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

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

Q1 2013 Results Earnings Call

May 7, 2013 11:00 AM ET

Executives

Roy Lamoreaux - Director, Investor Relations

Greg Armstrong - Chairman and CEO

Harry Pefanis - President and COO

Dean Liollio - President

Al Swanson - Executive Vice President and CFO

Analysts

Darren Horowitz - Raymond James

Steve Sherowski - Goldman Sachs

Brian Zarahn - Barclays Capital

Stephen Maresca - Morgan Stanley

Ethan Bellamy - Robert W. Baird

John Edwards - Credit Suisse

Ross Payne - Wells Fargo

Presentation

Operator

Ladies and gentlemen, thank you for standing by. Welcome to the Plains All American Pipeline and PAA Natural Gas Storage First Quarter 2013 Results Conference Call. (Operator Instructions)

As a reminder, this conference is being recorded. With that being said I’ll turn the conference now to the Director, Investor Relations, Mr. Roy Lamoreaux. Please go ahead, sir.

Roy Lamoreaux

Thank you. Good morning. Welcome to the Plains All American Pipeline and PAA Natural Gas Storage first quarter results conference call. The slide presentation for today’s call is available under the Conference Call tab of the Investor Relations section of our websites at paalp.com and pnglp.com.

I would mention that throughout the call, we will refer to the company by their New York Stock Exchange ticker symbols of PAA and PNG, respectively. As a reminder, Plains All American owns a 2% general partner interest in all of the incentive distribution rights and approximately 62% of the limited partner interest in PNG, which accordingly is consolidated into PAA’s results.

In addition to reviewing recent results, we’ll provide forward-looking comments on the partnerships’ outlook for the future. In order to avail ourselves with the Safe Harbor precepts that encourage companies to provide this type of information, we direct you to the risks and warnings set forth in the partnerships’ most recent and future filings with the Securities and Exchange Commission.

Today’s presentation will also include references to certain non-GAAP financial measures such as EBITDA. The non-GAAP Reconciliations section of our websites reconcile certain non-GAAP financial measures to the most directly comparable GAAP financial measures and provide a table of selected items that impact comparability of the partnerships’ reported financial information. References to adjusted financial metrics exclude the effect of these selected items. Also for PAA, all references to net income are references to net income attributable to Plains.

Today’s call will be chaired by Greg L. Armstrong, Chairman and CEO of PAA and PNG. Also participating in the call are Harry Pefanis, President and COO of PAA; Dean Liollio, President of PNG; and Al Swanson, Executive Vice President and CFO of PAA and PNG. In addition to these gentlemen and myself, we will have some other members of our management team present and available for the question-and-answer session.

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

Greg Armstrong

Thanks Roy. Good morning and welcome to everyone. Yesterday after market closed, PAA reported first quarter results that can justifiably be described as outstanding. First quarter adjusted EBITDA totaled $739 million which exceeded the midpoint of our guidance range by $124 million or 20% and the high end of our guidance range by $99 million or 15%.

In comparison to last year’s first quarter results, adjusted EBITDA, adjusted net income, and adjusted net income per diluted unit increased by 57%, 64% and 59% respectively. A summary of our first quarter results is reflected on slide three.

As reflected on slide four, these results marked the 45th consecutive quarter that PAA delivered results in line with or above guidance. Additionally, last month PAA declared a quarterly distribution of $0.57 per common unit or $2.30 per unit on an annualized basis payable next week. This distribution represents a 10% increase over the partnership distribution paid in May 2012 and a 2.2% increase over the partnership’s distribution paid in February 2013. Distribution coverage for the quarter was approximately 200%. As reflected on the bottom of slide four, PAA has increased its distribution in each of the last 15 quarters and 34 of the last 36 quarters.

Yesterday evening we also furnished operating and financial guidance for the second quarter and full year of 2013. Sequentially, our guidance for the second quarter reflects the impact of routine seasonality in our NGL business, as well as our view of the impact that recent and pending infrastructure projects will have basis differentials and on margins in our Supply and Logistics segment.

As we discussed on our last conference call, for the reminder of the year, quarterly comparisons for the Supply and Logistics segment will be challenging as a result of the very favorable market conditions experienced during comparable 2012 periods.

Conversely, segment comparisons for the transportation and facilities segments for the latter half of 2013 should show continued growth as a result of our capital investments. In the aggregate we expect full year adjusted EBITDA comparisons will be favorable.

In that regard, yesterday we increased the midpoint of our full year 2013 adjusted EBITDA guidance by $135 million or 7% to $2.16 million, which exceeds our actual results reported for 2012, which was a year that include significant contributions from our Supply and Logistics segment due to favorable market conditions. PAA continues to execute well in this environment and we are on track to meet or exceed our 2013 goals and to position PAA favorably for 2014 and beyond.

During the remainder of today’s call we will discuss the specifics of PAA segment performance relative to guidance, our expansion cavern program, our financial position, and a major drivers and assumptions supporting PAA’s financial and operating guidance. We’ll also recap -- also address similar information for PNG and at the end of the call I will provide a recap, as well as some comments regarding our outlook for the future.

Read the rest of this transcript for free on seekingalpha.com