Plains All American Pipeline LP (PAA) 2006 Q1 法說會逐字稿

Welcome to Plains All American Pipeline’s First Quarter 2006 Results Conference Call. During today’s call, the participants will provide comments on the Partnership’s outlook for the future, as well as review the results of the prior period. Accordingly, by doing so, they will use words such as ‘believes, estimate, expect, anticipate, et cetera.’

The law provides Safe Harbor protection to encourage companies to provide forward-looking information. The Partnership intends to avail itself of those Safe Harbor provisions, and directs you to the risks and warnings set forth in Plains All American Pipeline’s most recently filed 10-K, 10-Q, 8-K, and other current and future filings with the Securities & Exchange Commission.

In addition, the Partnership encourages you to visit Plains All American’s web site at www.paalp.com. In particular, the section entitled ‘non-GAAP reconciliation,’ which presents certain commonly used non-GAAP financial measures, such as EBITDA and EBIT which may be used here today in the prepared remarks or in the q and a session. This section also presents a reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measures, and includes a table of selected items that impact comparably with respect to the Partnership’s reported financial information.

Any reference during today’s call to adjusted EBITDA, adjusted net income, and the like as a reference to the financial measure excluding the impact of [other] items impacting the comparability.

Today’s conference call will be chaired by Greg L. Armstrong, Chairman and CEO of Plains All American Pipeline. Also participating in the call today are Harry Pefanis, Plains All American’s President and COO, and Phil Kramer, Plains All American’s EVP and Chief Financial Officer.

I will now turn the call over to Mr. Greg Armstrong.

Thanks, Darcy, and welcome to everyone. As a reminder, the conference call slide presentation is available for viewing and downloading at our web site at www.paalp.com.

Plains All American continues to build upon its 2005 accomplishments and also set the stage for continued growth in 2006, 2007, and beyond. In addition, in turning in strong results for this first quarter of 2006, we have completed five acquisitions for an aggregate consideration of approximately $360 million and have raised approximately $150 million of equity to support this acquisition activity.

We also remain on track with our largest expansion CapEx program today, and have added several new projects to the program, a portion of which we’ll carry over past the end of the year and provide us with a solid starting base for 2007.

We also took a big step towards achieving our goal of increasing our distributions paid in 2006 by 10 percent over distributions paid in 2005, as we increased our quarterly distribution to $0.7075 of this last quarter, which is an increase of nearly 3 percent over the previous quarter’s distribution. All in all, I’d say 2006 is off to a very good start.

As illustrated on slide 4, we’ve reported first quarter EBITDA of $100.3 million and net income of $63.4 million or $0.71 per diluted unit, which represents increases of 51 percent, 93 percent, and 65 percent, respectively, over the similar results for 2005’s first quarter. In last year’s first quarter we reported EBITDA of 56.5 million and net income of 32.8 million, which is $0.43 per diluted unit.

There were items impacting the comparability for the period, that negatively affected the results by a total of about 5.9 million, which consisted of a 10.6 million non cash compensation charge, a $.9 million loss on foreign currency revaluation, a .7 million mark-to-market loss associated with SFAS 133, and a $6.3 million gain due to the adoption of SFAS 123R, which is an accounting principle that relates to our long-term incentive plan.

Adjusting for these selected items impacting comparability, adjusted EIBTDA, adjusted net income, and adjusted net income for limited Partner unit for the first quarter of 2006 totaled 106.2 million, 69.3 million, and $0.82 per diluted unit, respectively. These results represent increases of 28 percent, 41 percent, and 22 percent, respectively, over the corresponding metrics of last year’s first quarter.

As slide 5 demonstrates, our first quarter performance exceeded the high end of our EBITDA guidance range and extended to 17 the number of consecutive quarters that PAA has delivered solid performance relative to our financial and operating guidance.

The remainder of today’s call will be divided into three parts. First, Harry will briefly review first quarter operating results and address the major operational assumptions for the guidance Phil will cover later. Harry will also give you a status report on our portfolio of expansion of internal growth projects, as well as discuss our recent acquisitions.

Second, Phil will cover the capitalization, liquidity, including our recent financing activities, and then also cover guidance for the second quarter and full year of 2006. And then, lastly, I’ll wrap-up with some closing comments and share some thoughts with you on our outlook for future growth.

At the conclusion of our prepared remarks, we will have a question and answer period, and a complete written transcript of the prepared comments will be posted on our web site shortly after the completion of this call. In addition, our web site will provide you with the option to download an audio version of the call on to your iPod or MP3 player.

And with that, I’ll now turn the call over to Harry.

Thanks Greg.

During my part of the call, I’m going to provide a brief review of performance drivers and market conditions that affected first quarter performance, and I’ll review certain operating and capital guidance figures that are incorporated into the 2006 guidance that Phil will be discussing in a few moments. And I’ll also provide a brief update on the major projects in our capital program and discuss our recent acquisitions.

Both of our segments met or exceeded the midpoint of our first quarter guidance. As I review performance today I’ll be comparing our actual results to the midpoint of the guidance we’ve provided on Form 8-K on February 23rd, 2006.

In our pipeline segment adjusted segment profit was slightly above our midpoint of guidance at $42.9 millions, but approximately $8.5 million under the last quarter’s adjusted segment profit. This YOY decline is primarily due to an increase in operating expenses, specifically relating to an increase in utility and personnel related costs.

Our volumes for the quarter were in line with guidance at just over 1.8 million barrels per day. As you can see on slide 6, actual first quarter volumes on some of our major pipelines include 44,000 barrels per day on our All American Pipeline system, 314,000 barrels per day on our share of the Basin pipeline system, 86,000 barrels per day on our share of the Capline system, and 66,000 barrels per day on the Manito pipeline system in Canada. Now, the Capline volumes are still being impacted by the affects of Hurricanes Rita and Katrina.

Now, the second quarter 2006 guidance, Phil will walk you through in a few minutes, incorporates forecasted volumes on the All American system of approximately 50,000 barrels per day, and forecasted volumes on the Basin system of 225,000 barrels per day. Volumes on the Capline system are forecast to increase to 175,000 barrels per day as we have a new ship rate on our Capline space starting April 1st.

The first quarter Basin volumes were higher than our annual guidance level, and the second quarter volumes are lower. However, we believe that the annual volumes would be in line with our original guidance, around 273,000 barrels a day. And many things impact monthly volumes on base, including refinery turnarounds, whether the market is contained or [bifurcated]. However, on average, annual average, these volumes are around 270,000 barrels a day.

As shown on slide 7, adjusted segment profit, our gathering marketing and [storage] segment, was $63.2 million, or roughly 1.2 million above the high end of our guidance range, and approximately 32 million above last year’s first quarter. On the same basis, our profit was approximately $1.01 per barrel.

Volumes of 699,000 barrels a day in this segment were slightly above our guidance. In addition, we also imported about 50,000 barrels a day of foreign crude to our Gulf Coast assets. And note that these volumes are not included in the gathering, marketing, and terming storage volumes.

Strong performance in this segment was primarily due to a combination of the pronounced tanker market, volatility in the crude oil market, and successful execution of our risk management strategies during the quarter. The second quarter marketing conditions are also favorable, although not quite as favorable as conditions in the first quarter. Market conditions incorporated into our forecast for the second half of the year are less favorable than we experienced over the last year.

Our guidance for the second quarter incorporates crude oil lease gathering volume of approximately 635,000 barrels per day and LPG volumes of approximately 58,000 barrels per day. The increase in leased volumes is due to our recent acquisition. Our adjusted segment profit barrel is forecast to be $0.75 per barrel for the midpoint of our second quarter guidance.

Maintenance capital expenditures for the quarter came in at approximately $4.7 million, which is slightly below our original projection. As we’ve mentioned during our previous conference call, our continued growth in size and scale allows us to increase our initial expansion capital budget from or to $230 million for the year and to build a backlog of over $300 million of incremental projects. We have recently expanded the 2006 capital program by approximately $20 million to $250 million to include a number of smaller projects that have crystallized in the first four months of the year.

Slide 8 highlights the sequential growth we have experienced in our internal expansion programs over the last five years. A listing of the major 2006 projects are on slide 9, along with the costs expected to be incurred in 2006 for each project.

These projects are all progressing and we have not made any material changes for timing or costs of these projects. Overall, our most significant project is the St. James terminal. We’ve completed two of the seven tank foundations, and we’ve begun construction on one tank. This facility remains on schedule for initial operations to begin the first half of 2007.

We’ve also made significant progress in the construction of the [Spraberry] natural gas storage facility, which is owned through our PAA/Vulcan Gas Storage joint venture. A rig is now on site and we expect to begin drilling on the first of the three caverns in the next few days. We forecasted that approximately 4 Bcf of storage capacity will be in service by mid 2007, with the remaining 20 Bcf of work capacity coming online in stages throughout 2008 and 2009.

I also want to provide some details on our recent acquisition activity. And, as Greg mentioned at the beginning of this call, we’ve been very active on the acquisition front this year. We’ve closed a number of transactions in the past few weeks, and in total we’ve closed five separate transactions for total consideration of approximately $360 million. Now, let me briefly describe each of these transactions, which are listed slide 10.

First, on April 18th, Plains LPG Services closed the acquisition of Andrews Petroleum Inc. and Lonestar Trucking Inc., collectively referred to as ‘Andrews,’ for $205 million plus approximately $9 million of transaction related costs. Andrews provides isomerization, fractionation, marketing, and transportation services to producers and consumers of natural gas liquids, or NGLs.

The primary assets consists of 200,000 barrels of NGL storage, a processing facility with [butane] capacity of 14,000 barrels per day, and NGL fractionation capacity of 9,600 barrels a day, a truck rack and a rail rack, and a fleet of over 50 tractor trailers. Primary assets are located near Bakersfield, California, and are in close proximity to major refineries and end product demand on the West Coast.

The bulk of the cash flows associated with the Andrews acquisition are derived from fee based contracts. However, similar to the crude oil business, the NGL and LPG, and LPG stands for liquefied petroleum gas, businesses exhibit certain inefficiencies that allow us to utilize our assets and market knowledge to capitalize on regional supply and demand imbalances.

Over the past several years we have methodically grown our LPG businesses through several acquisitions and development projects. The Andrews assets allow us to gain a strong foothold to that LPG market and meaningfully to expand our interest in propane, butane, and natural gas and gasoline business in the western United States.

Importantly, we believe the isomerization of butane is long-term, non-depleting activity, with strong fundamentals. We also have identified several growth opportunities related to these assets. Excluding any potential expansion of this facility, we expect these assets to generate approximately $25 million to $27 million to annual EBITDA in 2007.

In addition to the Andrews acquisition, we also purchased various midstream assets in four separate transactions for a total of $145 million net to PAA. First, Plains Marketing Canada L.P. purchased the remaining 85 percent interest in the Cactus Lake crude oil and pipeline that PMC operates in Canada. The transaction, this transaction is very consistent with our consolidation in the area.

Second, we purchased a 9.5 percent interest in the Plains operated Mesa pipeline system in West Texas, which increases our ownership in Mesa to 63 percent.

Third, PAA purchased crude oil gathering and transportation assets and related contracts in South Louisiana from SemCrude. This acquisition will complement our Gulf Coast activities, including the St. James terminal. In connection with this acquisition, we were able to consolidate and significantly expand the number of inland barges that we lease, and also entered into a five-year agreement to ensure that we will have access to inland barges we need to continue to service our customers.

And then, fourth, PAA/Vulcan Gas Storage purchased the Kimball Natural Gas Storage Facility, about a 2,000 Bcf facility located one mile from the PAA/Vulcan Bluewater Facility in Michigan.

Including the Andrews acquisition the total purchase price for the five transactions mentioned above was approximately $360 million net to PAA’s interest. Included in that figure is the purchase of approximately $36 million of crude oil inventory.

We believe there could be additional up side to further enhance the cash flows from each of these transactions, and we currently expect these assets to generate approximately $41 million to $44 million of annual EBITDA in 2007. The aggregate investment EBITDA multiple is approximately 8.2 times to 8.8 times, very attractive considering our cost of capital.

We are very pleased with these five complementary and strategic acquisitions, and even though the acquisition multiples have increased we think we will continue to have synergies that will allow us to be highly competitive, while at the same time providing opportunities to generate attractive economic returns for our unit holders.

And with that, I’ll turn the call over to Phil.

Thanks, Harry.

During my portion of the call, I’m going to review our capitalization and liquidity at the end of the first quarter, and then walk-through our updated financial guidance for the second quarter and for the year.

As summarized on slide 11, we maintained a strong credit profile during the first quarter, which was also positively impacted by our equity capital raising activities. Now, please note that we pre-funded approximately $100 million of the equity capital in anticipation of the Andrews acquisition prior to the end of the first quarter, and, as Harry noted, the acquisition didn’t close until after the quarter end.

And March 31st, PAA’s long-term debt outstanding remained substantially unchanged at approximately $952 million, while book equity increased to approximately 1.44 billion. As a result, our long-term debt to total cap ratio was approximately 40 percent. Our adjusted EBITDA to interest coverage ratio was approximately 6.9 times, and our long-term debt to first quarter annualized adjusted EBITDA was approximately 2.2 times. At quarter end all of our outstanding long-term debt had a fixed rate of interest and had an average life of approximately 7.4 years.

You should keep in mind that the foregoing metrics exclude our short-term debt and [contangled] related interest costs. Debt classified as short term primarily reflects borrowings under our contangle facility and our revolver for hedged crude oil and LPG, as well as NYMEX margin requirements. All the debt classified as short term is essentially self-liquidating debt, so the debt is repaid once the physical product is sold.

At March 31st the balance and short-term debt was approximately $876 million. That’s up from approximately $378 million at yearend. As we mentioned on our previous conference call in February, this increase was expected as the market shifted back into contangle for most of the first quarter.

As noted earlier, we raised equity during the first quarter of this year. In conjunction with the announcement of the Andrews acquisition on March 15th and in anticipation of several pending acquisitions, we announced our intent to raise up to approximately $150 million through the direct placement of 3.5 million common units. Of the 3.5 million common units, 2.3 million units were issued by the end of the quarter and, again, reflected in the March 31st balance sheet, and the remaining 1.2 million units or $50 million were issued in April.

The price we received for all of the units was 42.80 per unit, and that represented an approximate 4 percent discount to both the closing price on March 10th and the 15-day trailing average price at the time of the announcement. The discount to the direct purchasers was comparable to the underwriting discount, typically experienced in a public offering.

Importantly, for all of our unit holders this transaction enabled us to avoid the price deterioration that often occurs during the period between the announcement of an offering and the actual pricing. Just for a reference point, since the end of the third quarter of last year MLPs have experienced a 3.5 to 7.5 percent unit price decline from announcement to pricing, with respect to follow-on offerings.

Overall, the use of these equity proceeds and our excess cash flow from the first quarter to fund our acquisitions is consistent with our financial growth strategy and demonstrates our commitment to maintaining a strong balance sheet, significant liquidity and financial flexibility, in a volatile crude oil environment.

As a result of our strong capitalization liquidity entering the year, retention of cash flow and access to Partnership distributions and the recent private equity placement and despite approximately 360 million in acquisitions, excuse me, during the second quarter, we projected our long-term debt to cap ratio at the end of the second quarter, June 30th, will be approximately 42 to 45 percent, and that our leverage ratio and interest coverage ratio both will be well within our targeted credit metrics. We expect that almost 90 percent of our June 30 long-term debt will have a fixed rate of interest.

I’d also like to mention that a subsidiary of PAA, Vulcan Gas Storage, again, of which we own 50 percent, expects to close in the next week on $320 million of senior secured credit facilities. The facilities are non-recourse to PAA. The proceeds of the facilities will be used to fund construction of the Pine Prairie Natural Gas Storage Facility and to purchase the base gas.

Since we account for our investment in PAA/Vulcan using the equity method of accounting, and, therefore, do not consolidate any part of the assets or liabilities of PAA/Vulcan the debt will not be shown on our balance sheet, on PAA’s balance sheet.

I do want to point out, however, that PAA/Vulcan’s [low cap laws], we project that the debt to total cap ratio for that entity, PAA/Vulcan, will not exceed 55 percent during the construction phase of Pine Prairie.

One further note before I move on to guidance, our results for the first quarter were reduced by $0.04 per limited Partner unit due to the required accounting for earnings per unit under [EITF 0306], which in periods where net income exceeds distributions requires us to calculate earnings per unit as if all of our earnings for that period were distributed. As I’ve mentioned before on prior conference calls, this treatment does not impact our overall net income or other financial results, but does reduce our reported earnings per limited Partner unit.

I’ll now shift to a discussion of the Partnership’s financial guidance. Our guidance is based on reasonable expectations of volumes and expense levels, as well as our judgments and assumptions about the potential associated with our business development activities where the outcome is less than certain at this point, including the estimated contributions from recent acquisitions.

In addition, please keep in mind that the guidance I’ll be providing excludes non cash items that we believe affect comparability between periods. Our detailed guidance for the second quarter and for the full year was furnished via an 8-K this morning, so I’m just going to touch on the high points, and they are summarized on slide 12.

For the second quarter of this year, we’ve guided to an adjusted EBITDA range of $90 million to $100 million, to a midpoint of $95 million. This is slightly below our adjusted EBITDA in the first quarter, but above our original second quarter expectations that we included in our 2006 guidance issued in February. We received some benefit from the second quarter acquisitions and, as Harry noted earlier, we continue to see favorable market conditions, albeit it not quite as favorable as the first quarter.

For interest expense purposes, we anticipate average long-term debt balance to be approximately 1.2 billion. Results in interest expense of approximately $17.8 to $18.6 million. That uses a fully loaded weighted average interest rate of approximately 6 percent. The average interest rate includes our revolver commitment fees, the amortization of long-term debt premiums and discounts, and deferred amounts associated with terminated interest rate hedges.

As a reminder, interest on contangled related borrowings is included in cost of sales because we view the interest on these borrowings as part of the inventory costs. And just as a reference point, contangled related interest including cost of sales in the first quarter of this year was 8.6 million.

And, finally, depreciation and amortization will range between $22.7 million and $23.1 million.

These estimates result in adjusted net income of approximately $48 million to $60 million, and that equates to $0.51 to $0.65 per diluted unit.

For the full year this year we have increased our guidance based on first quarter performance, the expectation of slightly more favorable market conditions for the next few months, and the inclusion of our recently announced acquisitions.

For the full year we now expect adjusted EBITDA to be between 395 million and 425 million. The midpoint of 410 million is approximately $45 million higher than the original midpoint of our annual guidance, and that includes approximately, or is made-up of approximately $21 million from the partial year contribution from recent acquisitions, 6 million from the over performance from the first quarter results, and then an $18 million increase in the projected performance of the remainder of this year from our base level operations.

Interest expense is expected to range from approximately $69 million to $71 million, and is based on weighted average step balance for this year of approximately $1.2 billion. The fully loaded weighted average interest rate of approximately 6 percent. We are forecasting our incremental borrowing rate at approximately 5.9 percent.

Approximately 1.3 million of this year’s projected interest expense is expected to be non cash as it relates to the amortization of deferred amounts associated with interest rate hedges that were previously terminated.

Based on these estimates, we forecast adjusted net income of approximately 231 million to 265 million, that equates to $2.55 to $2.96 per diluted unit.

You should note that while total net income for the Partnership is not impacted by change in our annualized cash distribution level, a nickel increase in annualized distribution per unit equates to a nickel annualized decrease in net income for limited Partner unit, it excludes any impact to the EITF 0306, of course.

And let me also mention that the obligation for outstanding LCHIP awards as of the first of this year was reduced by approximately $6.3 million, which was recorded as accumulative affect of change in accounting principle, and that’s due to the adoption of SFAS 123, the revised 123, which is share based payments.

In simple terms, the adoption of this principle changed the method by which we accrue for the principally non cash LCHIP expense, and it decreased our lock to date on crude expense and liability relating to our LCHIP. More information on this will be included in the notes of our Form 10-Q, which we will file later.

Finally, consistent with past practice, we do not attempt to forecast any potential impact related to SFAS 133 as we have no way to control or forecast crude oil prices on the last day of each quarterly period. Accordingly, the guidance I’ve provided for the second quarter and for the year excludes any potential gains or losses associated with this accounting statement.

And then, again, for more detail on the projections and other assumptions, I direct you to the Form 8-K that we furnished this morning.

And just one other accounting related issue, and then I’ll turn the call back over to Greg. On April 1st of this year we adopted EITF 0413 which causes inventory purchases and sales under buy/sell transactions with the same counterparty to be treated as exchanges and netted for financial statement presentation. Going forward, this will significantly reduce our revenues for financial reporting purposes, but it will not impact our overall margins or our profits.

And, with that, I will now turn the call back over to Greg.

Thanks, Phil.

PAA’s 2006 accomplishments to date and strong first quarter results reinforce the effectiveness of the Partnership’s strategy and business model, which is designed to address the complexities inherent in the businesses and markets in which it operates. Because we target the more complex sectors of the broader midstream segment, we sometimes hear comments about the complexity of our business model.

And as can be shown on slide 13, while our business can appear confusing, when you remove the unique business complexities, the reality is is that the Partnership’s business model is very basic and straightforward. Although it’s been tweaked from time to time, the fundamental business model has changed little since we began implementing in the early 1990s.

We essentially combine four elements in our business model: strategic assets, capital, knowledge, and execution skills, to provide value added services to our customers and generate sustainable increasing profits in distribution for stakeholders.

Admittedly, our industry segment of choice is complex and requires an intimate knowledge of the constantly changing inefficiencies that exist in the midstream energy infrastructure, but it is those very complexities and inefficiencies that give us the opportunity to generate superior returns for our equity holders.

The execution of this business model has enabled us to consistently produce a base line of stable cash flow in all types of crude oil markets, and in certain types of markets to capture up side profits. As we have broadened our scale and scope through acquisition and internal expansion projects we have consistently adhered to our fundamental business model.

Furthermore, as we expand into complementary businesses, such as LPG, natural gas storage and refined products, or even into new domestic and international regions we believe that the solid execution of this business model will continue to deliver superior results, which favorably distinguish us from our competitors.

In addition, we have also consistently executed well defined and conservative financial growth strategy which has enabled us to maintain one of the strongest capitalization’s among our large cap MLP peer group, and that’s an achievement we believe the rating agencies will ultimately take note of.

While on the topic of execution, at the beginning of the year we provided five very specific goals for 2006 that involved delivering on our public guidance, maintaining financial strength, liquidity, and flexibility, optimizing our asset base, expanding our asset base through acquisitions, and increasing our distributions to unit holders.

Although our performance with respect to certain of these objectives can only be measured at the end of the year, I’m pleased to report that we believe we are on track to achieving or exceeding each of these goals, and a detailed recap of these goals and a status report of our performance today are set forth on slide 14.

In our February conference call we shared with you our positive outlook for growth beyond 2006, and our belief that while acquisitions could enhance that outlook our growing backlog of internal growth projects would underpin the Partnership’s ability to generate continued improvement in our operating and financial results, as well as continued distribution growth.

In the relatively short period of time between these conference calls, we believe the outlook and visibility for growth we shared you in Q4 has improved meaningfully. Inevitably, our results over the next several years will be impacted by a number of known as well as unknown factors and developments, both positive and negative.

But with that caveat, the improvement that I mentioned earlier is due in part to the additional acquisitions that we’ve announced, as well as continued strength of favorable crude oil market conditions. And, additionally, strengthening natural gas storage markets and the anticipated beneficial impact that such strengthening will have on our 50 percent ownership in PAA/Vulcan Gas Storage has similarly contributed to the improved outlook.

As we model our performance over the next several years we believe we have a solid case for forecasting continued improvement in operating and financial results. Given the fickle nature of the equity capital markets, we think it’s important to note that from an equity perspective we have pre-funded the vast majority of the capital necessary to fuel this growth, and, therefore, believe that PAA will not be required to rely heavily on the public equity capital market.

For example, even though our Pine Prairie Natural Gas Storage Facility will not be fully on stream until 2009, we have already raised and injected into PAA/Vulcan Gas Storage the equity necessary to finance our investment. In addition, we pre-funded the majority of the targeted equity financing for the recently announced acquisitions.

Moreover, despite steadily increasing quarterly distribution in each of the last eight consecutive quarters, PAA has been generating meaningful cash flow in excess of the distributions paid. By investing this cash flow we were able to access the cheapest form of equity capital available.

For those reasons, I want to spend just a few moments today to address our current distribution coverage and our visibility for future distribution growth. The figures that I reference are captured on slide 15 and assume the midpoint of our updated annual guidance figures.

Starting with the adjusted EBITDA for 2006 of 410 million and deducting our cash interest expense of approximately 69 million, maintenance capital of 23 million, and other non cash items of approximately 2 million, we arrive at a cash available for distribution of approximately 316 million.

Our stated distribution goal for 2006 is to average cash distributions during the year of $2.83 per unit, which essentially is 10 percent greater than last year, which is also the same current annualized distribution level that we currently have of $2.83. At that level and using our current units outstanding of 77.3 million units, the total cash distribution level required to meet that obligation is 253 million, which includes the general Partner’s share of total distribution. That calculation, alone, implies a very healthy coverage ratio of approximately 125 percent.

Our adjusted EBITDA and distributions paid in 2000 though 2006 guidance are summarized on slide 16, which illustrates that our distribution growth has averaged 7.5 percent per year since 2000. Looking beyond 2006 our results will incorporate a full year’s contribution from recent acquisitions and related synergies, as well as incremental cash flow contributions from a number of internal growth projects projected to come on stream. Therefore, we anticipate cash available for distribution will continue to increase.

Accordingly, subject to all the appropriate legal and operating caveats associated with forward-looking information generally, we anticipate PAA’s distribution growth over the next several years to fall within an approximate range of 7 to 9 percent per annum without respect to future acquisitions, while still at the same time remaining in line with or exceeding our targeted minimum distribution coverage of 105 percent to 110 percent. We think that’s powerful.

We believe that our investors place a premium value on stable, consistent distribution growth over an extended period of time. As a result, our game plan is to deliver consistent distribution growth and use the cash flow in excess of the annual distribution to fund a portion of our internal growth projects or to reduce debt.

In the event that we make significant acquisitions in the future, we will review the Partnership distribution coverage and financial position to determine what is in the best interest of the Partnership, taking into account all facts and circumstances that exist at that time.

In conclusion, we are pleased with the progress that we have made so far this year, and we believe that Plains All American is well positioned for continued growth and success. Thank you for your continued support of the Partnership, and we look forward to updating you on our progress in the next conference call.

I’d also like to announce that we will be having an Analyst Meeting in Houston on June 6th, and for more information on this event please call 713-646-4100 and ask for either Brad Thielmann or [Carolyn Tys], for information on that event.

That wraps up the items on our agenda, and we’d like to thank you all for your participation.

For those who have joined us late, a complete written transcript of the prepared comments of this call will be posted on our web site at www.paalp.com very shortly, as well as an option to download into an MP3 file.

Darcy, at this time, we’re ready to open the call up for questions.

[OPERATOR INSTRUCTIONS.]

Our first question will come from [Richard Bolivia] of Deutsche Bank.

How are you? Just a quick one on more of an industrial theme. We just wanted to kind of get a better handle on crude storage and the nature of crude storage, if you had anything on that given Steerhead’s opening and Exxon starting to run some more Canadian heavy crude down into Texas. Just kind of what you’re seeing as trends and storage transport, you know, particularly in the [Cushing] area?

Well, certainly, the market right now is paying everybody to store, you’re seeing some fairly steep contangle. I would say we’re still probably in the transition period. Certainly, Canadian crude started moving into Cushing, I believe it was around the 1st of March, and then Exxon, as you referred to, has started moving in crude recently.

So, I think the market is still settling out, but, clearly, if you look at the NYMEX and you’ll see that the market is basically rewarding or paying people to store crude now on a monthly basis.

And do you guys have any interest in kind of getting involved with storing Canadian versus WTI, any of that kind of thing?

We’re certainly – I mean our customers really tell us many times what they want us to store. I mean we have, one of the things, the premiere facilities in Cushing and, you know, ultimately it’s good for the industry to have more Canadian crude in, so we’re really indifferent to what our customers want us to store for their account.

Okay, great. Thanks, guys.

Thank you.

[OPERATOR INSTRUCTIONS.]

Gentlemen, there appear to be no questions at this time.

All right. Well, thanks to everybody who participated in the call, and we look forward to updating you on our next conference call. Thank you.

Thank you. Ladies and gentlemen, this does conclude today’s teleconference. You may all disconnect your lines at this time, and have a wonderful day.