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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
________________________________________________________________
FORM 10-Q
________________________________________________________________________________________________________________________________
☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2022
or
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number: 1-14569
________________________________________________________________
PLAINS ALL AMERICAN PIPELINE, L.P.
(Exact name of registrant as specified in its charter) | | | | | | | | |
Delaware | | 76-0582150 |
(State or other jurisdiction of incorporation or organization) | | (I.R.S. Employer Identification No.) |
333 Clay Street, Suite 1600
Houston, Texas 77002
(Address of principal executive offices) (Zip code)
(713) 646-4100
(Registrant’s telephone number, including area code)
________________________________________________________________
Securities registered pursuant to Section 12(b) of the Act: | | | | | | | | |
Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
Common Units | PAA | Nasdaq |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☑ Yes ☐ No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☑ Yes ☐ No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. | | | | | | | | | | | | | | |
Large accelerated filer | ☑ | | Accelerated filer | ☐ |
Non-accelerated filer | ☐ | | Smaller reporting company | ☐ |
| | | Emerging growth company | ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☑ No
As of April 29, 2022, there were 702,668,178 Common Units outstanding.
PLAINS ALL AMERICAN PIPELINE, L.P. AND SUBSIDIARIES
PART I. FINANCIAL INFORMATION
Item 1. UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
PLAINS ALL AMERICAN PIPELINE, L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in millions, except unit data) | | | | | | | | | | | |
| March 31, 2022 | | December 31, 2021 |
| (unaudited) |
ASSETS | | | |
| | | |
CURRENT ASSETS | | | |
Cash and cash equivalents | $ | 114 | | | $ | 449 | |
| | | |
Trade accounts receivable and other receivables, net | 7,136 | | | 4,705 | |
Inventory | 527 | | | 783 | |
Other current assets | 320 | | | 200 | |
Total current assets | 8,097 | | | 6,137 | |
| | | |
PROPERTY AND EQUIPMENT | 19,399 | | | 19,257 | |
Accumulated depreciation | (4,535) | | | (4,354) | |
Property and equipment, net | 14,864 | | | 14,903 | |
| | | |
OTHER ASSETS | | | |
Investments in unconsolidated entities | 3,807 | | | 3,805 | |
Intangible assets, net | 1,901 | | | 1,960 | |
Linefill | 919 | | | 907 | |
Long-term operating lease right-of-use assets, net | 387 | | | 393 | |
Long-term inventory | 374 | | | 253 | |
Other long-term assets, net | 293 | | | 251 | |
Total assets | $ | 30,642 | | | $ | 28,609 | |
| | | |
LIABILITIES AND PARTNERS’ CAPITAL | | | |
| | | |
CURRENT LIABILITIES | | | |
Trade accounts payable | $ | 6,867 | | | $ | 4,810 | |
Short-term debt | 900 | | | 822 | |
Other current liabilities | 803 | | | 600 | |
Total current liabilities | 8,570 | | | 6,232 | |
| | | |
LONG-TERM LIABILITIES | | | |
Senior notes, net | 7,931 | | | 8,329 | |
Other long-term debt, net | 55 | | | 69 | |
Long-term operating lease liabilities | 331 | | | 339 | |
Other long-term liabilities and deferred credits | 901 | | | 830 | |
Total long-term liabilities | 9,218 | | | 9,567 | |
| | | |
COMMITMENTS AND CONTINGENCIES (NOTE 10) | | | |
| | | |
PARTNERS’ CAPITAL | | | |
Series A preferred unitholders (71,090,468 and 71,090,468 units outstanding, respectively) | 1,505 | | | 1,505 | |
Series B preferred unitholders (800,000 and 800,000 units outstanding, respectively) | 787 | | | 787 | |
Common unitholders (702,668,178 and 704,991,540 units outstanding, respectively) | 7,751 | | | 7,680 | |
Total partners’ capital excluding noncontrolling interests | 10,043 | | | 9,972 | |
Noncontrolling interests | 2,811 | | | 2,838 | |
Total partners’ capital | 12,854 | | | 12,810 | |
Total liabilities and partners’ capital | $ | 30,642 | | | $ | 28,609 | |
The accompanying notes are an integral part of these condensed consolidated financial statements.
PLAINS ALL AMERICAN PIPELINE, L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in millions, except per unit data) | | | | | | | | | | | | | | | |
| | | Three Months Ended March 31, |
| | | | | 2022 | | 2021 |
| | | (unaudited) |
REVENUES | | | | | | | |
Product sales revenues | | | | | $ | 13,381 | | | $ | 8,083 | |
Services revenues | | | | | 313 | | | 300 | |
Total revenues | | | | | 13,694 | | | 8,383 | |
| | | | | | | |
COSTS AND EXPENSES | | | | | | | |
Purchases and related costs | | | | | 12,785 | | | 7,392 | |
Field operating costs | | | | | 346 | | | 219 | |
General and administrative expenses | | | | | 82 | | | 67 | |
Depreciation and amortization | | | | | 230 | | | 177 | |
(Gains)/losses on asset sales and asset impairments, net | | | | | (42) | | | 2 | |
Total costs and expenses | | | | | 13,401 | | | 7,857 | |
| | | | | | | |
OPERATING INCOME | | | | | 293 | | | 526 | |
| | | | | | | |
OTHER INCOME/(EXPENSE) | | | | | | | |
Equity earnings in unconsolidated entities | | | | | 97 | | | 88 | |
| | | | | | | |
Interest expense (net of capitalized interest of $1 and $5, respectively) | | | | | (107) | | | (107) | |
Other expense, net | | | | | (37) | | | (60) | |
| | | | | | | |
INCOME BEFORE TAX | | | | | 246 | | | 447 | |
Current income tax expense | | | | | (19) | | | (1) | |
Deferred income tax expense | | | | | (2) | | | (23) | |
| | | | | | | |
NET INCOME | | | | | 225 | | | 423 | |
Net income attributable to noncontrolling interests | | | | | (38) | | | (1) | |
NET INCOME ATTRIBUTABLE TO PAA | | | | | $ | 187 | | | $ | 422 | |
| | | | | | | |
NET INCOME PER COMMON UNIT (NOTE 4): | | | | | | | |
Net income allocated to common unitholders — Basic and Diluted | | | | | $ | 137 | | | $ | 371 | |
Basic and diluted weighted average common units outstanding | | | | | 705 | | | 722 | |
Basic and diluted net income per common unit | | | | | $ | 0.19 | | | $ | 0.51 | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
The accompanying notes are an integral part of these condensed consolidated financial statements.
PLAINS ALL AMERICAN PIPELINE, L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in millions)
| | | | | | | | | | | | | | | |
| | | Three Months Ended March 31, |
| | | | | 2022 | | 2021 |
| | | (unaudited) |
Net income | | | | | $ | 225 | | | $ | 423 | |
Other comprehensive income | | | | | 74 | | | 108 | |
Comprehensive income | | | | | 299 | | | 531 | |
Comprehensive income attributable to noncontrolling interests | | | | | (38) | | | (1) | |
Comprehensive income attributable to PAA | | | | | $ | 261 | | | $ | 530 | |
The accompanying notes are an integral part of these condensed consolidated financial statements.
PLAINS ALL AMERICAN PIPELINE, L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN
ACCUMULATED OTHER COMPREHENSIVE INCOME/(LOSS)
(in millions)
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| Derivative Instruments | | Translation Adjustments | | Other | | Total |
| (unaudited) |
Balance at December 31, 2021 | $ | (208) | | | $ | (642) | | | $ | (3) | | | $ | (853) | |
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Reclassification adjustments | 3 | | | — | | | — | | | 3 | |
Unrealized gain on hedges | 32 | | | — | | | — | | | 32 | |
Currency translation adjustments | — | | | 40 | | | — | | | 40 | |
Other | — | | | — | | | (1) | | | (1) | |
Total period activity | 35 | | | 40 | | | (1) | | | 74 | |
Balance at March 31, 2022 | $ | (173) | | | $ | (602) | | | $ | (4) | | | $ | (779) | |
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| Derivative Instruments | | Translation Adjustments | | Other | | Total |
| (unaudited) |
Balance at December 31, 2020 | $ | (258) | | | $ | (657) | | | $ | (3) | | | $ | (918) | |
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Reclassification adjustments | 3 | | | — | | | — | | | 3 | |
Unrealized gain on hedges | 68 | | | — | | | — | | | 68 | |
Currency translation adjustments | — | | | 37 | | | — | | | 37 | |
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Total period activity | 71 | | | 37 | | | — | | | 108 | |
Balance at March 31, 2021 | $ | (187) | | | $ | (620) | | | $ | (3) | | | $ | (810) | |
The accompanying notes are an integral part of these condensed consolidated financial statements.
PLAINS ALL AMERICAN PIPELINE, L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)
| | | | | | | | | | | |
| Three Months Ended March 31, |
| 2022 | | 2021 |
| (unaudited) |
CASH FLOWS FROM OPERATING ACTIVITIES | | | |
Net income | $ | 225 | | | $ | 423 | |
Reconciliation of net income to net cash provided by operating activities: | | | |
Depreciation and amortization | 230 | | | 177 | |
(Gains)/losses on asset sales and asset impairments, net | (42) | | | 2 | |
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Deferred income tax expense | 2 | | | 23 | |
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Change in fair value of Preferred Distribution Rate Reset Option (Note 8) | 44 | | | 67 | |
Equity earnings in unconsolidated entities | (97) | | | (88) | |
Distributions on earnings from unconsolidated entities | 96 | | | 110 | |
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Other | 4 | | | 6 | |
Changes in assets and liabilities, net of acquisitions | (122) | | | 71 | |
Net cash provided by operating activities | 340 | | | 791 | |
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CASH FLOWS FROM INVESTING ACTIVITIES | | | |
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Investments in unconsolidated entities | (3) | | | (35) | |
Additions to property, equipment and other | (101) | | | (97) | |
Proceeds from sales of assets | 53 | | | 21 | |
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Cash paid for purchases of linefill | (39) | | | — | |
Other investing activities | 9 | | | 3 | |
Net cash used in investing activities | (81) | | | (108) | |
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CASH FLOWS FROM FINANCING ACTIVITIES | | | |
Net borrowings/(repayments) under commercial paper program (Note 6) | 382 | | | (410) | |
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Net repayments under senior secured hedged inventory facility (Note 6) | — | | | (166) | |
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Repayments of senior notes | (750) | | | — | |
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Repurchase of common units (Note 7) | (25) | | | (3) | |
Distributions paid to Series A preferred unitholders (Note 7) | (37) | | | (37) | |
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Distributions paid to common unitholders (Note 7) | (127) | | | (130) | |
Distributions paid to noncontrolling interests (Note 7) | (59) | | | (6) | |
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Other financing activities | 19 | | | 65 | |
Net cash used in financing activities | (597) | | | (687) | |
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Effect of translation adjustment | 3 | | | — | |
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Net decrease in cash and cash equivalents and restricted cash | (335) | | | (4) | |
Cash and cash equivalents and restricted cash, beginning of period | 453 | | | 60 | |
Cash and cash equivalents and restricted cash, end of period | $ | 118 | | | $ | 56 | |
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Cash paid for: | | | |
Interest, net of amounts capitalized | $ | 74 | | | $ | 65 | |
Income taxes, net of amounts refunded | $ | 23 | | | $ | 24 | |
The accompanying notes are an integral part of these condensed consolidated financial statements.
PLAINS ALL AMERICAN PIPELINE, L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS’ CAPITAL
(in millions)
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| Limited Partners | | Partners’ Capital Excluding Noncontrolling Interests | | Noncontrolling Interests | | Total Partners’ Capital |
| Preferred Unitholders | | Common Unitholders | | | |
| Series A | | Series B | | | | |
| (unaudited) |
Balance at December 31, 2021 | $ | 1,505 | | | $ | 787 | | | $ | 7,680 | | | $ | 9,972 | | | $ | 2,838 | | | $ | 12,810 | |
Net income | 37 | | | 12 | | | 138 | | | 187 | | | 38 | | | 225 | |
Distributions (Note 7) | (37) | | | (12) | | | (127) | | | (176) | | | (59) | | | (235) | |
Other comprehensive income | — | | | — | | | 74 | | | 74 | | | — | | | 74 | |
Repurchase of common units (Note 7) | — | | | — | | | (25) | | | (25) | | | — | | | (25) | |
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Other | — | | | — | | | 11 | | | 11 | | | (6) | | | 5 | |
Balance at March 31, 2022 | $ | 1,505 | | | $ | 787 | | | $ | 7,751 | | | $ | 10,043 | | | $ | 2,811 | | | $ | 12,854 | |
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| Limited Partners | | Partners’ Capital Excluding Noncontrolling Interests | | Noncontrolling Interests | | Total Partners’ Capital |
| Preferred Unitholders | | Common Unitholders | | | |
| Series A | | Series B | | | | |
| (unaudited) |
Balance at December 31, 2020 | $ | 1,505 | | | $ | 787 | | | $ | 7,301 | | | $ | 9,593 | | | $ | 145 | | | $ | 9,738 | |
Net income | 37 | | | 12 | | | 373 | | | 422 | | | 1 | | | 423 | |
Distributions | (37) | | | (12) | | | (130) | | | (179) | | | (6) | | | (185) | |
Other comprehensive income | — | | | — | | | 108 | | | 108 | | | — | | | 108 | |
Repurchase of common units (Note 7) | — | | | — | | | (3) | | | (3) | | | — | | | (3) | |
Contributions from noncontrolling interests | — | | | — | | | — | | | — | | | 1 | | | 1 | |
Other | — | | | — | | | 2 | | | 2 | | | — | | | 2 | |
Balance at March 31, 2021 | $ | 1,505 | | | $ | 787 | | | $ | 7,651 | | | $ | 9,943 | | | $ | 141 | | | $ | 10,084 | |
The accompanying notes are an integral part of these condensed consolidated financial statements.
PLAINS ALL AMERICAN PIPELINE, L.P. AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 1—Organization and Basis of Consolidation and Presentation
Organization
Plains All American Pipeline, L.P. (“PAA”) is a Delaware limited partnership formed in 1998. Our operations are conducted directly and indirectly through our primary operating subsidiaries. As used in this Form 10-Q and unless the context indicates otherwise, the terms “Partnership,” “we,” “us,” “our,” “ours” and similar terms refer to PAA and its subsidiaries.
Our business model integrates large-scale supply aggregation capabilities with the ownership and operation of critical midstream infrastructure systems that connect major producing regions to key demand centers and export terminals. As one of the largest midstream service providers in North America, we own an extensive network of pipeline transportation, terminalling, storage and gathering assets in key crude oil and natural gas liquids (“NGL”) producing basins (including the Permian Basin) and transportation corridors and at major market hubs in the United States and Canada. Our assets and the services we provide are primarily focused on and conducted through two operating segments: Crude Oil and NGL. See Note 11 for further discussion of our operating segments.
Our non-economic general partner interest is held by PAA GP LLC (“PAA GP”), a Delaware limited liability company, whose sole member is Plains AAP, L.P. (“AAP”), a Delaware limited partnership. In addition to its ownership of PAA GP, as of March 31, 2022, AAP also owned a limited partner interest in us through its ownership of approximately 241.5 million of our common units (approximately 31% of our total outstanding common units and Series A preferred units combined). Plains All American GP LLC (“GP LLC”), a Delaware limited liability company, is AAP’s general partner. Plains GP Holdings, L.P. (“PAGP”) is the sole and managing member of GP LLC, and, at March 31, 2022, owned an approximate 81% limited partner interest in AAP. PAA GP Holdings LLC (“PAGP GP”) is the general partner of PAGP.
As the sole member of GP LLC, PAGP has responsibility for conducting our business and managing our operations; however, the board of directors of PAGP GP has ultimate responsibility for managing the business and affairs of PAGP, AAP and us. GP LLC employs our domestic officers and personnel; our Canadian officers and personnel are employed by our subsidiary, Plains Midstream Canada ULC.
References to our “general partner,” as the context requires, include any or all of PAGP GP, PAGP, GP LLC, AAP and PAA GP.
PLAINS ALL AMERICAN PIPELINE, L.P. AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Definitions
Additional defined terms are used in this Form 10-Q and shall have the meanings indicated below:
| | | | | | | | |
AOCI | = | Accumulated other comprehensive income/(loss) |
ASC | = | Accounting Standards Codification |
ASU | = | Accounting Standards Update |
Bcf | = | Billion cubic feet |
Btu | = | British thermal unit |
CAD | = | Canadian dollar |
CODM | = | Chief Operating Decision Maker |
EBITDA | = | Earnings before interest, taxes, depreciation and amortization |
EPA | = | United States Environmental Protection Agency |
FASB | = | Financial Accounting Standards Board |
GAAP | = | Generally accepted accounting principles in the United States |
ICE | = | Intercontinental Exchange |
ISDA | = | International Swaps and Derivatives Association |
LIBOR | = | London Interbank Offered Rate |
LTIP | = | Long-term incentive plan |
Mcf | = | Thousand cubic feet |
MMbls | = | Million barrels |
NGL | = | Natural gas liquids, including ethane, propane and butane |
NYMEX | = | New York Mercantile Exchange |
SEC | = | United States Securities and Exchange Commission |
TWh | = | Terawatt hour |
USD | = | United States dollar |
WTI | = | West Texas Intermediate |
Basis of Consolidation and Presentation
The accompanying unaudited condensed consolidated interim financial statements and related notes thereto should be read in conjunction with our 2021 Annual Report on Form 10-K. The accompanying condensed consolidated financial statements include the accounts of PAA and all of its wholly owned subsidiaries and those entities that it controls. Investments in entities over which we have significant influence but not control are accounted for by the equity method. We apply proportionate consolidation for pipelines and other assets in which we own undivided joint interests. The financial statements have been prepared in accordance with the instructions for interim reporting as set forth by the SEC. The condensed consolidated balance sheet data as of December 31, 2021 was derived from audited financial statements, but does not include all disclosures required by GAAP. The results of operations for the three months ended March 31, 2022 should not be taken as indicative of results to be expected for the entire year. All adjustments (consisting only of normal recurring adjustments) that in the opinion of management were necessary for a fair statement of the results for the interim periods have been reflected. All significant intercompany transactions have been eliminated in consolidation, and certain reclassifications have been made to information from previous years to conform to the current presentation, including the reclassifications discussed below.
Subsequent events have been evaluated through the financial statements issuance date and have been included in the following footnotes where applicable.
PLAINS ALL AMERICAN PIPELINE, L.P. AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Reclassification of Prior Period Information
During the fourth quarter of 2021, we effected changes in the primary financial information provided to our CODM (our Chief Executive Officer) for assessing performance and allocating resources to present two operating segments, Crude Oil and NGL. Prior to the fourth quarter of 2021, this information was organized into three operating segments: Transportation, Facilities and Supply and Logistics. See Note 11 for further discussion of our operating segments. In connection with this change, we changed the presentation of Revenues on our Condensed Consolidated Statements of Operations. “Product sales revenues” include amounts that were previously presented as “Supply and Logistics segment revenues,” while “Services revenues” includes amounts previously presented as “Transportation segment revenues” and “Facilities segment revenues.”
Note 2—Summary of Significant Accounting Policies
Restricted Cash
Restricted cash includes cash held by us that is unavailable for general use and is comprised of amounts advanced to us by certain equity method investees related to the construction of fixed assets where we serve as construction manager. The following table presents a reconciliation of cash and cash equivalents and restricted cash reported on our Condensed Consolidated Balance Sheets that sum to the total of the amounts shown on our Condensed Consolidated Statements of Cash Flows (in millions):
| | | | | | | | | | | |
| March 31, 2022 | | December 31, 2021 |
Cash and cash equivalents | $ | 114 | | | $ | 449 | |
Restricted cash (1) | 4 | | | 4 | |
Total cash and cash equivalents and restricted cash | $ | 118 | | | $ | 453 | |
(1)Included in “Other current assets” on our Condensed Consolidated Balance Sheets.
Recent Accounting Pronouncements
Except as discussed below and in our 2021 Annual Report on Form 10-K, there have been no new accounting pronouncements that have become effective or have been issued during the three months ended March 31, 2022 that are of significance or potential significance to us.
In August 2020, the FASB issued ASU 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity, which simplifies accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts on an entity’s own equity, by eliminating two of the three models that require separate accounting for embedded conversion features and the settlement assessment that entities are required to perform to determine whether a contract qualifies for equity classification. This guidance is effective for interim and annual periods beginning after December 15, 2021, with early adoption permitted. We adopted this guidance effective January 1, 2022, and our adoption did not have a material impact on our financial position, results of operations or cash flows.
PLAINS ALL AMERICAN PIPELINE, L.P. AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 3—Revenues and Accounts Receivable
Revenue Recognition
We disaggregate our revenues by segment and type of activity. These categories depict how the nature, amount, timing and uncertainty of revenues and cash flows are affected by economic factors. See Note 3 to our Consolidated Financial Statements included in Part IV of our 2021 Annual Report on Form 10-K for additional information regarding our types of revenues and policies for revenue recognition.
Revenues from Contracts with Customers. The following tables present our revenues from contracts with customers disaggregated by segment and type of activity (in millions):
| | | | | | | | | | | | | | | |
| | | Three Months Ended March 31, |
| | | | | 2022 | | 2021 |
Crude Oil segment revenues from contracts with customers | | | | | | | |
Sales | | | | | $ | 12,857 | | | $ | 7,726 | |
Transportation | | | | | 155 | | | 90 | |
Terminalling, Storage and Other | | | | | 90 | | | 130 | |
Total Crude Oil segment revenues from contracts with customers | | | | | $ | 13,102 | | | $ | 7,946 | |
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| | | Three Months Ended March 31, |
| | | | | 2022 | | 2021 |
NGL segment revenues from contracts with customers | | | | | | | |
Sales | | | | | $ | 845 | | | $ | 772 | |
Transportation | | | | | 9 | | | 7 | |
Terminalling, Storage and Other | | | | | 25 | | | 22 | |
Total NGL segment revenues from contracts with customers | | | | | $ | 879 | | | $ | 801 | |
Reconciliation to Total Revenues of Reportable Segments. The following disclosures only include information regarding revenues associated with consolidated entities; revenues from entities accounted for by the equity method are not included. The following tables present the reconciliation of our revenues from contracts with customers to total revenues of reportable segments and total revenues as disclosed in our Condensed Consolidated Statements of Operations (in millions):
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Three Months Ended March 31, 2022 | | Crude Oil | | NGL | | Total |
Revenues from contracts with customers | | $ | 13,102 | | | $ | 879 | | | $ | 13,981 | |
Other items in revenues | | (23) | | | (144) | | | (167) | |
Total revenues of reportable segments | | $ | 13,079 | | | $ | 735 | | | $ | 13,814 | |
Intersegment revenue elimination | | | | | | (120) | |
Total revenues | | | | | | $ | 13,694 | |
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Three Months Ended March 31, 2021 | | Crude Oil | | NGL | | Total |
Revenues from contracts with customers | | $ | 7,946 | | | $ | 801 | | | $ | 8,747 | |
Other items in revenues | | (93) | | | (162) | | | (255) | |
Total revenues of reportable segments | | $ | 7,853 | | | $ | 639 | | | $ | 8,492 | |
Intersegment revenue elimination | | | | | | (109) | |
Total revenues | | | | | | $ | 8,383 | |
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PLAINS ALL AMERICAN PIPELINE, L.P. AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Minimum Volume Commitments. We have certain agreements that require counterparties to transport or throughput a minimum volume over an agreed upon period. The following table presents counterparty deficiencies associated with contracts with customers and buy/sell arrangements that include minimum volume commitments for which we had remaining performance obligations and the customers still had the ability to meet their obligations (in millions):
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Counterparty Deficiencies | | Financial Statement Classification | | March 31, 2022 | | December 31, 2021 |
Billed and collected | | Liability | | $ | 56 | | | $ | 63 | |
Unbilled (1) | | N/A | | 16 | | | 16 | |
Total | | | | $ | 72 | | | $ | 79 | |
(1)Amounts were related to deficiencies for which the counterparties had not met their contractual minimum commitments and are not reflected in our Condensed Consolidated Financial Statements as we had not yet billed or collected such amounts.
Contract Balances. Our contract balances consist of amounts received associated with services or sales for which we have not yet completed the related performance obligation. The following table presents the change in the liability balance associated with contracts with customers (in millions):
| | | | | | | | |
| | Contract Liabilities |
Balance at December 31, 2021 | | $ | 141 | |
Amounts recognized as revenue | | (20) | |
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Additions | | 16 | |
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Balance at March 31, 2022 | | $ | 137 | |
Remaining Performance Obligations. The information below includes the amount of consideration allocated to partially and wholly unsatisfied remaining performance obligations under contracts that exist as of the end of the periods and the timing of revenue recognition of those remaining performance obligations. Certain contracts meet the requirements for the presentation as remaining performance obligations. These arrangements include a fixed minimum level of service, typically a set volume of service, and do not contain any variability other than expected timing within a limited range. The following table presents the amount of consideration associated with remaining performance obligations for the population of contracts with external customers meeting the presentation requirements as of March 31, 2022 (in millions):
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| Remainder of 2022 | | 2023 | | 2024 | | 2025 | | 2026 | | 2027 and Thereafter |
Pipeline revenues supported by minimum volume commitments and capacity agreements (1) | $ | 132 | | | $ | 174 | | | $ | 158 | | | $ | 134 | | | $ | 87 | | | $ | 379 | |
Terminalling, storage and other agreement revenues | 201 | | | 223 | | | 173 | | | 81 | | | 61 | | | 517 | |
Total | $ | 333 | | | $ | 397 | | | $ | 331 | | | $ | 215 | | | $ | 148 | | | $ | 896 | |
(1)Calculated as volumes committed under contracts multiplied by the current applicable tariff rate.
PLAINS ALL AMERICAN PIPELINE, L.P. AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The presentation above does not include (i) expected revenues from legacy shippers not underpinned by minimum volume commitments, including pipelines where there are no or limited alternative pipeline transportation options, (ii) intersegment revenues and (iii) the amount of consideration associated with certain income generating contracts, which include a fixed minimum level of service, that are either not within the scope of ASC 606 or do not meet the requirements for presentation as remaining performance obligations. The following are examples of contracts that are not included in the table above because they are not within the scope of ASC 606 or do not meet the requirements for presentation:
•Minimum volume commitments on certain of our joint venture pipeline systems;
•Acreage dedications;
•Buy/sell arrangements with future committed volumes;
•Short-term contracts and those with variable consideration, due to the election of practical expedients;
•Contracts within the scope of ASC 842, Leases; and
•Contracts within the scope of ASC 815, Derivatives and Hedging.
Trade Accounts Receivable and Other Receivables, Net
Our accounts receivable are primarily from purchasers and shippers of crude oil and, to a lesser extent, purchasers of NGL. These purchasers include, but are not limited to, refiners, producers, marketing and trading companies and financial institutions. The majority of our accounts receivable relate to our crude oil merchant activities that can generally be described as high volume and low margin activities, in many cases involving exchanges of crude oil volumes.
To mitigate credit risk related to our accounts receivable, we utilize a rigorous credit review process. We closely monitor market conditions and perform credit reviews of each customer to make a determination with respect to the amount, if any, of open credit to be extended to any given customer and the form and amount of financial performance assurances we require. Such financial assurances are commonly provided to us in the form of advance cash payments, standby letters of credit, credit insurance or parental guarantees. Additionally, in an effort to mitigate credit risk, a significant portion of our transactions with counterparties are settled on a net-cash basis. For a majority of these net-cash arrangements, we also enter into netting agreements (contractual agreements that allow us to offset receivables and payables with those counterparties against each other on our balance sheet).
Accounts receivable from the sale of crude oil are generally settled with counterparties on the industry settlement date, which is typically in the month following the month in which the title transfers. Otherwise, we generally invoice customers within 30 days of when the products or services were provided and generally require payment within 30 days of the invoice date. We review all outstanding accounts receivable balances on a monthly basis and record our receivables net of expected credit losses. We do not write-off accounts receivable balances until we have exhausted substantially all collection efforts. At March 31, 2022 and December 31, 2021, substantially all of our trade accounts receivable were less than 30 days past their invoice date. Our expected credit losses are immaterial. Although we consider our credit procedures to be adequate to mitigate any significant credit losses, the actual amount of current and future credit losses could vary significantly from estimated amounts.
The following is a reconciliation of trade accounts receivable from revenues from contracts with customers to total Trade accounts receivable and other receivables, net as presented on our Condensed Consolidated Balance Sheets (in millions):
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| March 31, 2022 | | December 31, 2021 |
Trade accounts receivable arising from revenues from contracts with customers | $ | 5,496 | | | $ | 4,031 | |
Other trade accounts receivables and other receivables (1) | 9,620 | | | 5,126 | |
Impact due to contractual rights of offset with counterparties | (7,980) | | | (4,452) | |
Trade accounts receivable and other receivables, net | $ | 7,136 | | | $ | 4,705 | |
(1)The balance is comprised primarily of accounts receivable associated with buy/sell arrangements that are not within the scope of ASC 606.
PLAINS ALL AMERICAN PIPELINE, L.P. AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 4—Net Income Per Common Unit
We calculate basic and diluted net income per common unit by dividing net income attributable to PAA (after deducting amounts allocated to the preferred unitholders and participating securities) by the basic and diluted weighted average number of common units outstanding during the period. Participating securities include equity-indexed compensation plan awards that have vested distribution equivalent rights, which entitle the grantee to a cash payment equal to the cash distribution paid on our outstanding common units.
The diluted weighted average number of common units is computed based on the weighted average number of common units plus the effect of potentially dilutive securities outstanding during the period, which include (i) our Series A preferred units and (ii) our equity-indexed compensation plan awards. See Note 12 and Note 18 to our Consolidated Financial Statements included in Part IV of our 2021 Annual Report on Form 10-K for a discussion of our Series A preferred units and equity-indexed compensation plan awards. When applying the if-converted method prescribed by FASB guidance, the possible conversion of approximately 71 million Series A preferred units, on a weighted-average basis, were excluded from the calculation of diluted net income per common unit for the three months ended March 31, 2022 and 2021 as the effect was antidilutive for both periods. Our equity-indexed compensation plan awards that contemplate the issuance of common units are considered potentially dilutive unless (i) they become vested only upon the satisfaction of a performance condition and (ii) that performance condition has yet to be satisfied. Equity-indexed compensation plan awards that were deemed to be dilutive during the period were reduced by a hypothetical common unit repurchase based on the remaining unamortized fair value, as prescribed by the treasury stock method in guidance issued by the FASB. For the three months ended March 31, 2022, approximately 0.7 million equity-indexed compensation plan awards, on a weighted-average basis, were dilutive, but did not change the presentation of diluted net income per common unit or diluted weighted average common units outstanding. For the three months ended March 31, 2021, there were no potentially dilutive equity-indexed compensation awards as a result of the hypothetical common unit repurchase.
The following table sets forth the computation of basic and diluted net income per common unit (in millions, except per unit data):
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| | | Three Months Ended March 31, |
| | | | | 2022 | | 2021 |
Basic and Diluted Net Income per Common Unit | | | | | | | |
Net income attributable to PAA | | | | | $ | 187 | | | $ | 422 | |
Distributions to Series A preferred unitholders | | | | | (37) | | | (37) | |
Distributions to Series B preferred unitholders | | | | | (12) | | | (12) | |
Distributions to participating securities | | | | | (1) | | | (1) | |
Other | | | | | — | | | (1) | |
Net income allocated to common unitholders (1) | | | | | $ | 137 | | | $ | 371 | |
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Basic and diluted weighted average common units outstanding | | | | | 705 | | | 722 | |
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Basic and diluted net income per common unit | | | | | $ | 0.19 | | | $ | 0.51 | |
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(1)We calculate net income allocated to common unitholders based on the distributions pertaining to the current period’s net income. After adjusting for the appropriate period’s distributions, the remaining undistributed earnings or excess distributions over earnings (i.e., undistributed loss), if any, are allocated to the common unitholders and participating securities in accordance with the contractual terms of our partnership agreement in effect for the period and as further prescribed under the two-class method.
PLAINS ALL AMERICAN PIPELINE, L.P. AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 5—Inventory, Linefill and Long-term Inventory
Inventory, linefill and long-term inventory consisted of the following (barrels in thousands and carrying value in millions):
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| March 31, 2022 | | | December 31, 2021 |
| Volumes | | Unit of Measure | | Carrying Value | | Price/ Unit (1) | | | Volumes | | Unit of Measure | | Carrying Value | | Price/ Unit (1) |
Inventory | | | | | | | | | | | | | | | | |
Crude oil | 4,711 | | | barrels | | $ | 420 | | | $ | 89.15 | | | | 8,041 | | | barrels | | $ | 544 | | | $ | 67.65 | |
NGL | 2,329 | | | barrels | | 102 | | | $ | 43.80 | | | | 6,982 | | | barrels | | 234 | | | $ | 33.51 | |
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Other | N/A | | | | 5 | | | N/A | | | N/A | | | | 5 | | | N/A |
Inventory subtotal | | | | | 527 | | | | | | | | | | 783 | | | |
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Linefill | | | | | | | | | | | | | | | | |
Crude oil | 15,160 | | | barrels | | 872 | | | $ | 57.52 | | | | 15,199 | | | barrels | | 862 | | | $ | 56.71 | |
NGL | 1,667 | | | barrels | | 47 | | | $ | 28.19 | | | | 1,633 | | | barrels | | 45 | | | $ | 27.56 | |
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Linefill subtotal | | | | | 919 | | | | | | | | | | 907 | | | |
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Long-term inventory | | | | | | | | | | | | | | | | |
Crude oil | 3,289 | | | barrels | | 325 | | | $ | 98.81 | | | | 2,973 | | | barrels | | 209 | | | $ | 70.30 | |
NGL | 1,071 | | | barrels | | 49 | | | $ | 45.75 | | | | 1,135 | | | barrels | | 44 | | | $ | 38.77 | |
Long-term inventory subtotal | | | | | 374 | | | | | | | | | | 253 | | | |
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Total | | | | | $ | 1,820 | | | | | | | | | | $ | 1,943 | | | |
(1)Price per unit of measure is comprised of a weighted average associated with various grades, qualities and locations. Accordingly, these prices may not coincide with any published benchmarks for such products.
Note 6—Debt
Debt consisted of the following (in millions):
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| March 31, 2022 | | December 31, 2021 |
SHORT-TERM DEBT | | | |
Commercial paper notes, bearing a weighted-average interest rate of 0.8% (1) | $ | 382 | | | $ | — | |
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Senior notes: | | | |
3.65% senior notes due June 2022 (2) | — | | | 750 | |
2.85% senior notes due January 2023 | 400 | | | — | |
Other | 118 | | | 72 | |
Total short-term debt | 900 | | | 822 | |
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LONG-TERM DEBT | | | |
Senior notes, net of unamortized discounts and debt issuance costs of $52 and $54, respectively | 7,931 | | | 8,329 | |
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Other | 55 | | | 69 | |
Total long-term debt | 7,986 | | | 8,398 | |
Total debt (3) | $ | 8,886 | | | $ | 9,220 | |
PLAINS ALL AMERICAN PIPELINE, L.P. AND SUBSIDIARIES
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(1)We classified these commercial paper notes as short-term as of March 31, 2022, as these notes were primarily designated as working capital borrowings, were required to be repaid within one year and were primarily for hedged NGL and crude oil inventory and NYMEX and ICE margin deposits.
(2)These senior notes were redeemed on March 1, 2022.
(3)Our fixed-rate senior notes had a face value of approximately $8.4 billion and $9.1 billion as of March 31, 2022 and December 31, 2021, respectively. We estimated the aggregate fair value of these notes as of March 31, 2022 and December 31, 2021 to be approximately $8.4 billion and $9.9 billion, respectively. Our fixed-rate senior notes are traded among institutions, and these trades are routinely published by a reporting service. Our determination of fair value is based on reported trading activity near the end of the reporting period. We estimate that the carrying value of outstanding borrowings under our commercial paper program approximates fair value as interest rates reflect current market rates. The fair value estimates for our senior notes and commercial paper notes are based upon observable market data and are classified in Level 2 of the fair value hierarchy.
Borrowings and Repayments
Total borrowings under our credit facilities and commercial paper program for the three months ended March 31, 2022 and 2021 were approximately $5.6 billion and $14.2 billion, respectively. Total repayments under our credit facilities and commercial paper program were approximately $5.2 billion and $14.8 billion for the three months ended March 31, 2022 and 2021, respectively. The variance in total gross borrowings and repayments is impacted by various business and financial factors including, but not limited to, the timing, average term and method of general partnership borrowing activities.
During the three months ended March 31, 2022, we redeemed our 3.65%, $750 million senior notes due June 2022.