Filed Pursuant to Rule 424b5
Registration No. 333-68446
The information in this preliminary prospectus is not complete and may be
changed. This preliminary prospectus is not an offer to sell nor does it seek
an offer to buy these securities in any jurisdiction where the offer or sale is
not permitted.
Subject to Completion. Dated August 9, 2002.
Prospectus Supplement to Prospectus dated September 4, 2001.
5,500,000 Common Units
Representing Limited Partner Interests
Plains All American Pipeline, L.P.
---------------
The common units represent limited partner interests in Plains All American
Pipeline, L.P. The common units are listed on the New York Stock Exchange under
the symbol "PAA." The last reported sale price of our common units on August 8,
2002 was $24.80 per common unit.
See "Risk Factors" beginning on page S-7 of this prospectus supplement and
on page 2 of the accompanying prospectus to read about important risks that you
should consider before buying the common units.
---------------
Neither the Securities and Exchange Commission nor any other regulatory
body has approved or disapproved of these securities or passed upon the
accuracy or adequacy of this prospectus. Any representation to the contrary is
a criminal offense.
---------------
Per
Common Unit Total
----------- -----
Initial price to public........................................... $ $
Underwriting discount............................................. $ $
Proceeds, before expenses, to Plains All American Pipeline, L.P. . $ $
To the extent that the underwriters sell more than 5,500,000 common units,
the underwriters have the option to purchase up to an additional 825,000 common
units from Plains All American Pipeline, L.P. at the initial price to public
less the underwriting discount.
---------------
The underwriters expect to deliver the common units against payment in New
York, New York on August , 2002.
Goldman, Sachs & Co.
Lehman Brothers
Salomon Smith Barney
UBS Warburg
A.G. Edwards & Sons, Inc.
Wachovia Securities
---------------
Prospectus Supplement dated August , 2002.
TABLE OF CONTENTS
Page No.
--------
Prospectus Supplement
PLAINS ALL AMERICAN PIPELINE, L.P............ S-1
RECENT DEVELOPMENTS.......................... S-4
THE OFFERING................................. S-6
RISK FACTORS................................. S-7
USE OF PROCEEDS.............................. S-7
PRICE RANGE OF COMMON UNITS AND DISTRIBUTIONS S-8
CAPITALIZATION............................... S-9
TAX CONSIDERATIONS........................... S-10
UNDERWRITING................................. S-11
LEGAL MATTERS................................ S-13
EXPERTS...................................... S-13
WHERE YOU CAN FIND MORE INFORMATION.......... S-14
Prospectus
ABOUT THIS PROSPECTUS........................ i
WHERE YOU CAN FIND MORE INFORMATION.......... ii
FORWARD-LOOKING STATEMENTS................... iii
WHO WE ARE................................... 1
RISK FACTORS................................. 2
USE OF PROCEEDS.............................. 10
RATIOS OF EARNINGS TO FIXED CHARGES.......... 10
DESCRIPTION OF OUR DEBT SECURITIES........... 11
DESCRIPTION OF OUR COMMON UNITS.............. 19
CASH DISTRIBUTION POLICY..................... 20
DESCRIPTION OF OUR PARTNERSHIP AGREEMENT..... 22
TAX CONSIDERATIONS........................... 26
SELLING UNITHOLDERS.......................... 40
PLAN OF DISTRIBUTION......................... 41
LEGAL MATTERS................................ 42
EXPERTS...................................... 42
-----------------
IMPORTANT NOTICE ABOUT INFORMATION IN THIS
PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS
This document is in two parts. The first part is the prospectus supplement,
which describes our business and the specific terms of this offering. The
second part, the base prospectus, gives more general information, some of which
may not apply to this offering. Generally, when we refer only to the
"prospectus," we are referring to both parts combined.
If the description of the offering varies between the prospectus supplement
and the base prospectus, you should rely on the information in the prospectus
supplement.
You should rely only on the information contained in or incorporated by
reference in this prospectus. We have not, and the underwriters have not,
authorized anyone to provide you with different information. We are not making
an offer of the common units in any jurisdiction where the offer is not
permitted. You should not assume that the information contained in this
prospectus or in the documents incorporated by reference in this prospectus is
accurate as of any date other than the date on the front of those documents.
The information in this prospectus supplement is not complete. You should
review carefully all of the detailed information appearing in this prospectus
supplement, the accompanying prospectus and the documents we have incorporated
by reference before making any investment decision.
PLAINS ALL AMERICAN PIPELINE, L.P.
We are a publicly traded Delaware limited partnership engaged in interstate
and intrastate marketing, transportation and terminalling of crude oil and
marketing of liquefied petroleum gas, or LPG. We have an extensive network of
pipeline transportation, storage and gathering assets in key oil producing
basins and at major market hubs in the United States and Canada. Several
members of our existing management team founded this midstream crude oil
business in 1992, and we completed our initial public offering in 1998. Our
EBITDA, excluding the impact of unusual and non-recurring items and the impact
of SFAS 133, Accounting for Derivative Instruments and Hedging Activities, has
increased from $1.8 million in 1993 to $118.4 million for the twelve months
ended June 30, 2002. EBITDA means earnings before interest, taxes, depreciation
and amortization.
Our operations are concentrated in Texas, California, Oklahoma and
Louisiana and in the Canadian provinces of Alberta, Saskatchewan and Manitoba
and can be categorized into two primary business activities:
. Pipeline Operations. We own and operate over 5,500 miles of gathering and
mainline crude oil pipelines located throughout the United States and
Canada. Our activities from pipeline operations generally consist of
transporting crude oil for a fee.
. Gathering, Marketing, Terminalling and Storage Operations. We own and
operate approximately 21.3 million barrels of above-ground crude oil
terminalling and storage facilities, including a state-of-the-art, crude
oil terminalling and storage facility at Cushing, Oklahoma. Cushing is
the largest crude oil trading hub in the United States, which we refer to
in this prospectus supplement as the Cushing Interchange, and the
designated delivery point for New York Mercantile Exchange, or NYMEX,
crude oil futures contracts. Our terminalling and storage operations
generate revenue through a combination of storage and throughput charges
to third parties. We also utilize our storage tanks to counter-cyclically
balance our gathering and marketing operations and to execute different
hedging strategies to stabilize profits and reduce the negative impact of
crude oil market volatility. Our gathering and marketing operations
include:
. the purchase of crude oil at the wellhead and the bulk purchase
of crude oil at pipeline and terminal facilities;
. the transportation of crude oil on trucks, barges or pipelines;
. the subsequent resale or exchange of crude oil at various points
along the crude oil distribution chain; and
. the purchase of LPG from producers, refiners and other
marketers, and the sale of LPG to end users and retailers.
For the six months ended June 30, 2002, we gathered from producers, using
our assets or third-party assets, approximately 405,000 barrels of crude oil
per day. In addition, we purchased in bulk, primarily at major trading
locations, approximately 67,000 barrels of crude oil per day. Our revenues
reflect the sale of these barrels plus the sale of additional barrels exchanged
through buy/sell arrangements entered into to enhance the margins of the
gathered and bulk purchased crude oil.
For the six months ended June 30, 2002 and the year ended December 31,
2001, we reported net income of $31.2 million and $44.2 million, respectively.
Excluding the impact of unusual and non-recurring items and the impact of SFAS
133, net income for the same periods would have been $33.0 million and $56.2
million, respectively. Cash flow from operations (net income plus noncash
items), excluding the impact of unusual and non-recurring items and the impact
of SFAS 133, for the six months ended June 30, 2002 and for the year ended
December 31, 2001, was $47.1 million and $80.5
S-1
million, respectively. EBITDA, excluding the impact of unusual and
non-recurring items and the impact of SFAS 133, for the same periods was $59.9
million and $109.6 million, respectively.
Business Strategy
Our business strategy is to capitalize on the regional crude oil supply and
demand imbalances that exist in the United States and Canada by combining the
strategic location and unique capabilities of our transportation and
terminalling assets with our extensive marketing and distribution expertise to
generate sustainable earnings and cash flow.
We intend to execute our business strategy by:
. increasing and optimizing throughput on our existing pipeline and
gathering assets and realizing cost efficiencies through operational
improvements;
. utilizing and expanding our Cushing Terminal and our other assets to
service the needs of refiners and to profit from merchant activities that
take advantage of crude oil pricing and quality differentials;
. selectively pursuing strategic and accretive acquisitions of crude oil
transportation assets, including pipelines, gathering systems,
terminalling and storage facilities and other assets that complement our
existing asset base and distribution capabilities; and
. optimizing and expanding our Canadian operations in order to take
advantage of anticipated increases in the volume and qualities of crude
oil produced in, and exported from, Canada.
Financial Strategy
Targeted Credit Profile
We believe that a major factor in our continued success will be our ability
to maintain a low cost of capital and access to the capital markets. Since our
initial public offering in 1998, we have consistently communicated to the
financial community our intention to maintain a strong credit profile that we
believe is consistent with our goal of achieving and maintaining an investment
grade credit rating. We have targeted a general credit profile with the
following attributes:
. an average long-term debt-to-total capitalization ratio of approximately
60% or less;
. an average long-term debt-to-EBITDA ratio of approximately 3.5x or less;
and
. an average EBITDA-to-interest coverage ratio of approximately 3.3x or
better.
As of June 30, 2002, we were within our targeted credit profile. In order
for us to maintain our targeted credit profile and achieve growth through
acquisitions, we intend to fund acquisitions using approximately equal
proportions of equity and debt. Because it is likely that acquisitions will
initially be financed using debt and because it is difficult to predict the
actual timing of accessing the market to raise equity, from time to time we may
be temporarily outside the parameters of our targeted credit profile.
Rating Agencies Update
On June 27, 2002, Standard & Poor's placed us on CreditWatch with positive
implications. The CreditWatch listing followed the announcement by Plains
Resources Inc., which owns an aggregate of 29% of our partnership interests,
that it is spinning off substantially all of its oil and natural gas
exploration and production assets. Historically, Standard & Poor's had
constrained our credit rating to a level no higher than one level above Plains
Resources' credit rating. In its press release, Standard & Poor's noted that
once the proposed spin-off occurs, the constraint on our credit rating will be
lifted and
S-2
we will likely be upgraded to an investment grade rating. Our current rating
with Moody's Investors Service is Ba2 with a positive outlook.
Competitive Strengths
We believe that the following competitive strengths position us to
successfully execute our business strategy:
. Our business activities are counter-cyclically balanced. We believe that
our terminalling and storage activities and our gathering and marketing
activities are counter-cyclical. We believe that this balance of
activities, combined with the long-term nature of our pipeline
transportation contracts, has a stabilizing effect on our cash flow from
operations.
. Our pipeline assets are strategically located and have additional
capacity. Our primary crude oil pipeline transportation and gathering
assets are located in prolific oil producing regions and are connected,
directly or indirectly, with our terminalling and storage assets that
service major North American refinery and distribution markets, where we
have strong business relationships. These assets are strategically
positioned to maximize the value of our crude oil by transporting it to
major trading locations and premium markets. Our pipeline networks
currently possess additional capacity that can accommodate increased
demand.
. Our Cushing Terminal is strategically located, operationally flexible and
readily expandable. Our Cushing Terminal interconnects with the Cushing
Interchange's major inbound and outbound pipelines, providing access to
both foreign and domestic crude oil. Our Cushing Terminal is the most
modern large-scale terminalling and storage facility at the Cushing
Interchange, incorporating (1) operational enhancements designed to
safely and efficiently terminal, store, blend and segregate large volumes
and multiple varieties of crude oil and (2) extensive environmental
safeguards. Collectively, our recently completed Phase II expansion
project, which became operational in July 2002, and our Phase III
expansion project, which we expect to be operational in January 2003,
will increase the total capacity of our Cushing Terminal by approximately
71% to approximately 5.3 million barrels. In addition, we believe that
the facility can be further expanded to meet additional demand should
market conditions warrant.
. We possess specialized crude oil market knowledge. We believe our
business relationships with participants in all phases of the crude oil
distribution chain, from crude oil producers to refiners, as well as our
own industry expertise, provide us with an extensive understanding of the
North American physical crude oil markets.
. We have the financial flexibility to continue to pursue expansion and
acquisition opportunities. We believe we have significant resources to
finance strategic expansion and acquisition opportunities, including our
ability to issue additional partnership units and to borrow under our
bank credit facility. Upon the completion of this offering, the
availability under our revolving credit facility will be approximately
$233 million.
. We have an experienced management team whose interests are aligned with
those of all of our unitholders. Our executive management team has an
average of more than 20 years industry experience, with an average of
over 15 years with us or our predecessors and affiliates. Members of our
senior management team own a 4% interest in our general partner and
through restricted unit grants and options, own significant contingent
equity incentives that vest only if we achieve specified performance
objectives. In addition, our senior management team collectively owns
approximately 300,000 common and subordinated units.
S-3
RECENT DEVELOPMENTS
Distribution Increase
On July 23, 2002, we announced a second quarter distribution of $0.5375 per
unit, an increase of $0.0125 per unit over the distribution for the first
quarter. The distribution is payable on August 14, 2002 to holders of record at
the close of business on August 5, 2002. This distribution increase represents
the fifth distribution increase in the last six quarters. Effective with this
second quarter distribution, we have raised our annualized distribution to
unitholders by a total of $0.35 per unit, or 19% above our minimum quarterly
distribution of $1.80 per unit, since our initial public offering in 1998.
Acquisitions
Shell Pipeline Company LP and Equilon Enterprises LLC
On August 1, 2002, we acquired interests in approximately 2,000 miles of
gathering and mainline crude oil pipelines and approximately 8.7 million
barrels (net to our interest) of above-ground crude oil terminalling and
storage assets in West Texas from Shell Pipeline Company LP and Equilon
Enterprises LLC, which we refer to collectively as Shell. The primary assets
included in the transaction are interests in the Basin Pipeline System, the
Permian Basin Gathering System and the Rancho Pipeline System. The total
purchase price of $322.7 million consisted of (i) $304.0 million in cash, which
was borrowed under our revolving credit facility, (ii) approximately $9.1
million related to the settlement of pre-existing accounts receivable and
inventory balances and (iii) approximately $9.6 million of estimated
transaction and closing costs.
The acquired assets are primarily fee-based mainline crude oil pipeline
transportation assets that gather crude oil in the Permian Basin and transport
that crude oil to major market locations in the Mid-Continent and Gulf Coast
regions. The Permian Basin has long been one of the most stable crude oil
producing regions in the United States, dating back to the 1930s. The acquired
assets fit well with our existing asset infrastructure in West Texas and
represent a valuable transportation link to Cushing, Oklahoma, where we are a
leading provider of storage and terminalling services. In addition, we believe
that the Basin Pipeline System is poised to benefit from potential shut-downs
of refineries and other pipelines due to the shifting market dynamics in the
West Texas area. We believe that the Shell acquisition will have the following
impact on us:
. increase pipeline transportation volumes by approximately 90%;
. increase crude oil storage capacity owned by approximately 70%;
. increase miles of pipelines owned by approximately 50%; and
. increase physical barrels handled by approximately 40%.
Additional information regarding the Shell acquisition, including pro forma
financial information and historical financial information regarding the
acquired business, may be found in our Current Report on Form 8-K filed August
9, 2002.
Coast Energy Group and Lantern Petroleum
In March 2002, we completed the acquisition of substantially all of the
domestic crude oil pipeline, gathering and marketing assets of Coast Energy
Group and Lantern Petroleum, divisions of Cornerstone Propane Partners, L.P.,
for approximately $7.6 million in cash net of liabilities assumed and including
transaction costs. The principal assets acquired are located in West Texas and
include several gathering lines, crude oil contracts and a small truck and
trailer fleet.
S-4
Butte Pipe Line Company
In February 2002, we acquired an approximate 22% equity interest in Butte
Pipe Line Company from Murphy Ventures, a subsidiary of Murphy Oil Corporation.
The total cost of the acquisition, including various transaction and related
expenses, was approximately $8.0 million. Butte Pipe Line Company owns the
373-mile Butte Pipeline System, principally a mainline crude oil transmission
system, that runs from Baker, Montana to Guernsey, Wyoming. The Butte Pipeline
is connected to the Poplar Pipeline System, which in turn is connected to the
Wascana Pipeline System that is 100% wholly owned by us. We believe these
pipeline systems will play an important role in moving increasing volumes of
Canadian crude oil into markets in the United States.
General
Consistent with our acquisition strategy, we are continuously engaged in
discussions with potential sellers regarding the possible purchase by us of
midstream crude oil assets. Such acquisition efforts involve participation by
us in processes that have been made public, involve a number of potential
buyers and are commonly referred to as "auction" processes as well as
situations where we believe we are the only party or one of a very limited
number of potential buyers in negotiations with the potential seller. We can
give you no assurance that our current or future acquisition efforts will be
successful or that any such acquisition will be completed on terms considered
favorable to us. Since 1998, we have announced and completed 12 acquisitions
for an aggregate purchase price of $1.1 billion.
Cushing Terminal Expansion
On July 1, 2002, we placed in service approximately 1.1 million barrels of
tank capacity associated with our Phase II expansion of the Cushing Terminal,
raising the facility's total storage capacity to approximately 4.2 million
barrels. In addition, we currently estimate that our Phase III expansion, an
additional 1.1 million barrels of tank capacity, will be completed in late 2002
or early 2003. Giving effect to these two expansions, the capacity of the
Cushing Terminal will increase approximately 71% to a total of approximately
5.3 million barrels. Upon completion of the Phase III expansion project, the
Cushing Terminal will consist of fourteen 100,000 barrel tanks, four 150,000
barrel tanks and twelve 270,000 barrel tanks, all of which are used to store
and terminal crude oil.
Credit Facility Amendment
On July 2, 2002, we amended our senior secured credit facility. The
amendment allows us to increase the size of our credit facility from $979
million to $1.13 billion and allows us to issue up to $400 million of senior
unsecured notes. As amended, our senior secured credit facility consists of:
. a letter of credit and hedged inventory facility of up to $350 million
(with current lender commitments totaling $200 million) maturing in April
2005;
. revolving credit facilities with a combined borrowing capacity of $480
million maturing in April 2005;
. a $99 million term loan maturing in 2006; and
. a $200 million term loan maturing in 2007.
S-5
THE OFFERING
Common units we are offering 5,500,000 common units; 6,325,000 common units if
the underwriters exercise their over-allotment
option in full.
Units to be outstanding
after this offering....... 37,415,939 common units if the underwriters do
not exercise their over-allotment option and
38,240,939 common units if the underwriters
exercise their over-allotment option in full;
1,307,190 Class B common units; and
10,029,619 subordinated units.
Cash distributions.......... Under our partnership agreement, we must
distribute all of our cash on hand at the end of
each quarter, less reserves established by our
general partner in its discretion. We refer to
this cash as "available cash," and we define its
meaning in our partnership agreement.
On July 23, 2002, we declared a quarterly cash
distribution for the second quarter of 2002 of
$0.5375 per common unit, or $2.15 per common unit
on an annualized basis. Under the quarterly
incentive distribution provisions, generally our
general partner is entitled to 15% of amounts we
distribute in excess of $0.450 per common unit,
25% of amounts we distribute in excess of $0.495
per common unit and 50% of amounts we distribute
in excess of $0.675 per common unit. For a
description of our cash distribution policy,
please read "Cash Distribution Policy" in the
accompanying prospectus.
Subordination period........ During the subordination period, common units are
entitled to receive a minimum quarterly
distribution of $0.45 per unit, plus arrearages
from any prior quarters, before any distributions
are paid on our subordinated units. The
subordination period will end once we meet the
financial tests in the partnership agreement, but
it generally cannot end before December 31, 2003.
When the subordination period ends, all remaining
subordinated units will convert into common
units, and the common units will no longer be
entitled to arrearages.
Early conversion of
subordinated units........ If we meet the financial tests in the partnership
agreement for any quarter ending on or after
December 31, 2002, 25% of the subordinated units
will convert into common units.
Estimated ratio of taxable
income to distributions... We estimate that if you own the common units you
purchase in this offering through December 31,
2004, you will be allocated, on a cumulative
basis, an amount of federal taxable income for
that period that will be less than 20% of the
cash distributed to you with respect to that
period. Please read "Tax Considerations" in this
prospectus supplement for the basis of this
estimate.
New York Stock Exchange
symbol.................... PAA.
S-6
RISK FACTORS
You should read carefully the discussion of the material risks relating to
an investment in the common units offered by Plains All American Pipeline, L.P.
set forth below and under the caption "Risk Factors" beginning on page 2 of the
accompanying prospectus, as well as those risks discussed in our Annual Report
on Form 10-K for the year ended December 31, 2001 and our Quarterly Reports on
Form 10-Q for the quarters ended March 31, 2002 and June 30, 2002, which are
incorporated by reference.
Recent Disruptions in Industry Credit Markets
As a result of business failures, revelations of material
misrepresentations and related financial restatements by several large,
well-known companies in various industries over the last nine months, there
have been significant disruptions and extreme volatility in the financial
markets and credit markets. Because of the credit intensive nature of the
energy industry and troubling disclosures by several large, diversified energy
companies, the energy industry has been especially impacted by these
developments, with the rating agencies downgrading a number of large, energy
related companies. Accordingly, in this environment we are exposed to an
increased level of direct and indirect counter-party credit and performance
risk. We believe we have made appropriate modifications to credit arrangements
with certain of our counter-parties that have been adversely affected by these
recent events. However, there can be no assurance that we have adequately
assessed the credit worthiness of our existing or future counter-parties or
that there will not be an unanticipated deterioration in their credit
worthiness, which could have an adverse impact on us.
USE OF PROCEEDS
The net proceeds of this offering, including our general partner's
proportionate capital contribution, are estimated to be approximately $133.1
million after deducting the underwriting discount and estimated offering
expenses. We intend to use the net proceeds of this offering to repay
indebtedness outstanding under our revolving credit facility. Indebtedness
under our revolving credit facility, which matures in April 2005, was $334.6
million as of August 8, 2002 and had a weighted average annual interest rate of
4.6%, without giving effect to interest rate hedges.
S-7
PRICE RANGE OF COMMON UNITS AND DISTRIBUTIONS
As of August 5, 2002, there were 31,915,939 common units outstanding, held
by approximately 17,000 holders, including common units held in street name.
The common units are traded on the NYSE under the symbol "PAA." An additional
1,307,190 Class B units are outstanding. The Class B units are held by an
affiliate of Plains Resources and are pari passu with and have economic terms
substantially similar to the common units but are not publicly traded. The
Class B units may be converted at the option of the holder into an equal number
of common units if specified conditions are met.
The following table sets forth, for the periods indicated, the high and low
sales prices for the common units, as reported on the NYSE Composite
Transactions Tape, and quarterly declared cash distributions per common unit.
The last reported sale price of common units on the NYSE on August 8, 2002 was
$24.80 per unit.
Price Range Cash
------------- Distributions
High Low per Unit
------ ------ -------------
2000
First Quarter.......................... $16.56 $13.00 $0.4500
Second Quarter......................... 18.63 15.25 0.4625
Third Quarter.......................... 19.75 18.00 0.4625
Fourth Quarter......................... 20.06 18.00 0.4625
2001
First Quarter.......................... $23.63 $19.06 $0.4750
Second Quarter......................... 28.00 22.15 0.5000
Third Quarter.......................... 29.65 23.10 0.5125
Fourth Quarter......................... 28.00 24.35 0.5125
2002
First Quarter.......................... $26.79 $23.60 $0.5250
Second Quarter......................... 27.30 24.60 0.5375
Third Quarter (through August 8, 2002). 26.38 19.54 (1)
--------
(1) The distribution for the third quarter of 2002 has not yet been declared or
paid.
S-8
CAPITALIZATION
The following table sets forth our capitalization as of June 30, 2002 on
(1) a historical unaudited basis, (2) a pro forma basis to give effect to the
Shell acquisition, and (3) a pro forma as adjusted basis to give further effect
to the sale of the common units offered by this prospectus supplement and the
application of the proceeds from the sale of the common units and our general
partner's proportionate capital contribution, assuming a public offering price
of $24.80 per common unit. You should read our financial statements and notes
that are incorporated by reference into this prospectus supplement for
additional information about our capital structure.
June 30, 2002
--------------
Plains All
American Pro Forma
Pipeline, L.P. Pro Forma As Adjusted
-------------- ---------- -----------
Cash and cash equivalents....... $ 5,792 $ 5,792 $ 5,792
======== ========== ==========
Long-term debt:
Revolving credit facility.... 91,591 379,834 246,747
Canadian term loan(1)........ 99,000 99,000 99,000
Term B loan(1)............... 200,000 200,000 200,000
-------- ---------- ----------
Total liabilities........ 390,591 678,834 545,747
-------- ---------- ----------
Partners' capital:
Common unitholders........... 405,031 405,031 535,334
Class B common unitholders... 19,389 19,389 19,389
Subordinated unitholders..... (40,005) (40,005) (40,005)
General partner.............. 13,521 13,521 16,305
-------- ---------- ----------
397,936 397,936 531,023
-------- ---------- ----------
Total capitalization..... $788,527 $1,076,770 $1,076,770
======== ========== ==========
--------
(1) Outstanding amounts include current maturities of long-term debt in the
amounts of $7 million and $2 million for the Canadian term loan and the
Term B loan, respectively.
S-9
TAX CONSIDERATIONS
We estimate that if you purchase common units in this offering and own them
through the record date for the distribution for the fourth quarter of 2004,
then you will be allocated, on a cumulative basis, an amount of federal taxable
income for such period that will be less than 20% of the cash distributed to
you with respect to the years 2002, 2003 and 2004. These estimates are based
upon the assumption that our available cash for distribution will approximate
the amount required to distribute cash to the holders of the common units in an
amount equal to the current quarterly distribution of $0.5375 per unit and
other assumptions with respect to capital expenditures, cash flow and
anticipated cash distributions. These estimates and assumptions are subject to,
among other things, numerous business, economic, regulatory, competitive and
political uncertainties beyond our control. Further, the estimates are based on
current tax law and certain tax reporting positions that we have adopted and
with which the IRS could disagree. Accordingly, we cannot assure you that the
estimates will be correct. The actual percentage of distributions that will
constitute taxable income could be higher or lower, and any differences could
be material and could materially affect the value of the common units. See "Tax
Considerations" in the accompanying prospectus.
The tax consequences to you of an investment in common units will depend in
part on your own tax circumstances. For a discussion of the principal federal
income tax considerations associated with our operations and the purchase,
ownership and disposition of common units, see "Tax Considerations" in the
accompanying prospectus. You are urged to consult your own tax advisor about
the federal, state and local tax consequences peculiar to your circumstances.
S-10
UNDERWRITING
We and the underwriters for the offering named below have entered into an
underwriting agreement with respect to the common units being offered. Subject
to certain conditions, each underwriter has severally agreed to purchase the
number of common units indicated in the following table.
Number of
Underwriters Common Units
------------ ------------
Goldman, Sachs & Co......
Lehman Brothers Inc......
Salomon Smith Barney Inc.
UBS Warburg LLC..........
A.G. Edwards & Sons, Inc.
Wachovia Securities, Inc.
---------
Total................. 5,500,000
=========
The underwriters are committed to take and pay for all of the common units
being offered, if any are taken, other than the common units covered by the
option described below unless and until this option is exercised.
If the underwriters sell more common units than the total number set forth
in the table above, the underwriters have an option to buy up to an additional
825,000 common units from us to cover such sales. The underwriters may exercise
that option for 30 days. If any common units are purchased pursuant to this
option, the underwriters will severally purchase common units in approximately
the same proportion as set forth in the table above.
The following table shows the per common unit and total underwriting
discounts and commissions to be paid to the underwriters by us. Such amounts
are shown assuming both no exercise and full exercise of the underwriters'
option to purchase 825,000 additional common units.
Paid by Plains All American Pipeline, L.P. No Exercise Full Exercise
------------------------------------------ ----------- -------------
Per Common Unit.............. $ $
Total........................ $ $
Common units sold by the underwriters to the public initially will be
offered at the initial price to public set forth on the cover of this
prospectus. Any common units sold by the underwriters to securities dealers may
be sold at a discount of up to $ per common unit from the initial price to
public. Any such securities dealers may resell any common units purchased from
the underwriters to certain other brokers or dealers at a discount of up to
$ per common unit from the initial price to public. If all of the common
units are not sold at the initial price to public, the underwriters may change
the offering price and the other selling terms.
We, our general partner and the officers and directors of the limited
liability company that controls our general partner have agreed with the
underwriters not to dispose of or hedge any common units or securities
convertible into or exchangeable for common units for 90 days after the date of
this prospectus, except with the prior written consent of Goldman, Sachs & Co.
This agreement does not apply to any existing employee benefit plans, to
issuance of common units in connection with acquisitions and capital
improvements that increase cash flow from operations on a per unit basis, to
the transfer of subordinated units or to certain sales of common units by the
officers and directors of the limited liability company that controls our
general partner to pay certain tax liabilities associated with the vesting of
units.
S-11
In connection with the offering, the underwriters may purchase and sell
common units in the open market. These transactions may include short sales,
stabilizing transactions and purchases to cover positions created by short
sales. Short sales involve the sale by the underwriters of a greater number of
common units than they are required to purchase in the offering. "Covered"
short sales are sales made in an amount not greater than the underwriters'
option to purchase additional common units from us in the offering. The
underwriters may close out any covered short position by either exercising
their option to purchase additional common units or purchasing common units in
the open market. In determining the source of common units to close out the
covered short position, the underwriters will consider, among other things, the
price of common units available for purchase in the open market as compared to
the price at which they may purchase common units through their option to
purchase additional common units from us. "Naked" short sales are any sales in
excess of such option. The underwriters must close out any naked short position
by purchasing common units in the open market. A naked short position is more
likely to be created if the underwriters are concerned that there may be
downward pressure on the price of the common units in the open market after
pricing that could adversely affect investors who purchase in the offering.
Stabilizing transactions consist of various bids for or purchases of common
units made by the underwriters in the open market prior to the completion of
the offering.
The underwriters may also impose a penalty bid. This occurs when a
particular underwriter repays to the underwriters a portion of the underwriting
discount received by it because the underwriters have repurchased common units
sold by or for the account of such underwriter in stabilizing or short covering
transactions.
Purchases to cover a short position and stabilizing transactions may have
the effect of preventing or retarding a decline in the market price of the
common units, and together with the imposition of the penalty bid, may
stabilize, maintain or otherwise affect the market price of the common units.
As a result, the price of the common units may be higher than the price that
otherwise might exist in the open market. If these activities are commenced,
they may be discontinued at any time. These transactions may be effected on the
New York Stock Exchange, in the over-the-counter market or otherwise.
We estimate that our share of the total expenses of the offering, excluding
underwriting discounts and commissions, will be approximately $300,000.
We, together with our subsidiary operating partnerships and their general
partner, our general partner and the limited liability company that controls
our general partner, have agreed to indemnify the several underwriters against
certain liabilities, including liabilities under the Securities Act of 1933.
Certain of the underwriters and their affiliates have provided from time to
time, and expect to provide in the future, investment and commercial banking
and financial advisory services to us and our affiliates in the ordinary course
of business, for which they have received and may continue to receive customary
fees and commissions. Wachovia Bank, National Association, an affiliate of
Wachovia Securities, Inc., is a lender under our bank credit facility. An
affiliate of Wachovia Securities, Inc. also owns a 3.382% interest in our
general partner as well as 328,668 subordinated units. Citicorp USA, Inc., an
affiliate of Salomon Smith Barney Inc., is also a lender under our bank credit
facility.
Because the National Association of Securities Dealers, Inc. views the
common units offered hereby as interests in a direct participation program, the
offering is being made in compliance with Rule 2810 of the NASD's Conduct
Rules. Investor suitability with respect to the common units should be judged
similarly to the suitability with respect to other securities that are listed
for trading on a national securities exchange.
S-12
LEGAL MATTERS
Vinson & Elkins L.L.P. will issue opinions about the validity of the common
units offered hereby and various other legal matters in connection with the
offering on our behalf. Baker Botts L.L.P., the underwriters' counsel, will
also issue opinions about various legal matters in connection with the offering
on behalf of the underwriters.
EXPERTS
The financial statements incorporated in this prospectus by reference to
the Annual Report on Form 10-K of Plains All American Pipeline, L.P. for the
year ended December 31, 2001, the audited balance sheet of Plains AAP, L.P. as
of December 31, 2001, included as Exhibit 99.1 to Plains All American Pipeline,
L.P.'s Current Report on Form 8-K dated May 24, 2002 and the audited historical
financial statements of Basin Pipeline System, Rancho Pipeline System and the
Permian Basin Gathering System included in Plains All American Pipeline L.P.'s
Current Report on Form 8-K dated August 9, 2002 have been so incorporated in
reliance on the reports of PricewaterhouseCoopers LLP, independent accountants,
given on the authority of said firm as experts in auditing and accounting.
S-13
WHERE YOU CAN FIND MORE INFORMATION
The SEC allows us to "incorporate by reference" information we file with
it. This procedure means that we can disclose important information to you by
referring you to documents filed with the SEC. The information we incorporate
by reference is part of this prospectus and later information that we file with
the SEC will automatically update and supersede this information. We
incorporate by reference the documents listed below:
. Annual Report on Form 10-K for the year ended December 31, 2001;
. Quarterly Report on Form 10-Q for the quarter ended March 31, 2002;
. Quarterly Report on Form 10-Q for the quarter ended June 30, 2002;
. Current Reports on Form 8-K filed on August 9, 2002, May 24, 2002, May 7,
2002, March 14, 2002, March 6, 2002 and March 1, 2002; and
. the description of our common units contained in our Form 8-A/A dated
November 3, 1998.
You may request a copy of these filings at no cost by making written or
telephone requests for copies to:
Plains All American Pipeline, L.P.
333 Clay Street, Suite 1600
Houston, Texas 77002
Attention: Tim Moore
Telephone: (713) 646-4100
You should rely only on the information incorporated by reference or
provided in this prospectus. We have not authorized anyone else to provide you
with any information. You should not assume that the information incorporated
by reference or provided in this prospectus is accurate as of any date other
than the date on the front of each document.
S-14
================================================================================
No dealer, salesperson or other person is authorized to give any
information or to represent anything not contained in this prospectus. You must
not rely on any unauthorized information or representations. This prospectus is
an offer to sell only the common units offered hereby, but only under
circumstances and in jurisdictions where it is lawful to do so. The information
contained in this prospectus is current only as of its date.
---------------
TABLE OF CONTENTS
Prospectus Supplement
Page
----
Plains All American Pipeline, L.P.. S-1
Recent Developments................ S-4
The Offering....................... S-6
Risk Factors....................... S-7
Use of Proceeds.................... S-7
Price Range of Common Units and
Distributions.................... S-8
Capitalization..................... S-9
Tax Considerations................. S-10
Underwriting....................... S-11
Legal Matters...................... S-13
Experts............................ S-13
Where You Can Find More Information S-14
Prospectus
About This Prospectus.............. i
Where You Can Find More Information ii
Forward-Looking Statements......... iii
Who We Are......................... 1
Risk Factors....................... 2
Use of Proceeds.................... 10
Ratios of Earnings to Fixed Charges 10
Description of Our Debt Securities. 11
Description of Our Common Units.... 19
Cash Distribution Policy........... 20
Description of Our Partnership
Agreement........................ 22
Tax Considerations................. 26
Selling Unitholders................ 40
Plan of Distribution............... 41
Legal Matters...................... 42
Experts............................ 42
================================================================================
================================================================================
5,500,000 Common Units
Plains All American Pipeline, L.P.
Representing Limited Partner
Interests
---------------
[LOGO] PLAINS ALL AMERICAN PIPE
---------------
Goldman, Sachs & Co.
Lehman Brothers
Salomon Smith Barney
UBS Warburg
A.G. Edwards & Sons, Inc.
Wachovia Securities
================================================================================