Plains All American Pipeline, L.P. (PAA)

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Plains All American Pipeline, L.P. (PAA)

Q3 2009 Earnings Call Transcript

November 5, 2009 11:00 am ET


Greg Armstrong – Chairman and CEO

Harry Pefanis – President and COO

Al Swanson – SVP and CFO


Brian Zarahn – Barclays Capital

Darren Horowitz – Raymond James

Dave Warren [ph] – Banc of America

Ross Payne – Wells Fargo

Michael Blum – Wells Fargo

John Edwards – Morgan Keegan

Yves Siegel – Credit Suisse



Welcome to the Plains All American Pipeline third quarter 2009 results conference call. During today's call, in addition to reviewing the results of the prior period, the participants will provide forward-looking comments on the Partnership's outlook for the future. Accordingly, in doing so, they will use words such as believe, estimate, expect, anticipate, et cetera.

The Partnership intends to avail itself of Safe Harbor precepts that encourage companies to provide this information and directs you to the risks and warnings set forth in Plains All American Pipeline's most recently filed 10-K, 10-Q, 8-K and other current and future filings with the Securities and Exchange Commission.

In addition, the Partnership encourages you to visit its website at, in particular, the section entitled Non-GAAP Reconciliation, which presents certain commonly used non-GAAP financial measures such as EBITDA and EBIT, which may be used here today in the prepared remarks or in the Q&A session.

This section of the website also reconciles the non-GAAP financial measures to the most directly comparable GAAP financial measures and includes a table of selected items that impacts comparability with respect to the Partnership's reported financial information. Any reference during today's call to adjusted EBITDA, adjusted net income and the like is a reference to the financial measure, excluding the effect of selected items impacting comparability.

Today's conference will be chaired by Greg L. Armstrong, Chairman and CEO of Plains All American Pipeline. Also participating in the call are Harry Pefanis, Plains All American's President and COO, and Al Swanson, Plains All American's Senior Vice President and CFO.

I will now turn the call over to Mr. Greg Armstrong. Please go ahead.

Greg Armstrong

Thank you, Michelle. And good morning to everyone and welcome. In addition to Harry and Al, we also have several other members of our management team available for the question-and-answer session, including Pat Diamond, our Vice President responsible for Strategic Planning. Roy Lamoreaux, our Manager of Investor Relations, is also here. As a reminder, the slide presentation we will be referring to in this call is available on our website at

Plains All American has been very active and productive in the four months since the end of the second quarter. We delivered solid operating and financial results, acquired the remaining 50% interest in PAA Natural Gas Storage, raised approximately $1.2 billion in the capital markets at very attractive rates, and increased our annualized distribution by $0.06 or 1.7% to $3.68 per unit.

We also ended the third quarter with a solid balance sheet and over $1.6 billion of available committed liquidity, of which approximately $260 million was used in early October to prepay our 7.125% notes.

With regards to financial results, as illustrated on slide three, yesterday we reported EBITDA of $242 million and net income of $122 million or $0.65 per diluted unit. Excluding the selected items impacting comparability listed in the table at the bottom of slide three, our adjusted EBITDA was $234 million and adjusted net income was $114 million or $0.59 per diluted unit.

As shown on slide four, this marks the 31st consecutive quarter of delivering results in line with our guidance. During the remainder of today’s call, we will focus on the topics listed on slide five, which include the comparison of actual performance to guidance and operational assumptions incorporated into our future guidance, capital projects and acquisition activities update, capitalization liquidity at the September 30, 2009 and recent financings, our fourth quarter 2009 financial guidance, we’ll also focus on the positive performance of PAA’s assets and business model over the last few years and provide some preliminary 2010 EBITDA guidance and growth capital investment plans.

With that, I’ll turn the call over to Harry.

Harry Pefanis

Thanks, Greg. During my portion of the call, I'll review our third quarter operating results compared to the midpoint of our guidance issued on August 5, 2009, discuss the operational assumptions used to generate our fourth quarter 2009 guidance, and discuss the progress of our expansion capital program and our acquisition activities.

Let me start with our operating results for the third quarter. As shown on slide six, adjusted segment profit for the Transportation segment was $135 million or $0.50 per barrel. That’s about $8 million above the midpoint of our guidance range. Higher than forecasted pipeline loss (inaudible) and about $3 million of lower than forecasted G&A expenses were the primary drivers for the over-performance relative to our guidance.

About $1.5 million of the pipeline loss allowance amount was a correction to a prior period, which had an offsetting impact on our marketing segment. Our pipeline volumes for the quarter were about 2.9 million barrels per day, which was approximately 5% lower than guidance. Our revenues were basically in line with our guidance due to the volume mix in the quarter.

Adjusted segment profit for the Facilities segment was $59 million, or $0.27 a barrel, and that’s about $6 million above the midpoint of our guidance range. The PNGS acquisition, that’s our natural gas storage entity, contributed approximately $3 million of the (inaudible) performance. The remaining benefit was primarily attributable to the revenue recognition of minimum annual throughput fees from one of our customers. Average capacity of 61 million barrels per month for the third quarter was up slightly from guidance of $60 million per month as a result of owning 100% of PNGS for one month during the period.

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