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Plains All American Pipeline, L.P. and Plains GP Holdings Report Third-Quarter 2018 Results

November 6, 20182:29 PM Business Wire

HOUSTON–(BUSINESS WIRE)–Plains All American Pipeline, L.P. (NYSE: PAA) and Plains GP Holdings (NYSE: PAGP) today reported third-quarter 2018 results.

Third-Quarter Highlights

  • Delivered 3Q18 financial and operating results ahead of expectations
  • Increased 2018 Adjusted EBITDA guidance
  • Announced and closed sale of 30% interest in BridgeTex for net proceeds of $862 million, resulting in a gain of $210 million
  • Continued progress on leverage reduction plan with visibility to complete during 1H19

“We are pleased to report solid third-quarter results and increased guidance for the full year that reflects continued execution of our business plan and constructive industry fundamentals,” stated Willie Chiang, Chief Executive Officer of Plains All American Pipeline. “We are on track with our deleveraging objectives, our capital program and other commercial and operating initiatives and believe that we are well positioned for the future.”

Plains All American Pipeline, L.P.

Summary Financial Information (unaudited)

(in millions, except per unit data)

Three Months Ended
September 30,
% Nine Months Ended
September 30,
%
GAAP Results 2018 2017 Change 2018 2017 Change
Net income attributable to PAA $ 710 $ 33 ** $ 1,099 $ 665 65 %
Diluted net income/(loss) per common unit $ 0.87 $ (0.01 ) ** $ 1.30 $ 0.76 71 %
Diluted weighted average common units outstanding 799 725 10 % 728 715 2 %
Distribution per common unit declared for the period $ 0.30 $ 0.30 — %
Three Months Ended
September 30,
% Nine Months Ended
September 30,
%
Non-GAAP Results (1) 2018 2017 Change 2018 2017 Change
Adjusted net income attributable to PAA $ 361 $ 195 85 % $ 995 $ 609 63 %
Diluted adjusted net income per common unit $ 0.43 $ 0.21 105 % $ 1.16 $ 0.69 68 %
Adjusted EBITDA $ 636 $ 489 30 % $ 1,735 $ 1,452 19 %
Implied DCF per common unit $ 0.55 $ 0.41 34 % $ 1.52 $ 1.25 22 %

____________________

**

Indicates that variance as a percentage is not meaningful.

(1)

See the section of this release entitled “Non-GAAP Financial Measures and Selected Items Impacting Comparability” and the tables attached hereto for information regarding certain selected items that PAA believes impact comparability of financial results between reporting periods, as well as for information regarding non-GAAP financial measures (such as Adjusted EBITDA) and their reconciliation to the most directly comparable measures as reported in accordance with GAAP.

Segment Adjusted EBITDA for the third quarter and first nine months of 2018 and 2017 is presented below:

Summary of Selected Financial Data by Segment (unaudited)

(in millions)

Segment Adjusted EBITDA
Transportation Facilities

Supply and
Logistics

Three Months Ended September 30, 2018 $ 388 $ 173 $ 75
Three Months Ended September 30, 2017 $ 363 $ 182 $ (56 )
Percentage change in Segment Adjusted EBITDA versus 2017 period 7 % (5 )% 234 %
Percentage change in Segment Adjusted EBITDA versus 2017 period further adjusted for impact of divested assets 12 % (1 )% N/A
Segment Adjusted EBITDA
Transportation Facilities

Supply and
Logistics

Nine Months Ended September 30, 2018 $ 1,083 $ 530 $ 120
Nine Months Ended September 30, 2017 $ 933 $ 550 $ (32 )
Percentage change in Segment Adjusted EBITDA versus 2017 period 16 % (4 )% 475 %
Percentage change in Segment Adjusted EBITDA versus 2017 period further adjusted for impact of divested assets 21 % 3 % N/A

Third-quarter 2018 Transportation Segment Adjusted EBITDA increased by 7% over comparable 2017 results. This increase was primarily driven by increased volume on our Permian Basin systems. Third-quarter 2018 results also benefited from the Diamond pipeline being placed into service in late 2017. These favorable results were partially offset by the impact of asset sales in the Rocky Mountain and Central regions.

Third-quarter 2018 Facilities Segment Adjusted EBITDA decreased by 5% versus comparable 2017 results, primarily due to the impact of asset sales. This was partially offset by increased revenue from capacity expansions and increased throughput at our Cushing terminal, as well as increased activity at our St. James terminal and certain crude oil rail terminals.

Third-quarter 2018 Supply and Logistics Segment Adjusted EBITDA increased versus comparable 2017 results due to favorable regional crude oil differentials, higher lease gathering margins and volumes, and a benefit from an audit recovery in our NGL business.

2018 Full-Year Guidance

The table below presents our full-year 2018 financial and operating guidance:

Financial and Operating Guidance (unaudited)

(in millions, except volumes, per unit and per barrel data)

Twelve Months Ended December 31,
2016 2017 2018 (G)
+ / –
Segment Adjusted EBITDA
Transportation $ 1,141 $ 1,287 $ 1,510
Facilities 667 734 690
Fee-Based $ 1,808 $ 2,021 $ 2,200
Supply and Logistics 359 60 350

Adjusted other income/(expense), net

2 1 —
Adjusted EBITDA (1) $ 2,169 $ 2,082 $ 2,550
Interest expense, net (2) (451 ) (483 ) (420 )
Maintenance capital (186 ) (247 ) (240 )
Current income tax expense (85 ) (28 ) (55 )
Other (33 ) (12 ) 5
Implied DCF (1) $ 1,414 $ 1,312 $ 1,840
Preferred unit distributions paid (3) — (5 ) (160 )
General partner cash distributions (565 ) — —
Implied DCF Available to Common Unitholders $ 849 $ 1,307 $ 1,680
Implied DCF per Common Unit (1) $ 1.83 $ 1.82 $ 2.31
Implied DCF per Common Unit and Common Equivalent Unit (1) $ 1.63 $ 1.67 $ 2.25
Distributions per Common Unit (4) $ 2.65 $ 1.95 $ 1.20
Common Unit Distribution Coverage Ratio

0.87

x

0.94

x

1.93

x

Operating Data
Transportation
Average daily volumes (MBbls/d) 4,637 5,186 5,925
Segment Adjusted EBITDA per barrel $ 0.67 $ 0.68 $ 0.70
Facilities
Average capacity (MMBbls/Mo) 127 130 125
Segment Adjusted EBITDA per barrel $ 0.44 $ 0.47 $ 0.46
Supply and Logistics
Average daily volumes (MBbls/d) 1,153 1,219 1,275
Segment Adjusted EBITDA per barrel $ 0.85 $ 0.13 $ 0.75
Expansion Capital $ 1,405 $ 1,135 $ 1,950
Fourth-Quarter Adjusted EBITDA as Percentage of Full Year 28 % 30 % 32 %

____________________

(G)

2018 Guidance forecasts are intended to be + / – amounts.

(1)

See the section of this release entitled “Non-GAAP Financial Measures and Selected Items Impacting Comparability” and the Non-GAAP Reconciliation tables attached hereto for information regarding non-GAAP financial measures and, for the historical 2016 and 2017 periods, their reconciliation to the most directly comparable measures as reported in accordance with GAAP. We do not provide a reconciliation of non-GAAP financial measures to the equivalent GAAP financial measures on a forward-looking basis as it is impractical to forecast certain items that we have defined as “Selected Items Impacting Comparability” without unreasonable effort, due to the uncertainty and inherent difficulty of predicting the occurrence and financial impact of and the periods in which such items may be recognized. Thus, a reconciliation of non-GAAP financial measures to the equivalent GAAP financial measures could result in disclosure that could be imprecise or potentially misleading.

(2)

Excludes certain non-cash items impacting interest expense such as amortization of debt issuance costs and terminated interest rate swaps.

(3)

Cash distributions paid to our preferred unitholders during the year presented. The distribution requirement of our Series A preferred units was paid-in-kind for all 2016 and 2017 quarterly distributions and for the February 2018 quarterly distribution. Distributions on our Series A preferred units must be paid in cash beginning with the May 2018 quarterly distribution. The distribution requirement of our Series B preferred units, which were issued in October 2017, is payable semi-annually in arrears on May 15 and November 15. A pro-rated initial distribution on the Series B preferred units was paid on November 15, 2017.

(4)

Cash distributions per common unit paid or to be paid during the periods presented.

Plains GP Holdings

PAGP owns an indirect non-economic controlling interest in PAA’s general partner and an indirect limited partner interest in PAA. As the control entity of PAA, PAGP consolidates PAA’s results into its financial statements, which is reflected in the condensed consolidating balance sheet and income statement tables included at the end of this release. Information regarding PAGP’s distributions is reflected below:

Q3 2018 Q2 2018 Q3 2017
Distribution per Class A share declared for the period $ 0.30 $ 0.30 $ 0.30
Q3 2018 distribution percentage change from prior periods — % — %

Conference Call

PAA and PAGP will hold a joint conference call at 4:00 p.m. CT on Tuesday, November 6, 2018 to discuss the following items:

  1. PAA’s third-quarter 2018 performance;
  2. Financial and operating guidance for the full year of 2018 and preliminary 2019;
  3. Capitalization and liquidity; and
  4. PAA and PAGP’s outlook for the future.

Conference Call Webcast Instructions

To access the internet webcast please go to https://event.webcasts.com/starthere.jsp?ei=1213672&tp_key=802fe3c91a

Alternatively, the webcast can be accessed at www.plainsallamerican.com, under the Investor Relations section of the website (Navigate to: Investor Relations / either “PAA” or “PAGP” / News & Events / Quarterly Earnings). Following the live webcast, an audio replay in MP3 format will be available on the website within two hours after the end of the call and will be accessible for a period of 365 days. A transcript will also be available after the call at the above referenced website.

Non-GAAP Financial Measures and Selected Items Impacting Comparability

To supplement our financial information presented in accordance with GAAP, management uses additional measures known as “non-GAAP financial measures” in its evaluation of past performance and prospects for the future. The primary additional measures used by management are earnings before interest, taxes, depreciation and amortization (including our proportionate share of depreciation and amortization and gains and losses on significant asset sales of unconsolidated entities), and gains on sales of investments in unconsolidated entities, adjusted for certain selected items impacting comparability (“Adjusted EBITDA”) and implied distributable cash flow (“DCF”).

Management believes that the presentation of such additional financial measures provides useful information to investors regarding our performance and results of operations because these measures, when used to supplement related GAAP financial measures, (i) provide additional information about our core operating performance and ability to fund distributions to our unitholders through cash generated by our operations and (ii) provide investors with the same financial analytical framework upon which management bases financial, operational, compensation and planning/budgeting decisions. We also present these and additional non-GAAP financial measures, including adjusted net income attributable to PAA and basic and diluted adjusted net income per common unit, as they are measures that investors, rating agencies and debt holders have indicated are useful in assessing us and our results of operations. These non-GAAP measures may exclude, for example, (i) charges for obligations that are expected to be settled with the issuance of equity instruments, (ii) gains or losses on derivative instruments that are related to underlying activities in another period (or the reversal of such adjustments from a prior period), the mark-to-market related to our Preferred Distribution Rate Reset Option, gains and losses on derivatives that are related to investing activities (such as the purchase of linefill) and inventory valuation adjustments, as applicable, (iii) long-term inventory costing adjustments, (iv) items that are not indicative of our core operating results and business outlook and/or (v) other items that we believe should be excluded in understanding our core operating performance. These measures may further be adjusted to include amounts related to deficiencies associated with minimum volume commitments whereby we have billed the counterparties for their deficiency obligation and such amounts are recognized as deferred revenue in “Other current liabilities” on our Condensed Consolidated Financial Statements. Such amounts are presented net of applicable amounts subsequently recognized into revenue. Furthermore, the calculation of these measures contemplates tax effects as a separate reconciling item, where applicable. We have defined all such items as “selected items impacting comparability.” Due to the nature of the selected items, certain selected items impacting comparability may impact certain non-GAAP financial measures, referred to as adjusted results, but not impact other non-GAAP financial measures. We do not necessarily consider all of our selected items impacting comparability to be non-recurring, infrequent or unusual, but we believe that an understanding of these selected items impacting comparability is material to the evaluation of our operating results and prospects.

Although we present selected items impacting comparability that management considers in evaluating our performance, you should also be aware that the items presented do not represent all items that affect comparability between the periods presented. Variations in our operating results are also caused by changes in volumes, prices, exchange rates, mechanical interruptions, acquisitions, divestitures, expansion projects and numerous other factors. These types of variations may not be separately identified in this release, but will be discussed, as applicable, in management’s discussion and analysis of operating results in our Quarterly Report on Form 10-Q.

Our definition and calculation of certain non-GAAP financial measures may not be comparable to similarly-titled measures of other companies. Adjusted EBITDA, Implied DCF and other non-GAAP financial performance measures are reconciled to Net Income (the most directly comparable measure as reported in accordance with GAAP) for the historical periods presented in the tables attached to this release, and should be viewed in addition to, and not in lieu of, our Condensed Consolidated Financial Statements and notes thereto. In addition, we encourage you to visit our website at www.plainsallamerican.com (in particular the section under “Financial Information” entitled “Non-GAAP Reconciliations” within the Investor Relations tab), which presents a reconciliation of our commonly used non-GAAP and supplemental financial measures.

Forward-Looking Statements

Except for the historical information contained herein, the matters discussed in this release consist of forward-looking statements that involve certain risks and uncertainties that could cause actual results or outcomes to differ materially from results or outcomes anticipated in the forward-looking statements. These risks and uncertainties include, among other things, declines in the actual or expected volume of crude oil and NGL shipped, processed, purchased, stored, fractionated and/or gathered at or through the use of our assets, whether due to declines in production from existing oil and gas reserves, reduced demand, failure to develop or slowdown in the development of additional oil and gas reserves, whether from reduced cash flow to fund drilling or the inability to access capital, or other factors; the effects of competition; market distortions caused by over-commitments to infrastructure projects, which impacts volumes, margins, returns and overall earnings; unanticipated changes in crude oil and NGL market structure, grade differentials and volatility (or lack thereof); environmental liabilities or events that are not covered by an indemnity, insurance or existing reserves; fluctuations in refinery capacity in areas supplied by our mainlines and other factors affecting demand for various grades of crude oil, NGL and natural gas and resulting changes in pricing conditions or transportation throughput requirements; maintenance of our credit rating and ability to receive open credit from our suppliers and trade counterparties; the occurrence of a natural disaster, catastrophe, terrorist attack (including eco-terrorist attacks) or other event, including attacks on our electronic and computer systems; failure to implement or capitalize, or delays in implementing or capitalizing, on expansion projects, whether due to permitting delays, permitting withdrawals or other factors; shortages or cost increases of supplies, materials or labor; the impact of current and future laws, rulings, governmental regulations, accounting standards and statements, and related interpretations; the failure to consummate, or significant delay in consummating, sales of assets or interests as a part of our strategic divestiture program; tightened capital markets or other factors that increase our cost of capital or limit our ability to obtain debt or equity financing on satisfactory terms to fund additional acquisitions, expansion projects, working capital requirements and the repayment or refinancing of indebtedness; the availability of, and our ability to consummate, acquisition or combination opportunities; the successful integration and future performance of acquired assets or businesses and the risks associated with operating in lines of business that are distinct and separate from our historical operations; the currency exchange rate of the Canadian dollar; continued creditworthiness of, and performance by, our counterparties, including financial institutions and trading companies with which we do business; inability to recognize current revenue attributable to deficiency payments received from customers who fail to ship or move more than minimum contracted volumes until the related credits expire or are used; non-utilization of our assets and facilities; increased costs, or lack of availability, of insurance; weather interference with business operations or project construction, including the impact of extreme weather events or conditions; the effectiveness of our risk management activities; fluctuations in the debt and equity markets, including the price of our units at the time of vesting under our long-term incentive plans; risks related to the development and operation of our assets, including our ability to satisfy our contractual obligations to our customers; factors affecting demand for natural gas and natural gas storage services and rates; general economic, market or business conditions and the amplification of other risks caused by volatile financial markets, capital constraints and pervasive liquidity concerns; and other factors and uncertainties inherent in the transportation, storage, terminalling and marketing of crude oil, as well as in the storage of natural gas and the processing, transportation, fractionation, storage and marketing of natural gas liquids as discussed in the Partnerships’ filings with the Securities and Exchange Commission.

Plains All American Pipeline, L.P. is a publicly traded master limited partnership that owns and operates midstream energy infrastructure and provides logistics services for crude oil, NGLs and natural gas. PAA owns an extensive network of pipeline transportation, terminalling, storage and gathering assets in key crude oil and NGL producing basins and transportation corridors and at major market hubs in the United States and Canada. On average, PAA handles more than 5 million barrels per day of crude oil and NGL in its Transportation segment. PAA is headquartered in Houston, Texas. More information is available at www.plainsallamerican.com.

Plains GP Holdings is a publicly traded entity that owns an indirect, non-economic controlling general partner interest in PAA and an indirect limited partner interest in PAA, one of the largest energy infrastructure and logistics companies in North America. PAGP is headquartered in Houston, Texas. More information is available at www.plainsallamerican.com.

PLAINS ALL AMERICAN PIPELINE, L.P. AND SUBSIDIARIES

FINANCIAL SUMMARY (unaudited)

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in millions, except per unit data)

Three Months Ended
September 30,
Nine Months Ended
September 30,
2018 2017 2018 2017
REVENUES $ 8,792 $ 5,873 $ 25,269 $ 18,618
COSTS AND EXPENSES
Purchases and related costs 7,768 5,327 22,838 16,239
Field operating costs 326 283 931 876
General and administrative expenses 74 68 232 210
Depreciation and amortization 131 151 306 401
Total costs and expenses 8,299 5,829 24,307 17,726
OPERATING INCOME 493 44 962 892
OTHER INCOME/(EXPENSE)
Equity earnings in unconsolidated entities 110 80 281 201
Gain on sale of investment in unconsolidated entities 210 — 210 —
Interest expense, net (110 ) (134 ) (327 ) (390 )
Other income/(expense), net (3 ) (1 ) 8 (6 )
INCOME/(LOSS) BEFORE TAX 700 (11 ) 1,134 697
Current income tax (expense)/benefit (14 ) 1 (34 ) (9 )
Deferred income tax (expense)/benefit 24 44 (1 ) (21 )
NET INCOME 710 34 1,099 667
Net income attributable to noncontrolling interests — (1 ) — (2 )
NET INCOME ATTRIBUTABLE TO PAA $ 710 $ 33 $ 1,099 $ 665
NET INCOME/(LOSS) PER COMMON UNIT:
Net income/(loss) allocated to common unitholders — Basic $ 658 $ (8 ) $ 946 $ 547
Basic weighted average common units outstanding 726 725 726 714
Basic net income/(loss) per common unit $ 0.91 $ (0.01 ) $ 1.30 $ 0.77
Net income/(loss) allocated to common unitholders — Diluted $ 697 $ (8 ) $ 947 $ 547
Diluted weighted average common units outstanding 799 725 728 715
Diluted net income/(loss) per common unit $ 0.87 $ (0.01 ) $ 1.30 $ 0.76

NON-GAAP ADJUSTED RESULTS

(in millions, except per unit data)

Three Months Ended
September 30,
Nine Months Ended
September 30,
2018 2017 2018 2017
Adjusted net income attributable to PAA $ 361 $ 195 $ 995 $ 609
Diluted adjusted net income per common unit $ 0.43 $ 0.21 $ 1.16 $ 0.69
Adjusted EBITDA $ 636 $ 489 $ 1,735 $ 1,452

PLAINS ALL AMERICAN PIPELINE, L.P. AND SUBSIDIARIES

FINANCIAL SUMMARY (unaudited)

CONDENSED CONSOLIDATED BALANCE SHEET DATA

(in millions)

September 30,
2018
December 31,
2017
ASSETS
Current assets $ 4,127 $ 4,000
Property and equipment, net 14,677 14,089
Goodwill 2,540 2,566
Investments in unconsolidated entities 2,539 2,756
Linefill and base gas 914 872
Long-term inventory 179 164
Other long-term assets, net 951 904
Total assets $ 25,927 $ 25,351
LIABILITIES AND PARTNERS’ CAPITAL
Current liabilities $ 4,656 $ 4,531
Senior notes, net 8,939 8,933
Other long-term debt, net 201 250
Other long-term liabilities and deferred credits 781 679
Total liabilities 14,577 14,393
Partners’ capital 11,350 10,958
Total liabilities and partners’ capital $ 25,927 $ 25,351

DEBT CAPITALIZATION RATIOS

(in millions)

September 30,
2018
December 31,
2017
Short-term debt (1) $ 429 $ 737
Long-term debt 9,140 9,183
Total debt $ 9,569 $ 9,920
Long-term debt $ 9,140 $ 9,183
Partners’ capital 11,350 10,958
Total book capitalization $ 20,490 $ 20,141
Total book capitalization, including short-term debt $ 20,919 $ 20,878
Long-term debt-to-total book capitalization 45 % 46 %
Total debt-to-total book capitalization, including short-term debt 46 % 48 %

____________________

(1) Includes borrowings for cash margin deposits with our clearing brokers, which are associated with financial derivatives used for hedging purposes, and for short-term hedged inventory purchases.

Contacts

Plains All American Pipeline, L.P. and Plains GP Holdings
Roy Lamoreaux, 866-809-1291
Vice President, Investor Relations & Communications
or
Brett Magill, 866-809-1291
Director, Investor Relations

Read full story here

Permian Plains All American Pipeline

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