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

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

Q3 2010 Earnings Call

November 04, 2010 11:00 a.m. ET

Executives

Greg Armstrong - CEO

Harry Pefanis - President & COO

Dean Liollio - President, PNG

Al Swanson - SVP & CFO

Analysts

Yves Siegel - Credit Suisse

Brian Zarahn - Barclays Capital

Darren Horowitz - Raymond James

John Tysseland - Citigroup

Michael Cerasoli - Goldman Sachs

Selman Akyol - Stifel Nicolaus

Jeremy Tonet - UBS

John Edwards - Morgan Keegan

Joseph Siano - Credit Suisse

Presentation

Operator

Ladies and gentlemen thank you for standing by and welcome to the Plains All American Pipeline's and PAA Natural Gas Storage Third Quarter 2010 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, which may include words such as believe, estimate, expect, anticipate or other words that indicate a forward view.

The partnership intends to avail themselves of Safe Harbor precepts that encourage companies to provide this type of information and directs you to the risks and warnings set forth in Plains All American Pipeline's and PAA Natural Gas Storage most recently filed prospectus 10-K, 10-Q, 8-K, is applicable and other current and future filings with the Securities and Exchange Commission.

Throughout the call participants may reference the company's by their respective New York Stock Exchange ticker symbol of PAA or Plains All American Pipeline and PNG or PAA Natural Gas Storage.

In addition, the partnership encourages you to visit the website at www.paalp.com and www.pnglp.com and in particular, the section entitled non-GAAP Reconciliation, which presents certain commonly used non-GAAP financial measures such as EBIT and EBITDA, which may be used here today in the prepared remarks and 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 impact compatibility with respect to the Partnership's reported financial information. Any reference during today's call to adjust EBITDA, adjust net income and the like, is a reference to the financial measure, excluding the effect of selected items impacting compatibility also for PAA also references to net income or references to net income attributable to claims.

Today's conference 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 and Vice Chairman of PNG, Dean Liollio, President of PNG, and Al Swanson, CFO of PAA and PNG.

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

Greg Armstrong

Thank you Gael and good morning and welcome to everyone. In addition to Harry, Dean and Al, we also have several of the members of our management team available for the question and answer session including Roy Lamoreaux, Director of Investor Relations. As a reminder, the slide presentation we will be referring to in this call is available on our website at www.paalp.com and www.pnglp.com.

Yesterday afternoon, Plains All American reported third quarter performance between the mid-point and high end of our guidance range. As illustrated on slide 3 for the third quarter of 2010, PAA reported EBITDA of $205 million and net income of $81 million or $0.28 per diluted unit. Excluding the selected items impacting comparability, which are included in the table at the bottom of the slide, our adjusted EBITDA was $264 million and adjusted net income was $140 million or $0.70 per diluted unit.

Adjusted EBITDA results, adjusted net income and adjusted net income per diluted unit for the third quarter of 2010 increased 13%, 23% and 19% respectively over last years third quarter.

In compression to guidance PAA's overall results were bear the top of the range and were highlighted by over performance in our fee based transportation facility segments and in line performance in our supply and logistic business.

Slide 4 graphically presents this quarters aggregate and performance versus guidance; highlight the fact that we have now delivered 35 consecutive quarters or results inline with guidance. PAA Natural Gas Storage also reported third quarter performance slightly ahead of the mid-point of this guidance range and Dean will cover those results later in the call.

Last month PAA had incurred a 3.3% year-over-year increase in our run rate distributions to $3.80 per unit on an annualized basis which met our distribution growth goal for the year. This equates to a 3.7% increase in distributions paid in 2010 versus 2009.

As of the distribution payable next week, PAA will have increased this distribution in 24 out of the last 26 quarters. During the remainder of the call today will focus on the following items for both PAA and PNG which are highlighted on slide 5. They include comparison of actual performance to guidance and operational assumptions that are incorporated into that guidance. Capital projects and acquisition activities update, our capitalization liquidity at the end of the third quarter, fourth quarter 2010 financial guidance and preliminary 2011 EBITDA guidance in growth capital investment plans.

With that I'll turn the call over to Harry.

Harry Pefanis

Thanks Greg. I'll now review our third quarter operating results compared to the mid point of our guidance issued on August 4, 2010, discuss the operational assumptions used to generate our fourth quarter guidance, and discuss the progress of our expansion capital programs and acquisition activities. Dean will, then, cover the PNG specific information in just a moment.

Overall, our third quarter operating results were favorable to the mid point of our guidance. As shown on slide 6, adjusted segment profits for the transportation segment was a $142 million or $0.50 per barrel, which is about $7 million above the mid point of our guidance range.

These favorable results are due to the combination of higher revenues associated with our Pipeline and also barrels and operating expenses were a little lower than forecasted. Volumes for the quarter were in line with the mid point of our guidance.

Adjusted segment profit for the facility segment was $75 million or about $0.35 per barrel, which is approximately $5 million above the mid point of our guidance. Segment capacity with 71 million barrels per month, which was in line with our guidance. Segment profit benefited from higher ancillary fees, primarily related to higher throughput volumes as well as lower operating expenses.

Adjusted segment profit for the Supply and Logistic segment was $48 million or $0.63 per barrel, which was in line with mid point guidance. With the exception of our waterborne 400 crude oil imports, volumes were in line with guidance also.

The variance in our waterborne volumes were due to arrival of a carload that was anticipated to be received in the fourth quarter. As a result, we will see lower waterborne volumes in our fourth quarter guidance.

Maintenance capital expenditures were $29 million for the third quarter, resulting in a total of $62 million since September 30th. We expect maintenance capital to run between $85 million to $90 million for the year.

Let me now move slide 7 and review the operational assumptions used to generate our fourth quarter 2010 guidance, which was furnished in our Form 8-K, issued last night.

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