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

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

Q3 2012 Earnings Call

November 06, 2012 10:00 am ET

Executives

Roy I. Lamoreaux - Director of Investor Relations

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

Harry N. Pefanis - Vice Chairman of PNGS GP LLC

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

Al Swanson - Chief Financial Officer of Plains All American Gp Llc and Executive Vice President of Plains All American Gp Llc

Analysts

Darren Horowitz - Raymond James & Associates, Inc., Research Division

Brian J. Zarahn - Barclays Capital, Research Division

Theodore Durbin - Goldman Sachs Group Inc., Research Division

S. Ross Payne - Wells Fargo Securities, LLC, Research Division

John Edwards - Crédit Suisse AG, Research Division

Michael J. Blum - Wells Fargo Securities, LLC, Research Division

Rebecca Followill - U.S. Capital Advisors LLC, Research Division

Mark L. Reichman - Simmons & Company International, Research Division

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

Presentation

Operator

Ladies and gentlemen, thank you for standing by, and welcome to the PAA and PNG Third Quarter Results Conference Call. [Operator Instructions] And later, we will conduct a question-and-answer session. [Operator Instructions] And as a reminder, today's conference is being recorded. I would now like to turn the conference over to your host, Director of Investor Relations, Mr. Roy Lamoreaux. Please go ahead, sir.

Roy I. Lamoreaux

Good morning. Thank you. We welcome you to Plains All American Pipeline and PAA Natural Gas Storage's Third Quarter 2012 Results Conference Call. The slide presentation for today's call is available under the Conference Call tab of the Investor Relations sections 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 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 EBIT and 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 have several 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 L. Armstrong

Thanks, Roy. Good morning and welcome to everyone. To our friends in the Northeast, please know that our thoughts and prayers are with you and wish all of you a speedy recovery.

With respect to PAA's third quarter results, we continue the multi-quarter trend where PAA once again delivered strong quarterly results. After market close yesterday, Plains All American announced third quarter adjusted EBITDA of $502 million, which exceed the midpoint of our guidance range by approximately $92 million, due principally to strong results in our Facilities and Supply and Logistics segments. Current year results also compared favorably to last year's third quarter, as adjusted EBITDA, adjusted net income and adjusted net income per diluted unit for the third quarter of 2012 increased by 21%, 18% and 3%, respectively.

Although it did not impact our adjusted results, our third quarter reported results included the impact of a noncash -- of noncash impairment charges totaling $125 million, the bulk of which is associated with our recent determination not to proceed with the development of the Pier 400 project in Los Angeles. Harry will provide some additional comments on the background for our decision during his portion of the call.

Highlights of PAA's third quarter adjusted performance are reflected on Slide 3. A detailed reconciliation between reported results and adjusted results is included in the appendix. As illustrated in the middle graph, PAA continues to generate strong distribution coverage as total coverage in the third quarter of 2012 was 145%. As shown in the top panel in Slide 4, these third result -- third quarter results marked the 43rd consecutive quarter that PAA has delivered results in line with or above guidance.

I want to also note that early last month, PAA completed a 2-for-1 unit split and subsequently declared a 9% year-over-year increase in our annualized run rate distribution to $2.17 per common unit. As shown in the bottom panel of Slide 4, PAA has increased its distribution in each of the last 13 quarters and in 32 of the last 34 quarters. Over nearly a 12-year period, PAA has grown its distribution at a compound annual growth rate of approximately 7.5%.

Yesterday evening, we furnished updated financial and operating guidance for the full year of 2012, increasing adjusted EBITDA guidance by $137 million. This represents an approximate 7% increase over the full year guidance provided on August 6, and a 22% increase over the full year guidance we provided at the beginning of the year. Clearly, PAA is executing well in this environment, and we are on track to meet or exceed our goals for 2012.

As shown on Slide 5, yesterday evening, we also furnished preliminary guidance for 2013, targeting a midpoint for adjusted EBITDA of $1.925 billion. Although the midpoint of this preliminary guidance reflects an approximate 5% decrease in year-to-year performance for total adjusted EBITDA, it is important to mention that it does not assume the continuation of favorable market conditions beyond the first quarter of 2013. Importantly, our preliminary 2013 guidance reflects continued and meaningful improvement in PAA's baseline performance, with 2013 adjusted EBITDA forecast to increase 17% over the 2012 guidance provided in February 2012.

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