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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) - May 6, 2002
Plains All American Pipeline, L.P.
(Name of Registrant as specified in its charter)
DELAWARE 0-9808 76-0582150
(State or other jurisdiction (Commission File Number) (I.R.S. Employer
of incorporation or organization) Identification No.)
333 Clay Street
Houston, Texas 77002
(713) 646-4100
(Address, including zip code, and telephone number,
including area code, of Registrant's principal executive offices)
N/A
(Former name or former address, if changed since last report.)
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Item 7. Financial Statements and Exhibits
(c) Exhibit 99.1 - Press Release dated May 6, 2002.
Item 9. Regulation FD Disclosure
In accordance with General Instruction B.2. of Form 8K, the following
information (including Exhibit 99.1) shall not be deemed "filed" for purposes of
Section 18 of the Securities Act of 1934, as amended, nor shall it be deemed
incorporated by reference in any filing under the Securities Act of 1933, as
amended, except as shall be expressly set forth by specific reference in such a
filing.
Acquisition of Shell West Texas Pipeline Business Unit
Plains All American Pipeline, L.P. (the "Partnership") announced today that
it has reached a definitive agreement to acquire certain crude oil pipeline
assets from Shell Pipeline Company LP (f/k/a Equilon Pipeline Company LLC) and
Equilon Enterprises LLC (d.b.a. Shell Oil Products US)(collectively, "Shell").
The transaction is subject to the performance of customary due diligence and
receipt of regulatory approvals and is expected to close within the next 90
days.
Primary assets included in the transaction are interests in: (i) the Basin
Pipeline System, (ii) the Rancho Pipeline System and (iii) the Permian Basin
Gathering System. Total consideration for the assets is approximately $315
million.
Historical operating and financial results are in the process of being
audited, but unaudited information preliminarily indicates that the package of
assets the Partnership is acquiring generated approximately $30 million of
earnings before interest, depreciation, taxes and amortization ("EBITDA") during
2001 (estimated by the Partnership using unaudited historical data conformed to
the Partnership's measurement of EBITDA from its existing assets). Allowing for
a 12 to 18 month period to phase in the expense-related synergies, implement and
commercialize operations and shut-down or otherwise optimize certain marginal
assets included in the package, the Partnership anticipates that the projected
EBITDA run rate will increase over time such that the EBITDA run rate for the
third year under the Partnership's ownership is expected to be approximately
$37.5 million.
Terms of the Agreement
Under the terms of the agreement, the Partnership will acquire from Shell
for approximately $315 million cash (i) 100% of the outstanding partnership
interests in Basin Pipeline Holdings LP, (ii) 100% of the outstanding
partnership interests in Rancho Pipeline Holdings LP, (iii) the Permian Basin
Gathering System and associated facilities and (iv) other small gathering
assets.
Description of Assets to be Acquired
Basin Pipeline System. The Basin Pipeline System is a 514-mile mainline
crude oil transmission system with a capacity of approximately 290,000 barrels
per day into Cushing. During 2001, system throughput (as measured by deliveries
at Cushing) averaged approximately 216,000 barrels per day. The size of the pipe
ranges from 20 to 24 inches in diameter. The Basin system consists of three
primary movements of crude oil: (1) barrels are shipped from Jal, New Mexico to
facilities in Wink and Midland, Texas, where they are exchanged and/or further
shipped to refining centers; (2) barrels are shipped by refiners to the
Mid-Continent region on the Midland to Wichita Falls segment, with some of the
barrels delivered to third-party pipelines; and (3) foreign and Gulf of Mexico
barrels are delivered into Basin at Wichita Falls and these volumes, along with
volumes that originate out of West Texas and New Mexico, are shipped to Cushing
for further distribution to Mid-Continent or Midwest refineries. The Basin
system also includes approximately 5.1 million barrels of crude oil storage
capacity. Shell's ownership interest in the system ranges from approximately 78%
to 89% depending upon the segment.
Rancho Pipeline System. The Rancho Pipeline System is a 24-inch, 458-mile
mainline crude oil transmission system with a capacity of approximately 150,000
barrels per day. During 2001, system throughput averaged approximately 98,000
barrels per day. The Rancho system transports crude oil from McCamey, Texas, to
the Houston Ship Channel where it connects to the Houston refining complex. The
Rancho system includes approximately 1.1 million barrels of crude oil storage
capacity. Shell's ownership interest in the system ranges from approximately 45%
to 58% depending upon the segment.
Permian Basin Gathering System. The Permian Basin Gathering System is
comprised of a 100% ownership interest in approximately 17 gathering systems and
nine trunk lines with connecting injection stations and storage facilities. The
Permian Basin system gathered approximately 85,000 barrels per day in 2001. The
Permian Basin system includes approximately 3.0 million barrels of crude oil
storage capacity.
Other. The LeFors Gathering System is located in the Texas Panhandle and
consists of approximately 68 miles of active trunk and gathering pipelines. In
addition, there are approximately 800,000 barrels of tankage at stations in West
Texas and New Mexico that are connected to, but not included in, the pipeline
systems discussed above.
Financing
The Partnership presently intends to fund the transaction using existing
availability under the Partnership's revolving credit facility. The Partnership
intends to closely monitor both the equity and debt markets for desirable
re-financing alternatives.
Impact
The following chart illustrates the quantitative impact of the assets to be
acquired on selected operating and financial metrics of PAA:
Pre- Post- Change
Equilon Equilon --------------
Metric Transaction (1) Transaction Amount %
------ --------------- ----------- ------ -----
Operational
Pipeline Transportation
Volumes (bpd) 477,400 952,400 475,000 99%
Miles of Pipe Owned 3,604 5,571 1,967 55%
Tankage Capacity (MBbls.) 13,648(2) 23,573 9,925 73%
Physical Barrels Handled (bpd) 1,005,900 1,480,900 475,000 47%
Financial
Total EBITDA (2002E) ($M) $124,500 $157,700 $33,200(3) 27%
Notes:
(1) Source: Partnership 2001 10-K, 8-K guidance for 2002 filed on March 6,
2002, and other Partnership data.
(2) Includes the Partnership's Phase II and III construction projects at the
Cushing Terminal, which will add a total of 2.2 million barrels of storage
capacity.
(3) 2002 amount represents PAA's estimate for the Shell assets to be acquired,
incorporating PAA's estimate of annualized operational and administrative
cost savings relative to 2001 levels.
Press Release
The Partnership has issued a press release with respect to the transaction,
which is attached hereto on Exhibit 99.1.
Forward-Looking Statements And Associated Risks
All statements, other than statements of historical fact, included in this
report are forward-looking statements, including, but not limited to, statements
identified by the words "anticipate," "believe," "estimate," "expect," "plan,"
"intend" and "forecast" and similar expressions and statements regarding our
business strategy, plans and objectives of our management for future operations.
These statements reflect our current views with respect to future events, based
on what we believe are reasonable assumptions. Certain factors could cause
actual results to differ materially from results anticipated in the
forward-looking statements. These factors include, but are not limited to:
.. Abrupt or severe production declines or production interruptions in outer
continental shelf crude oil production located offshore California and
transported on the All American Pipeline;
.. successful consummation of anticipated acquisitions;
.. successful integration and future performance of acquired assets;
.. the availability of adequate supplies of and demand for crude oil in the
areas in which we operate;
.. the effects of competition;
.. the success of our risk management activities;
.. the availability (or lack thereof) of acquisition or combination
opportunities;
.. our ability to receive credit on satisfactory terms;
.. shortages or cost increases of power supplies, materials or labor;
.. weather interference with business operations or project construction
.. the impact of current and future laws and governmental regulations;
.. environmental liabilities that are not covered by an indemnity or
insurance;
.. fluctuations in the debt and equity markets; and
.. general economic, market or business conditions.
The Partnership undertakes no obligation to publicly update or revise any
forward-looking statements. Further information on risks and uncertainties is
available in the Partnership's filings with the Securities and Exchange
Commission ("SEC"), which are incorporated by reference herein.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
PLAINS ALL AMERICAN PIPELINE, L.P.
Date: May 6, 2002 By: Plains AAP, L.P., its general partner
By: Plains All American GP LLC,
its general partner
By: /s/ Phil Kramer
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Name: Phil Kramer
Title: Executive Vice President and Chief
Financial Officer
EXHIBIT INDEX
Exhibit
Number Description
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99.1 Press Release dated May 6, 2002