Plains All American Pipeline refines targeted debt ratio, completes financing transactions

By Jennifer Lanning Drey

Savannah, Ga., Feb. 10 - Plains All American Pipeline, LP has refined its financial growth strategies so that its credit metrics now reflect a debt to EBITDA ratio that will average within an approximate target range of 3.5 times to 4.0 times, chief financial officer Al Swanson said Thursday during the company's fourth-quarter and year-end earnings conference call.

Plains previously targeted a ratio of 3.5 times based on current debt and forward EBITDA, he said.

The modification was made in recognition of both an upward shift in acquisition multiples and longer lead times for realization of synergies and commencement of cash flow from expansion projects, Swanson said.

Plains also increased its target to fund at least 55% of growth capital with equity or retained cash flow. The previous target was 50%.

For 2010, Plains' adjusted long-term debt to adjusted EBTIDA ratio was 3.8 times. The adjusted EBTIDA to interest coverage ratio was 5 times, the CFO reported.

Excluding $466 million of notes used to fund inventory, the company's adjusted long-term debt balance was $4.2 billion at Dec. 31.

Plains ended 2010 with pro forma committed liquidity of $1.4 billion, which included $140 million under the PAA Natural Gas Storage revolver as well as the full $500 million of available liquidity under a new revolving credit facility the company entered into in January.

The company reported adjusted EBTIDA of $1.11 billion for 2010 versus adjusted EBTIDA of $1.02 billion in 2009.

Recent financings

Since the close of the third quarter, Plains has been busy with a series of financing activities, Swanson also noted during the call.

Specifically, in mid-November, Plains completed a 4.8 million common unit offering for net proceeds of $296 million.

Additionally, in January, the company entered into a $500 million revolving credit facility as well as completed a $600 million senior note offering for net proceeds of $592 million.

Of the $900 million of cash proceeds from the equity and senior note offering, $230 million was used in connection with Plains' acquisition of Nexen's Bakken gathering and transportation assets.

Additionally, $222 million went to redeem Plains' $200 million of 7 ¾% senior notes due in 2012, and $430 million was used to fund Plains' obligations to PAA Natural Gas Storage in connection with its acquisition of the Southern Pines Energy Center.

The remaining cash proceeds and the flexibility provided by the $500 million revolving credit facility will be used to maintain solid liquidity as the company executes its 2011 expansion capital program and pursues acquisitions, Swanson said.

Capital program increased

Plains has established a $550 million expansion capital program for 2011, representing a $195 million increase over the 2010 capital program, Harry Pefanis, its chief operating officer, said during Thursday's call.

"Overall, we believe we are well positioned to generate growth from a combination of organic expansion opportunities as well as strategic acquisitions," Pefanis said.

Plains completed six acquisitions in 2010 for aggregate consideration of $410 million.

The company reported net income attributable to Plains of $142 million for the fourth quarter versus net income attributable to Plains of $110 million for the fourth quarter of 2009.

Plains is a petroleum and natural gas company is based in Houston.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.