Contacts:
Phillip D. Kramer
Executive Vice President and CFO
713/646-4560 – 800/564-3036
Brad A. Thielemann
Manager, Special Projects
713/646-4222 – 800/564-3036
FOR IMMEDIATE RELEASE
PAA to Acquire Crude Oil Pipeline Systems
(Houston – May 24, 2006) Plains All American Pipeline, L.P. (NYSE: PAA) announced today that its subsidiary, Plains Pipeline L.P., has signed a definitive agreement to acquire interests in certain Gulf Coast crude oil pipeline systems from BP Oil Pipeline Company for approximately $133.5 million. The transaction is expected to close on June 30, 2006, subject to satisfaction of Hart-Scott-Rodino requirements and other customary closing conditions as well as the expiration of preferential purchase rights on certain of the assets.
The assets to be acquired consist of a 100% interest in the Bay Marchand-to-Ostrica-to-Alliance Pipeline ("BOA"), a 64.35% interest in a segment of the Clovelly-to-Meraux Pipeline ("CAM") and various interests in segments of the High Island Pipeline System ("HIPS.") BOA and CAM are the two primary suppliers of ConocoPhillips' Alliance refinery, which is located in Belle Chasse, Louisiana. Substantially all of the acquired capacity on these two systems is subject to long-term leases whereby the pipeline owner receives an annual service payment and reimbursement for the vast majority of the pipeline's direct costs, as well as an annual index-based escalator. HIPS is a network of offshore gathering pipeline systems that delivers crude oil to various points in or around Texas City, Texas. Total pipeline mileage for these three systems is approximately 320 miles.
"These quality assets will be an excellent addition to our existing crude oil operations in the Gulf Coast region," said Greg Armstrong, Chairman and CEO. "In addition, we expect the long-term contracts associated with these assets to provide stable, fee-based cash flow for many years to come." Armstrong stated that the multiple of purchase price to expected annual EBITDA from these assets is expected to be approximately 9.0x.
Plains All American Pipeline, L.P. is engaged in interstate and intrastate crude oil transportation and crude oil gathering, marketing, terminalling and storage, as well as the marketing and storage of liquefied petroleum gas and other petroleum products, in the
United States and Canada. Through its 50% ownership in PAA/Vulcan Gas Storage LLC, the Partnership is also engaged in the development and operation of natural gas storage facilities. The Partnership's common units are traded on the New York Stock Exchange under the symbol "PAA." The Partnership is headquartered in Houston, Texas.
Non-GAAP Financial Measures
In this release, the Partnership's disclosure of expected earnings before interest, taxes, depreciation and amortization ("EBITDA") associated with the assets to be acquired is not presented in accordance with generally accepted accounting principles. Net income and cash flow from operations are the most directly comparable GAAP measures to EBITDA. This release does not include a reconciliation of EBITDA to net income or cash flow from operations for forecasted periods because it is impracticable, in this situation, to do so. EBITDA is presented because the Partnership believes it provides additional information with respect to both the performance of its fundamental business activities as well as its ability to meet future debt service, capital expenditures and working capital requirements. The Partnership also believes that debt holders commonly use EBITDA to analyze Partnership performance.
Forward Looking Statements
Certain statements made herein are forward-looking statements under the Private Securities Litigation Reform Act of 1995. They include statements regarding the timing and expected benefits of the acquisition of pipeline systems, including the expected financial impact of associated long-term contracts. These statements are based on management's current expectations and estimates; actual results may differ materially due to certain risks and uncertainties. For example, the timing of the acquisition and the ability of the Partnership to achieve expected results may be affected by successful completion of the acquisition and integration of the acquired assets. Other risks and uncertainties that may affect actual results include refinery downtime, continued creditworthiness of, and performance by, our counterparties, unusual weather patterns, the effects of competition, the success of our risk management activities, commodity price fluctuations, regulatory changes, and other factors and uncertainties inherent in the Partnership's business as discussed in the Partnership's Annual Report on Form 10-K for the year ended December 31, 2005 as filed with the Securities and Exchange Commission.
END