Plains All American Pipeline' CEO Discusses Q2 2012 Results - Earnings Call Transcript

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

Q2 2012 Earnings Call

August 7, 2012 11:00 AM ET

Executives

Roy Lamoreaux – Director, IR

Greg Armstrong – Chairman and CEO

Harry Pefanis – President and COO

Dean Liollio – President, PNG

Al Swanson – EVP and CFO

Analysts

Darren Horowitz – Raymond James

Brian Zarahn – Barclays

Ted Durbin – Goldman Sachs

Michael Blum – Wells Fargo

Ross Payne – Wells Fargo

Selman Akyol – Stifel Nicolaus

Presentation

Operator

Ladies and gentlemen, thank you for standing by and welcome to the PAA and PNG Second Quarter Results Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will be given at that time. (Operator Instructions) And also as a reminder, today’s teleconference is being recorded.

At this time, I will turn the conference call over to your host, Director of Investor Relations, Mr. Roy Lamoreaux. Please go ahead, sir.

Roy Lamoreaux

Good morning and welcome to the Plains All American Pipeline and PAA Natural Gas Storage’s second quarter of 2012 results conference call. The slide presentation for today’s call is available on the conference call tab of the Investor Relations section of our website at paalp.com and pnglp.com. I would mention that throughout the call, we will refer to the companies 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 and all the incentive distribution rights and approximately 62% of the limited partnership in PNG, which accordingly is consolidated into PAA’s results. In addition to reviewing recent results, we’ll provide forward-looking comments on the Partnership’s outlook for the future. In order to avail ourselves of Safe Harbor precepts that encourage companies to provide this type of information, we direct you to the risks and warnings set forth in the Partnership’s 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 reconciliation sections of our website 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 Partnership’s 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 Armstrong

Thanks, Roy. Good morning and welcome to everyone. Continuing a multi-quarter trend, PAA delivered strong second quarter results underpinned by solid fundamental performance and enhanced by favorable market conditions.

Yesterday, after market close, Plains All American announced second quarter adjusted EBITDA of $522 million. These results exceeded the midpoint of our guidance range by $62 million or 13% and were $42 million above the high-end of our guidance range. These results are also consistent with the updated estimate of expected second quarter performance that we provided in a press release issued on May 30 despite the impact of an $11 million charge associated with the Rangeland pipeline release we experienced later in June.

Current year results compared very favorably to last year’s second quarter as adjusted EBITDA, adjusted net income and adjusted net income per diluted unit for the second quarter of 2012 increased 43%, 53% and 46% respectively. Highlights of PAA’s second quarter performance are reflected on slide 3, which all I will – also illustrates that PAA’s distribution for the second quarter of 2012 was approximately 165%.

PAA’s second quarter results were driven by solid performance in all three segments with the Supply and Logistics segment being the largest contributor to over-performance. These second quarter results mark the 42nd consecutive quarter that PAA has delivered results in line with or above guidance.

In July, PAA declared an 8.4% year-over-year increase in our annualized run rate distribution to $4.26 per common unit. As shown on slide 4, PAA has increased its distribution in each of the last 12 quarters and in 31 of the last 33 quarters. Over the last 11.5 years, PAA has grown its distribution at a compound annual growth rate of approximately 7.5%.

Yesterday evening, we furnished financial and operating guidance for the third quarter and the balance of the year, increasing the third – increasing the midpoint of our full year 2012 adjusted EBITDA guidance by $80 million. This represents an approximate 4% increase over the full year guidance provided on May 7, 2012 and a 14% increase over the full year guidance we provided at the beginning of the year. PAA is executing well in this environment and we are on track to meet or exceed our 2012 goals.

Additionally, yesterday, we announced several new capital projects or expansions of existing projects that we expect to implement over the next 12 to 24 months and are expected to yield attractive financial returns. During the remainder of today’s call, we will discuss our segment performance relative to guidance, our expansion capital program, our acquisition integration activities and our financial position. We will also address the drivers and major assumptions supporting our financial and operating guidance for the third quarter of 2012. We will address similar information for PNG, and at the end of the call, I will provide a recap as well as some comments regarding our outlook for the future.

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