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

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

Q4 2010 Earnings Call

February 10, 2011 11:00 am ET


Dean Liollio - President of PNGS GP LLC and Director of PNGS GP LLC

Greg Armstrong - Chairman of Plains All American GP LLC and Chief Executive Officer of Plains All American GP LLC

Al Swanson - Chief Financial Officer of Plains All American GP LLC and Senior Vice President of Plains All American GP LLC

Harry Pefanis - Vice Chairman of PNGS GP LLC


S. Ross Payne

Jeremy Tonet - UBS Investment Bank

Brian Zarahn - Barclays Capital

Darren Horowitz - Raymond James & Associates

Michael Cerasoli - Goldman Sachs Group Inc.

John Edwards - Morgan Keegan & Company, Inc.

Gabriel Moreen - BofA Merrill Lynch

Barrett Blaschke - RBC Capital Markets, LLC

Michael Blum - Wells Fargo Securities, LLC

Selman Akyol - Stifel, Nicolaus & Co., Inc.



Ladies and gentlemen, thank you for standing by, and welcome to the Plains All American and PAA Natural Gas Fourth Quarter Earnings Call. [Operator Instructions] Also, I would like to welcome to the Plains All American Pipeline and PAA Natural Gas Storage Fourth Quarter and Year End 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 partnerships, outlook for 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 a Safe Harbor precept that encourage companies to provide this type of information and directs you to the risks and warnings set forth in Plains All American Pipeline and PAA Natural Gas Storage most recently filed prospectus 10-K, 10-Q, 8-K, as 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 PAA for Plains All American Pipeline and PNG for PAA Natural Gas Storage.

In addition, the partnerships encourage you to visit their website at and 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 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 partnership reported financial information. Any reference during today's call to adjusted EBITDA, adjusted net income and the like is a reference to the financial measures, excluding the effect of selected items impacting comparability. Also, for PAA, all references to net income are reference to net income attributable to Plains.

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 conference over to your host, Greg Armstrong. Please go ahead.

Greg Armstrong

Thank you, Caroline. Good morning, and welcome to everyone. In addition to Harry, Dean and Al, we also have several other members of our management team available for the question-and-answer session including Roy Lamoreaux, Director of Investor Relations.

This is the first full year that we will have both PAA and PNG as public entities, and I wanted to take the opportunity to let you know that Dan Bach will be joining our Investor Relations effort as Manager, Investor Relations reporting to Roy. Dan has been with PAA since 2004 and he is very familiar with each of our segments and the drivers behind PAA's and PNG's results as his primary role has been planning and forecasting. As a reminder, the slide presentation we will be referring to in this call is available on our websites at and

We have a lot of information to cover today with respect to PAA's fourth quarter results, our overall performance for the full year of 2010 and our guidance for the full year and first quarter of 2011. We will also cover similar information for PAA Natural Gas Storage or PNG as we refer to it, which is a majority owned and controlled subsidiary of PAA. On balance, I think you will find the information for both entities very much on the positive side, both with respect to fourth quarter performance and 2011 outlook.

Plains All American closed out 2010 with very strong performance exceeding the high end of PAA's fourth quarter adjusted EBITDA guidance by $22 million or $35 million above the midpoint of the guidance range. Combined with the solid performance delivered in the first nine months of the year, PAA's full year performance also exceeded the high end of the guidance we provided on February 10, 2010, by approximately $41 million, and that's about $66 million above the high end of the guidance range. Our 2010 acquisitions were weighted towards the end of the year, and thus, contributed less than $5 million to this overperformance. So overall, it was a very solid year of blocking and tackling.

As shown on Slide 3 for the fourth quarter of 2010, PAA reported EBITDA of $277 million and net income of $142 million or $0.67 per diluted unit. Excluding the selected items impacting comparability, which are included in the table at the bottom of the slide, our adjusted EBITDA for the fourth quarter of 2010 was $322 million and adjusted net income was $187 million or $0.99 per diluted unit. In comparison to the same metrics in last year, those metrics were up 17%, 26% and 24%, respectively. PAA's fourth quarter results were driven by in-line performance in the Transportation segment and overperformance in the Facilities and the Supply and Logistics segments.

Slide 4 graphically represent this quarter's aggregate performance versus guidance highlighting the fact that we have now delivered 36 consecutive quarters where results in line with guidance throughout a variety of energy market conditions. Keeping pace with the parent, PAA Natural Gas Storage also reported fourth quarter performance that was at the high end of its guidance range, and Dean will cover those results later in the call.

As shown on Slide 5, for the full year of 2010, we reported adjusted EBITDA of $1.1 billion and adjusted net income of $594 million. These results represent increases of 8% and 7%, respectively, over the same measures for 2009. Adjusted net income per diluted unit in 2010 was $3.03, and that compares to $3.14 per unit in 2009.

Last month, PAA declared a 3.2% year-over-year increase in our run rate distribution to $3.83 per unit on an annualized basis. As of the distribution payable next week, PAA will have increased its distribution in 25 out of the last 27 quarters. Yesterday evening, we also furnished financial and operating guidance for 2011 that illustrates PAA's strong performance and is expected to continue throughout the coming year, as the midpoint of our guidance range for adjusted EBITDA in 2011 is projected to be approximately 11% above 2010. Additionally, we believe our ongoing expansion capital program, which totals $550 million for 2011, positions PAA for continued growth in 2012 and beyond.

During the remainder of the call today, Harry, Dean and Al will discuss the details of our fourth quarter performance relative to guidance, review our capital projects and acquisition activities, provide an overview of capitalization liquidity and also the primary drivers and information that supports our 2011 guidance. Following their presentations, I'll wrap up with a few brief comments and discuss PAA's 2011 distribution guidance.

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

Harry Pefanis

Thanks, Greg. I'll now review our fourth quarter operating results compared to the midpoint of our guidance issued on November 3, 2010, discuss the operational assumptions used to generate our guidance for 2011 and discuss our expansion capital program and acquisition activities. Dean will cover the PNG-specific information in a moment.

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