistent with our outlook, we are seeing increased interest
from potential shippers for pipeline space currently available on
our existing assets as well as for incremental pipeline capacity at
rates that provide us an attractive return. All of this reinforces
our outlook and confidence in a back-end weighted improvement
during 2017 in our fee based growth and that we remain on-course
for a meaningful increase in year-over-year performance in 2018 and
beyond.”
Segment adjusted EBITDA for the first quarter of 2017 is
presented below:
Summary of
Selected Financial Data by Segment(1) (unaudited)
(in millions)
Three Months Ended Three
Months Ended March 31, 2017 March 31, 2016
Transportation Facilities
Supply and Logistics Transportation
Facilities Supply and Logistics Segment
adjusted EBITDA $ 273 $ 188 $ 51 $ 281
$ 167 $ 184
Percentage change in segment adjusted EBITDA
versus 2016 period (3 )% 13 %
(72 )%
___________________________________________
(1) During the fourth quarter of 2016, we modified
our primary segment performance measure to segment adjusted EBITDA
from segment profit and also modified our definition of adjusted
EBITDA to exclude our proportionate share of depreciation and
amortization expense associated with equity method investments.
Prior period segment amounts have been recast to reflect these
changes.
First-quarter 2017 Transportation segment adjusted EBITDA
decreased by 3% versus comparable 2016 results. This decrease was
primarily driven by the impact of non-core asset sales and other
volume decreases in the Rocky Mountain region primarily associated
with pipeline downtime. These decreases were partially offset by
increases on certain of our Permian Basin pipelines due largely to
increased Delaware Basin production impacting our Basin pipeline
and contributions from our Alpha Crude Connector gathering system
which we acquired in February 2017.
First-quarter 2017 Facilities segment adjusted EBITDA increased
by 13% versus comparable 2016 results. This increase was primarily
due to contributions from the Canadian NGL assets we acquired in
August 2016, higher fees at certain of our NGL storage and
fractionation facilities and contributions from ongoing expansion
projects at our Fort Saskatchewan facility. These increases were
partially offset by lower U.S. rail terminal activity, lower
utilization of our West Coast terminals, and the impact of non-core
asset sales.
First-quarter 2017 Supply and Logistics segment adjusted EBITDA
decreased by 72% relative to comparable 2016 results. This decrease
was primarily driven by lower results from our NGL activities due
to the impact of competition and continued margin compression, and
unusually warm weather, as well as margin compression from our
crude oil gathering and marketing activities caused by continued
intense competition.
2017 Full-Year Guidance
Full-year 2017 financial and operating guidance is presented
below:
FINANCIAL AND
OPERATING GUIDANCE (unaudited)
(in millions, except per barrel data)
Twelve Months Ended December 31,
2015 2016 2017 (G)
2017 vs 2016 + / -
Segment Adjusted
EBITDA Transportation $ 1,056 $ 1,141 $ 1,325 16 % Facilities
588 667 705 6 % Supply and Logistics 568 359 230
(36)
%
Other income/(expense), net 1 2 —
Adjusted EBITDA (1) $ 2,213
$ 2,169 $ 2,260 4
% Interest expense, net (2) (417 ) (451 ) (480 ) 6 %
Maintenance capital (220 ) (186 ) (195 ) 5 % Current income tax
expense (84 ) (85 ) (40 )
(53)
%
Other (18 ) (33 ) (5 )
(85)
%
Implied DCF (1) $ 1,474 $
1,414 $ 1,540 9 %
Operating Data Transportation Average daily
volumes (MBbls/d) 4,453 4,637 5,400 16 % Segment Adjusted EBITDA
per barrel $ 0.65 $ 0.67 $ 0.67 —
%
Facilities Average capacity (MMBbls/Mo) 126 129 130 1
% Segment Adjusted EBITDA per barrel $ 0.39 $ 0.43 $ 0.45 5 %
Supply and Logistics Average daily volumes (MBbls/d)
1,168 1,160 1,230 6 % Segment Adjusted EBITDA per barrel $ 1.33 $
0.85 $ 0.51
(40)
%
Expansion Capital $ 2,170 $
1,405 $ 900 $
(505)
Second Quarter Adjusted EBITDA as Percentage of Full
Year 22 % 22 % 20 %
___________________________________________
(G) 2017 Guidance forecasts are intended to be + / -
amounts. (1)
See the section of this release entitled
“Non-GAAP Financial Measures and Selected Items Impacting
Comparability” and the Financial Data Reconciliations table
attached hereto for information regarding non-GAAP financial
measures. For the historical 2015 and 2016 periods, please visit
our website at www.plainsallamerican.com (in particular the section
under “Financial Information” entitled “Non-GAAP Reconciliations”
within the “Investor Relations” tab), for a reconciliation to the
most directly comparable measures as reported in accordance with
GAAP. We do not provide a reconciliation of non-GAAP financial
measures to the equivalent GAAP financial measures on a
forward-looking basis as it is impractical to forecast certain
items that we have defined as “Selected Items Impacting
Comparability” without unreasonable effort, due to the uncertainty
and inherent difficulty of predicting the occurrence and financial
impact of and the periods in which such items may be recognized.
Thus, a reconciliation of non-GAAP financial measures to the
equivalent GAAP financial measures could result in disclosure that
could be imprecise or potentially misleading.
(2) Excludes certain non-cash items impacting interest expense such
as amortization of debt issuance costs and terminated interest rate
swaps.
Plains GP Holdings
PAGP owns an indirect non-economic controlling interest in PAA’s
general partner and an indirect limited partner interest in PAA. As
the control entity of PAA, PAGP consolidates PAA’s results into its
financial statements, which is reflected in the condensed
consolidating balance sheet and income statement tables included at
the end of this release. Information regarding PAGP’s distributions
is reflected below:
Q1 2017 Q4 2016
Q1 2016 Distribution per Class A share
declared for the period (1) $ 0.55 $ 0.55 $ 0.62
Q1 2017 distribution percentage change from prior
periods — % (11.3 )%
___________________________________________
(1) A reverse split of PAGP’s Class A shares was
completed on November 15, 2016. The effect of the reverse split has
been retroactively applied to all per-share amounts presented.
Conference Call
PAA and PAGP will hold a conference call at 11:00 a.m. ET on
Tuesday, May 9, 2017 to discuss the following items:
1. PAA’s first-quarter 2017 performance;
2. Financial and operating guidance for
2017;
3. Major expansion projects;
4. Capitalization and liquidity; and
5. PAA and PAGP’s outlook for the future.
Conference Call Webcast Instructions
To access the internet webcast of the conference call, please go
to www.plainsallamerican.com, under the Investor Relations section
of the website (Navigate to: Investor Relations / either PAA or
PAGP / News & Events / Quarterly Earnings). Following the live
webcast, an audio replay in MP3 format will be available on the
website within two hours after the end of the call and will be
accessible for a period of 365 days.
Non-GAAP Financial Measures and Selected Items Impacting
Comparability
To supplement our financial information presented in accordance
with GAAP, management uses additional measures known as “non-GAAP
financial measures” in its evaluation of past performance and
prospects for the future. The primary additional measures used by
management are earnings before interest, taxes, depreciation and
amortization (including our proportionate share of depreciation and
amortization of unconsolidated entities) and adjusted for certain
selected items impacting comparability (“Adjusted EBITDA”) and
implied distributable cash flow (“DCF”).
Management believes that the presentation of such additional
financial measures provides useful information to investors
regarding our performance and results of operations because these
measures, when used to supplement related GAAP financial measures,
(i) provide additional information about our core operating
performance and ability to fund distributions to our unitholders
through cash generated by our operations and (ii) provide investors
with the same financial analytical framework upon which management
bases financial, operational, compensation and planning/budgeting
decisions. We also present these and additional non-GAAP financial
measures, including adjusted net income attributable to PAA and
basic and diluted adjusted net income per common unit, as they are
measurements that investors, rating agencies and debt holders have
indicated are useful in assessing us and our results of operations.
These non-GAAP measures may exclude, for example, (i) charges for
obligations that are expected to be settled with the issuance of
equity instruments, (ii) gains or losses on derivative instruments
that are related to underlying activities in another period (or the
reversal of such adjustments from a prior period), the
mark-to-market related to our Preferred Distribution Rate Reset
Option, gains and losses on derivatives that are related to
investing activities (such as the purchase of linefill) and
inventory valuation adjustments, as applicable, (iii) long-term
inventory costing adjustments, (iv) items that are not indicative
of our core operating results and business outlook and/or (v) other
items that we believe should be excluded in understanding our core
operating performance. These measures may further be adjusted to
include amounts related to deficiencies associated with minimum
volume commitments whereby we have billed the counterparties for
their deficiency obligation and such amounts are recognized as
deferred revenue in “Accounts payable and accrued liabilities” on
our Condensed Consolidated Financial Statements. Such amounts are
presented net of applicable amounts subsequently recognized into
revenue. Furthermore, the calculation of these measures
contemplates tax effects as a separate reconciling item, where
applicable. We have defined all such items as “selected items
impacting comparability.” Due to the nature of the selected items,
certain selected items impacting comparability may impact certain
non-GAAP financial measures, referred to as adjusted results, but
not impact other non-GAAP financial measures. We do not necessarily
consider all of our selected items impacting comparability to be
non-recurring, infrequent or unusual, but we believe that an
understanding of these selected items impacting comparability is
material to the evaluation of our operating results and
prospects.
Although we present selected items impacting comparability that
management considers in evaluating our performance, you should also
be aware that the items presented do not represent all items that
affect comparability between the periods presented. Variations in
our operating results are also caused by changes in volumes,
prices, exchange rates, mechanical interruptions, acquisitions,
expansion projects and numerous other factors. These types of
variations are not separately identified in this release, but will
be discussed, as applicable, in management’s discussion and
analysis of operating results in our Quarterly Report on
Form 10-Q.
Our definition and calculation of certain non-GAAP financial
measures may not be comparable to similarly-titled measures of
other companies. Adjusted EBITDA, Implied DCF and other
non-GAAP financial performance measures are reconciled to Net
Income (the most directly comparable measure as reported in
accordance with GAAP) for the historical periods presented in the
tables attached to this release, and should be viewed in addition
to, and not in lieu of, our Condensed Consolidated Financial
Statements and notes thereto. In addition, we encourage you to
visit our website at www.plainsallamerican.com (in particular the
section under “Financial Information” entitled “Non-GAAP
Reconciliations” within the Investor Relations tab), which presents
a reconciliation of our commonly used non-GAAP and supplemental
financial measures.
Forward-Looking Statements
Except for the historical information contained herein, the
matters discussed in this release consist of forward-looking
statements that involve certain risks and uncertainties that could
cause actual results or outcomes to differ materially from results
or outcomes anticipated in the forward-looking statements. These
risks and uncertainties include, among other things, declines in
the volume of crude oil and NGL shipped, processed, purchased,
stored, fractionated and/or gathered at or through the use of our
assets, whether due to declines in production from existing oil and
gas reserves, reduced demand, failure to develop or slowdown in the
development of additional oil and gas reserves, whether from
reduced cash flow to fund drilling or the inability to access
capital, or other factors; the effects of competition; market
distortions caused by producer over-commitments to new or recently
constructed infrastructure projects, which impacts volumes,
margins, returns and overall earnings; unanticipated changes in
crude oil market structure, grade differentials and volatility (or
lack thereof); environmental liabilities or events that are not
covered by an indemnity, insurance or existing reserves;
maintenance of our credit rating and ability to receive open credit
from our suppliers and trade counterparties; fluctuations in
refinery capacity in areas supplied by our mainlines and other
factors affecting demand for various grades of crude oil, refined
products and natural gas and resulting changes in pricing
conditions or transportation throughput requirements; the
occurrence of a natural disaster, catastrophe, terrorist attack
(including eco-terrorist attacks) or other event, including attacks
on our electronic and computer systems; failure to implement or
capitalize, or delays in implementing or capitalizing, on expansion
projects, whether due to permitting delays, permitting withdrawals
or other factors; tightened capital markets or other factors that
increase our cost of capital or limit our ability to obtain debt or
equity financing on satisfactory terms to fund additional
acquisitions, expansion projects, working capital requirements and
the repayment or refinancing of indebtedness; the successful
integration and future performance of acquired assets or businesses
and the risks associated with operating in lines of business that
are distinct and separate from our historical operations; the
currency exchange rate of the Canadian dollar; continued
creditworthiness of, and performance by, our counterparties,
including financial institutions and trading companies with which
we do business; inability to recognize current revenue attributable
to deficiency payments received from customers who fail to ship or
move more than minimum contracted volumes until the related credits
expire or are used; non-utilization of our assets and facilities;
increased costs, or lack of availability, of insurance; weather
interference with business operations or project construction,
including the impact of extreme weather events or conditions; the
availability of, and our ability to consummate, acquisition or
combination opportunities; the effectiveness of our risk management
activities; shortages or cost increases of supplies, materials or
labor; the impact of current and future laws, rulings, governmental
regulations, accounting standards and statements, and related
interpretations; fluctuations in the debt and equity markets,
including the price of our units at the time of vesting under our
long-term incentive plans; risks related to the development and
operation of our assets, including our ability to satisfy our
contractual obligations to our customers; factors affecting demand
for natural gas and natural gas storage services and rates; general
economic, market or business conditions and the amplification of
other risks caused by volatile financial markets, capital
constraints and pervasive liquidity concerns; and other factors and
uncertainties inherent in the transportation, storage, terminalling
and marketing of crude oil and refined products, as well as in the
storage of natural gas and the processing, transportation,
fractionation, storage and marketing of natural gas liquids as
discussed in the Partnerships’ filings with the Securities and
Exchange Commission.
Plains All American Pipeline, L.P. is a publicly traded master
limited partnership that owns and operates midstream energy
infrastructure and provides logistics services for crude oil, NGLs,
natural gas and refined products. PAA owns an extensive network of
pipeline transportation, terminalling, storage and gathering assets
in key crude oil and NGL producing basins and transportation
corridors and at major market hubs in the United States and Canada.
On average, PAA handles over 4.7 million barrels per day of crude
oil and NGL in its Transportation segment. PAA is headquartered in
Houston, Texas. More information is available at
www.plainsallamerican.com.
Plains GP Holdings is a publicly traded entity that owns an
indirect, non-economic controlling general partner interest in PAA
and an indirect limited partner interest in PAA, one of the largest
energy infrastructure and logistics companies in North America.
PAGP is headquartered in Houston, Texas. More information is
available at www.plainsallamerican.com.
PLAINS ALL AMERICAN PIPELINE, L.P. AND
SUBSIDIARIES
FINANCIAL SUMMARY (unaudited)
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
(in millions, except per unit data)
Three Months Ended March 31, 2017
2016 REVENUES $ 6,667 $ 4,111
COSTS AND EXPENSES Purchases and related costs 5,593 3,348
Field operating costs 288 300 General and administrative expenses
74 67 Depreciation and amortization 121 114 Total
costs and expenses 6,076 3,829
OPERATING INCOME 591
282
OTHER INCOME/(EXPENSE) Equity earnings in
unconsolidated entities 53 47 Interest expense, net (129 ) (112 )
Other income/(expense), net (5 ) 5
INCOME BEFORE
TAX 510 222 Current income tax expense (10 ) (31 ) Deferred
income tax benefit/(expense) (56 ) 12
NET
INCOME 444 203 Net income attributable to noncontrolling
interests — (1 )
NET INCOME ATTRIBUTABLE TO PAA $ 444
$ 202
NET INCOME PER COMMON UNIT: Net
income allocated to common unitholders — Basic $ 406 $ 28 Basic
weighted average common units outstanding 691 398 Basic net income
per common unit $ 0.59 $ 0.07 Net income
allocated to common unitholders — Diluted $ 443 $ 28 Diluted
weighted average common units outstanding 758 399 Diluted net
income per common unit $ 0.58 $ 0.07
NON-GAAP ADJUSTED
RESULTS
(in millions, except per unit data)
Three Months Ended March 31, 2017
2016 Adjusted net income attributable to PAA $ 224
$ 355 Diluted adjusted net income per common unit $
0.27 $ 0.45 Adjusted EBITDA $ 512 $ 633
PLAINS ALL AMERICAN PIPELINE, L.P.
AND SUBSIDIARIES
FINANCIAL SUMMARY (unaudited)
CONDENSED
CONSOLIDATED BALANCE SHEET DATA
(in millions)
March 31, December 31, 2017 2016
ASSETS Current assets $ 4,210 $ 4,272 Property and
equipment, net 14,060 13,872 Goodwill 2,596 2,344 Investments in
unconsolidated entities 2,469 2,343 Linefill and base gas 883 896
Long-term inventory 131 193 Other long-term assets, net 920
290 Total assets $ 25,269 $ 24,210
LIABILITIES AND
PARTNERS' CAPITAL Current liabilities $ 4,156 $ 4,664 Senior
notes, net of unamortized discounts and debt issuance costs 9,876
9,874 Other long-term debt 3 250 Other long-term liabilities and
deferred credits 644 606 Total liabilities $ 14,679 $ 15,394
Partners' capital excluding noncontrolling interests 10,534
8,759 Noncontrolling interests 56 57 Total partners' capital
10,590 8,816 Total liabilities and partners' capital $
25,269 $ 24,210
DEBT
CAPITALIZATION RATIOS
(in millions)
March 31, December 31,
2017 2016 Short-term debt (1) $ 1,341 $ 1,715
Long-term debt 9,879 10,124 Total debt $ 11,220
$ 11,839 Long-term debt $ 9,879 $ 10,124
Partners' capital 10,590 8,816 Total book
capitalization $ 20,469 $ 18,940 Total book
capitalization, including short-term debt $ 21,810 $ 20,655
Long-term debt-to-total book capitalization 48 % 53 %
Total debt-to-total book capitalization, including short-term debt
51 % 57 %
___________________________________________
(1) As of March 31, 2017 and December 31, 2016,
short-term debt includes borrowings of approximately $1,307 million
and $1,303 million, respectively, for short-term hedged inventory
purchases and borrowings of approximately $95 million and $410
million, respectively, for cash margin deposits with our clearing
brokers, which are associated with financial derivatives used for
hedging purposes.
PLAINS ALL AMERICAN PIPELINE, L.P. AND SUBSIDIARIES
FINANCIAL SUMMARY (unaudited)
OPERATING
DATA (1)
Three Months Ended March 31, 2017 2016
Transportation segment (average daily volumes in thousands of
barrels per day): Tariff activities volumes Crude oil pipelines
(by region): Permian Basin (2) 2,466 2,045 South Texas / Eagle Ford
(2) 310 313 Western 189 175 Rocky Mountain (2) 385 437 Gulf Coast
342 581 Central (2) 405 379 Canada 363 394 Crude oil
pipelines 4,460 4,324 NGL pipelines 180 178 Tariff
activities total volumes 4,640 4,502 Trucking volumes 114
106 Transportation segment total volumes 4,754 4,608
Facilities segment (average monthly volumes): Crude oil,
refined products and NGL terminalling and storage (average monthly
capacity in millions of barrels) 111 105 Rail load / unload
volumes (average volumes in thousands of barrels per day) 35
91 Natural gas storage (average monthly working capacity in
billions of cubic feet) 97 97 NGL fractionation (average
volumes in thousands of barrels per day) 125 115 Facilities
segment total volumes (average monthly volumes in millions of
barrels) (3) 132 127
Supply and Logistics segment
(average daily volumes in thousands of barrels per day): Crude
oil lease gathering purchases 916 913 NGL sales 351 308 Waterborne
cargos 7 7 Supply and Logistics segment total volumes 1,274
1,228
___________________________________________
(1) Average volumes are calculated as total volumes
for the period (attributable to our interest) divided by the number
of days or months in the period. (2) Region includes volumes
(attributable to our interest) from pipelines owned by
unconsolidated entities. (3) Facilities segment total volumes is
calculated as the sum of: (i) crude oil, refined products and NGL
terminalling and storage capacity; (ii) rail load and unload
volumes multiplied by the number of days in the period and divided
by the number of months in the period; (iii) natural gas storage
working capacity divided by 6 to account for the 6:1 mcf of natural
gas to crude Btu equivalent ratio and further divided by 1,000 to
convert to monthly volumes in millions; and (iv) NGL fractionation
volumes multiplied by the number of days in the period and divided
by the number of months in the period.
PLAINS ALL AMERICAN PIPELINE, L.P. AND SUBSIDIARIES
FINANCIAL SUMMARY (unaudited)
COMPUTATION OF
BASIC AND DILUTED NET INCOME PER COMMON
UNIT(1)
(in millions, except per unit data)
Three Months Ended March 31, 2017
2016 Basic Net Income per Common Unit Net
income attributable to PAA $ 444 $ 202 Distributions to Series A
preferred units (34 ) (23 ) Distributions to general partner — (155
) Other (4 ) 4 Net income allocated to common unitholders $
406 $ 28 Basic weighted average common units
outstanding 691 398 Basic net income per common unit $ 0.59
$ 0.07
Diluted Net Income per Common
Unit Net income attributable to PAA $ 444 $ 202 Distributions
to Series A preferred units — (23 ) Distributions to general
partner — (155 ) Other (1 ) 4 Net income allocated to common
unitholders $ 443 $ 28 Basic weighted average
common units outstanding 691 398 Effect of dilutive securities:
Series A preferred units (2) 65 — LTIP units (3) 2 1
Diluted weighted average common units outstanding 758 399
Diluted net income per common unit $ 0.58 $
0.07
___________________________________________
(1) We calculate net income allocated to common
unitholders based on the distributions pertaining to the current
period’s net income. After adjusting for the appropriate period’s
distributions, the remaining undistributed earnings or excess
distributions over earnings (“undistributed loss”), if any, are
allocated to the general partner, common unitholders and
participating securities in accordance with the contractual terms
of our partnership agreement in effect for the period and as
further prescribed under the two-class method. The Simplification
Transactions, which closed on November 15, 2016, simplified our
governance structure and permanently eliminated our IDRs and the
economic rights associated with our 2% general partner interest. As
such, beginning with the distribution pertaining to the fourth
quarter of 2016, our general partner is no longer entitled to
receive distributions on these interests. (2) The possible
conversion of our Series A preferred units was excluded from the
calculation of diluted net income per common unit for the three
months ended March 31, 2016 as the effect was antidilutive. (3) Our
Long-term Incentive Plan (“LTIP”) awards that contemplate the
issuance of common units are considered dilutive unless (i) vesting
occurs only upon the satisfaction of a performance condition and
(ii) that performance condition has yet to be satisfied. LTIP
awards that are deemed to be dilutive are reduced by a hypothetical
unit repurchase based on the remaining unamortized fair value, as
prescribed by the treasury stock method in guidance issued by the
FASB.
PLAINS ALL AMERICAN PIPELINE, L.P. AND
SUBSIDIARIES
FINANCIAL SUMMARY (unaudited)
SELECTED
FINANCIAL DATA BY SEGMENT(1)
(in millions)
Three Months Ended Three
Months Ended March 31, 2017 March 31, 2016
Supply and
Supply and Transportation Facilities
Logistics Transportation Facilities
Logistics Revenues (2) $ 389 $ 293 $ 6,400 $ 383 $ 265 $
3,821 Purchases and related costs (2) (24 ) (11 ) (5,970 ) (21 ) (5
) (3,677 ) Field operating costs (2) (3) (137 ) (82 ) (67 ) (137 )
(85 ) (81 ) Equity-indexed compensation expense - field operating
costs (4 ) (1 ) — — — — Segment general and administrative expenses
(3) (4) (27 ) (17 ) (23 ) (23 ) (15 ) (25 ) Equity-indexed
compensation expense - general and administrative (2 ) (2 ) (3 ) (2
) (1 ) (1 ) Equity earnings in unconsolidated entities 53 — — 47 —
— Adjustments: (5) Depreciation and amortization of
unconsolidated entities 14 — — 12 — — (Gains)/losses from
derivative activities net of inventory valuation adjustments — 2
(291 ) — — 122 Long-term inventory costing adjustments — — 7 — — 23
Deficiencies under minimum volume commitments, net 5 6 — 20 7 —
Equity-indexed compensation expense 1 — 2 2 1 1 Net (gain)/loss on
foreign currency revaluation — — (4 ) — — 1 Significant
acquisition-related expenses 5 — — — —
— Segment adjusted EBITDA $ 273 $ 188 $
51 $ 281 $ 167 $ 184 Maintenance
capital $ 29 $ 27 $ 3 $ 35 $ 9 $
3
___________________________________________
(1) During the fourth quarter of 2016, we modified
our primary segment performance measure to segment adjusted EBITDA
from segment profit. Segment adjusted EBITDA forms the basis of our
internal financial reporting and is the primary measure used by our
Chief Operating Decision Maker (“CODM”) in assessing performance
and allocating resources among our operating segments. Prior period
segment amounts have been recast to reflect this change. (2)
Includes intersegment amounts. (3) Field operating costs and
Segment general and administrative expenses exclude equity-indexed
compensation expense, which is presented separately in the table
above. (4) Segment general and administrative expenses reflect
direct costs attributable to each segment and an allocation of
other expenses to the segments. The proportional allocations by
segment require judgment by management and are based on the
business activities that exist during each period. (5) Represents
adjustments utilized by our CODM in the evaluation of segment
results. Many of these adjustments are also considered selected
items impacting comparability when calculating consolidated
non-GAAP financial measures such as Adjusted EBITDA. See the
“Selected Items Impacting Comparability” table on the following
page for additional discussion.
PLAINS ALL
AMERICAN PIPELINE, L.P. AND SUBSIDIARIES
FINANCIAL SUMMARY (unaudited)
SELECTED ITEMS
IMPACTING COMPARABILITY
(in millions, except per unit data)
Three Months Ended March 31,
2017 2016 Selected Items Impacting
Comparability: (1) Gains/(losses) from derivative
activities net of inventory valuation adjustments (2) $ 285 $ (122
) Long-term inventory costing adjustments (3) (7 ) (23 )
Deficiencies under minimum volume commitments, net (4) (11 ) (27 )
Equity-indexed compensation expense (5) (3 ) (4 ) Net gain on
foreign currency revaluation (6) 3 3 Significant
acquisition-related expenses (7) (5 ) — Selected items
impacting comparability - Adjusted EBITDA $ 262 $ (173 ) Tax
effect on selected items impacting comparability (42 ) 20
Selected items impacting comparability - Adjusted net income
attributable to PAA $ 220 $ (153 ) Impact to basic
net income per common unit $ 0.32 $ (0.38 ) Impact to
diluted net income per common unit $ 0.31 $ (0.38 )
___________________________________________
(1) Certain of our non-GAAP financial measures may
not be impacted by each of the selected items impacting
comparability. (2) We use derivative instruments for risk
management purposes and our related processes include specific
identification of hedging instruments to an underlying hedged
transaction. Although we identify an underlying transaction for
each derivative instrument we enter into, there may not be an
accounting hedge relationship between the instrument and the
underlying transaction. In the course of evaluating our results of
operations, we identify the earnings that were recognized during
the period related to derivative instruments for which the
identified underlying transaction does not occur in the current
period and exclude the related gains and losses in determining
adjusted results. In addition, we exclude gains and losses on
derivatives that are related to investing activities, such as the
purchase of linefill. We also exclude the impact of corresponding
inventory valuation adjustments, as applicable, as well as the
mark-to-market adjustment related to our Preferred Distribution
Rate Reset Option. (3) We carry crude oil and NGL inventory
comprised of minimum working inventory requirements in third-party
assets and other working inventory that is needed for our
commercial operations. We consider this inventory necessary to
conduct our operations and we intend to carry this inventory for
the foreseeable future. Therefore, we classify this inventory as
long-term on our balance sheet and do not hedge the inventory with
derivative instruments (similar to linefill in our own assets). We
treat the impact of changes in the average cost of the long-term
inventory (that result from fluctuations in market prices) and
writedowns of such inventory that result from price declines as a
selected item impacting comparability. (4) We have certain
agreements that require counterparties to deliver, transport or
throughput a minimum volume over an agreed upon period.
Substantially all of such agreements were entered into with
counterparties to economically support the return on our capital
expenditure necessary to construct the related asset. Some of these
agreements include make-up rights if the minimum volume is not met.
We record a receivable from the counterparty in the period that
services are provided or when the transaction occurs, including
amounts for deficiency obligations from counterparties associated
with minimum volume commitments. If a counterparty has a make-up
right associated with a deficiency, we defer the revenue
attributable to the counterparty’s make-up right and subsequently
recognize the revenue at the earlier of when the deficiency volume
is delivered or shipped, when the make-up right expires or when it
is determined that the counterparty’s ability to utilize the
make-up right is remote. We include the impact of amounts billed to
counterparties for their deficiency obligation, net of applicable
amounts subsequently recognized into revenue, as a selected item
impacting comparability. We believe the inclusion of the
contractually committed revenues associated with that period is
meaningful to investors as the related asset has been constructed,
is standing ready to provide the committed service and the fixed
operating costs are included in the current period results. (5) Our
total equity-indexed compensation expense includes expense
associated with awards that will or may be settled in units and
awards that will or may be settled in cash. The awards that will or
may be settled in units are included in our diluted net income per
unit calculation when the applicable performance criteria have been
met. We consider the compensation expense associated with these
awards as a selected item impacting comparability as the dilutive
impact of the outstanding awards is included in our diluted net
income per unit calculation and the majority of the awards are
expected to be settled in units. The portion of compensation
expense associated with awards that are certain to be settled in
cash is not considered a selected item impacting comparability. (6)
During the periods presented, there were fluctuations in the value
of the Canadian dollar to the U.S. dollar, resulting in gains and
losses that were not related to our core operating results for the
period and were thus classified as a selected item impacting
comparability. (7) Includes acquisition-related expenses associated
with the Alpha Crude Connector acquisition.
PLAINS
ALL AMERICAN PIPELINE, L.P. AND SUBSIDIARIES
FINANCIAL SUMMARY (unaudited)
FINANCIAL DATA
RECONCILATIONS
(in millions)
Three Months Ended March 31,
2017 2016 Net Income to Adjusted
EBITDA and Implied DCF Reconciliation Net Income $ 444 $ 203
Interest expense, net 129 112 Income tax expense 66 19 Depreciation
and amortization 121 114 Depreciation and amortization of
unconsolidated entities (1) 14 12 Selected items impacting
comparability - Adjusted EBITDA (2) (262 ) 173 Adjusted
EBITDA $ 512 $ 633 Interest expense, net (3) (125 ) (108 )
Maintenance capital (59 ) (47 ) Current income tax expense (10 )
(31 ) Adjusted equity earnings in unconsolidated entities, net of
distributions (4) (15 ) (7 ) Distributions to noncontrolling
interests (5) — (1 ) Implied DCF (6) $ 303 $ 439
___________________________________________
(1) Adjustment to add back our proportionate share of
depreciation and amortization expense of unconsolidated entities.
(2) Certain of our non-GAAP financial measures may not be impacted
by each of the selected items impacting comparability. (3) Excludes
certain non-cash items impacting interest expense such as
amortization of debt issuance costs and terminated interest rate
swaps. (4) Represents the difference between non-cash equity
earnings in unconsolidated entities (adjusted for our proportionate
share of depreciation and amortization) and cash distributions
received from such entities. (5) Includes distributions that
pertain to the current period’s net income, which are paid in the
subsequent period.
PLAINS ALL AMERICAN PIPELINE,
L.P. AND SUBSIDIARIES
FINANCIAL SUMMARY (unaudited)
COMPUTATION OF
BASIC AND DILUTED ADJUSTED NET INCOME PER COMMON
UNIT(1)
(in millions, except per unit data)
Three Months Ended March 31,
2017 2016 Basic Adjusted Net Income
per Common Unit Net income attributable to PAA $ 444 $ 202
Selected items impacting comparability - Adjusted net income
attributable to PAA (2) (220 ) 153 Adjusted net income
attributable to PAA 224 355 Distributions to Series A preferred
units (34 ) (23 ) Distributions to general partner — (155 ) Other
(4 ) 2 Adjusted net income allocated to common unitholders $
186 $ 179 Basic weighted average common units
outstanding 691 398 Basic adjusted net income per common
unit $ 0.27 $ 0.45
Diluted Adjusted Net
Income per Common Unit Net income attributable to PAA $ 444 $
202 Selected items impacting comparability - Adjusted net income
attributable to PAA (2) (220 ) 153 Adjusted net income
attributable to PAA 224 355 Distributions to Series A preferred
units (34 ) (23 ) Distributions to general partner — (155 ) Other
(4 ) 2 Adjusted net income allocated to common unitholders $
186 $ 179 Basic weighted average common units
outstanding 691 398 Effect of dilutive securities: LTIP units (3) 2
1 Diluted weighted average common units outstanding
693 399 Diluted adjusted net income per common
unit (4) $ 0.27 $ 0.45
___________________________________________
(1) We calculate adjusted net income allocated to
common unitholders based on the distributions pertaining to the
current period’s net income. After adjusting for the appropriate
period’s distributions, the remaining undistributed earnings or
excess distributions over earnings (“undistributed loss”), if any,
are allocated to the general partner, common unitholders and
participating securities in accordance with the contractual terms
of our partnership agreement in effect for the period and as
further prescribed under the two-class method. The Simplification
Transactions, which closed on November 15, 2016, simplified our
governance structure and permanently eliminated our IDRs and the
economic rights associated with our 2% general partner interest. As
such, beginning with the distribution pertaining to the fourth
quarter of 2016, our general partner is no longer entitled to
receive distributions from these interests. (2) Certain of our
non-GAAP financial measures may not be impacted by each of the
selected items impacting comparability. (3) Our Long-term Incentive
Plan (“LTIP”) awards that contemplate the issuance of common units
are considered dilutive unless (i) vesting occurs only upon the
satisfaction of a performance condition and (ii) that performance
condition has yet to be satisfied. LTIP awards that are deemed to
be dilutive are reduced by a hypothetical unit repurchase based on
the remaining unamortized fair value, as prescribed by the treasury
stock method in guidance issued by the FASB. (4) The possible
conversion of our Series A preferred units was excluded from the
calculation of diluted adjusted net income per common unit for the
three months ended March 31, 2017 and 2016 as the effect was
antidilutive.
PLAINS GP HOLDINGS AND
SUBSIDIARIES
FINANCIAL SUMMARY (unaudited)
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS(1)
(in millions, except per share data)
Three Months Ended Three
Months Ended March 31, 2017 March 31, 2016
Consolidating
Consolidating PAA Adjustments
(2) PAGP PAA Adjustments (2)
PAGP REVENUES $ 6,667 $ — $ 6,667 $ 4,111 $ — $ 4,111
COSTS AND EXPENSES Purchases and related costs 5,593
— 5,593 3,348 — 3,348 Field operating costs 288 — 288 300 — 300
General and administrative expenses 74 1 75 67 1 68 Depreciation
and amortization 121 1 122 114 —
114 Total costs and expenses 6,076 2 6,078 3,829 1 3,830
OPERATING INCOME 591 (2 ) 589 282 (1 ) 281
OTHER INCOME/(EXPENSE) Equity earnings in unconsolidated
entities 53 — 53 47 — 47 Interest expense, net (129 ) — (129 ) (112
) (4 ) (116 ) Other income/(expense), net (5 ) — (5 ) 5
— 5
INCOME BEFORE TAX 510 (2 )
508 222 (5 ) 217 Current income tax expense (10 ) — (10 ) (31 ) —
(31 ) Deferred income tax benefit/(expense) (56 ) (40 ) (96 ) 12
(21 ) (9 )
NET INCOME 444 (42 ) 402 203 (26 )
177 Net income attributable to noncontrolling interests —
(361 ) (361 ) (1 ) (140 ) (141 )
NET INCOME ATTRIBUTABLE TO
PAGP $ 444 $ (403 ) $ 41 $ 202 $ (166 ) $
36
BASIC NET INCOME PER CLASS A SHARE $ 0.34
$ 0.39
DILUTED NET INCOME PER CLASS A
SHARE $ 0.34 $ 0.37
BASIC WEIGHTED
AVERAGE CLASS A SHARES OUTSTANDING 120 95
DILUTED WEIGHTED AVERAGE CLASS A SHARES OUTSTANDING 120
245
___________________________________________
(1)
A reverse split of PAGP’s Class A shares was
completed on November 15, 2016. The effect of the reverse split has
been retroactively applied to all per-share amounts presented.
(2)
Represents the aggregate consolidating adjustments necessary to
produce consolidated financial statements for PAGP.
PLAINS GP HOLDINGS AND SUBSIDIARIES
FINANCIAL SUMMARY (unaudited)
CONDENSED
CONSOLIDATING BALANCE SHEET DATA
(in millions)
March 31, 2017 December 31,
2016 Consolidating
Consolidating PAA
Adjustments (1) PAGP PAA
Adjustments (1) PAGP ASSETS Current
assets $ 4,210 $ 4 $ 4,214 $ 4,272 $ 3 $ 4,275 Property and
equipment, net 14,060 17 14,077 13,872 18 13,890 Goodwill 2,596 —
2,596 2,344 — 2,344 Investments in unconsolidated entities 2,469 —
2,469 2,343 — 2,343 Deferred tax asset — 2,221 2,221 — 1,876 1,876
Linefill and base gas 883 — 883 896 — 896 Long-term inventory 131 —
131 193 — 193 Other long-term assets, net 920 (3 ) 917
290 (4 ) 286 Total assets $ 25,269 $ 2,239
$ 27,508 $ 24,210 $ 1,893 $ 26,103
LIABILITIES AND PARTNERS' CAPITAL Current liabilities
$ 4,156 $ 2 $ 4,158 $ 4,664 $ 2 $ 4,666 Senior notes, net of
unamortized discounts and debt issuance costs 9,876 — 9,876 9,874 —
9,874 Other long-term debt 3 — 3 250 — 250 Other long-term
liabilities and deferred credits 644 — 644 606
— 606 Total liabilities $ 14,679 $ 2 $ 14,681 $
15,394 $ 2 $ 15,396 Partners' capital excluding
noncontrolling interests 10,534 (7,930 ) 2,604 8,759 (7,022 ) 1,737
Noncontrolling interests 56 10,167 10,223 57
8,913 8,970 Total partners' capital 10,590
2,237 12,827 8,816 1,891 10,707 Total
liabilities and partners' capital $ 25,269 $ 2,239 $
27,508 $ 24,210 $ 1,893 $ 26,103
___________________________________________
(1) Represents the aggregate consolidating
adjustments necessary to produce consolidated financial statements
for PAGP.
PLAINS GP HOLDINGS AND SUBSIDIARIES
FINANCIAL SUMMARY (unaudited)
COMPUTATION OF
BASIC AND DILUTED NET INCOME PER CLASS A
SHARE(1)
(in millions, except per share data)
Three Months Ended March 31,
2017 2016 Basic Net Income per Class
A Share Net income attributable to PAGP $ 41 $ 36 Basic
weighted average Class A shares outstanding 120 95 Basic net
income per Class A share $ 0.34 $ 0.39
Diluted Net
Income per Class A Share Net income attributable to PAGP $ 41 $
36 Incremental net income attributable to PAGP resulting from
assumed exchange of AAP units and AAP Management Units — 54
Net income attributable to PAGP including incremental net income
from assumed exchange of AAP units and AAP Management Units $ 41
$ 90 Basic weighted average Class A shares
outstanding 120 95 Dilutive shares resulting from assumed exchange
of AAP units and AAP Management Units — 150 Diluted weighted
average Class A shares outstanding 120 245
Diluted net income per Class A
share(2)
$ 0.34 $ 0.37
___________________________________________
(1) A reverse split of PAGP’s Class A shares was
completed on November 15, 2016. The effect of the reverse split has
been retroactively applied to all per-share amounts presented.
(2)
For the three months ended March 31, 2017,
the possible exchange of any AAP units and certain AAP Management
Units would not have had a dilutive effect on basic net income per
Class A share.
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version on businesswire.com: http://www.businesswire.com/news/home/20170508006348/en/
Plains All American Pipeline, L.P. and Plains GP HoldingsRoy
Lamoreaux, 866-809-1291Vice President, Investor Relations &
CommunicationsorBrett Magill, 866-809-1291Manager, Investor
Relations
Plains GP (NYSE:PAGP)
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