LONG BEACH, CALIF., May 3 /CNW/ – Pacific Energy Partners, L.P.
(NYSE:PPX) (the “Partnership”) announced that net income for the three months
ended March 31, 2006, was $11.6 million, or $0.30 per limited partner unit,
compared to net income of $3.4 million, or $0.17 per limited partner unit, in
the first quarter of 2005. Recurring net income for the first quarter of 2005
was $10.3 million, or $0.34 per limited partner unit. Recurring net income for
the 2005 quarter excluded a $2.0 million insurance deductible associated with
the Line 63 oil release, a $3.1 million expense for the accelerated vesting of
restricted units under the Partnership’s long-term incentive plan that
resulted from the change of control of the general partner and $1.8 million of
transaction costs related to the change of control.
The results for the first quarter of 2006 reflect the benefit of the
September 30, 2005, acquisition of refined products terminals and a refined
products pipeline from Valero L.P. and increased margins for Pacific Marketing
and Transportation (“PMT”). Partially offsetting these increases were income
reductions in the Rocky Mountain region caused by substantial downtime at a
major Rocky Mountain refinery and lower tank utilization at Pacific Terminals.
The Partnership incurred higher interest expense in the first quarter of 2006
and there were approximately 32% more units outstanding compared to the 2005
quarter, both attributable to the financing of the Valero asset acquisition.
General and administrative costs were also higher this quarter.
On April 21, 2006, the Partnership announced an increase in its cash
distribution of $0.0125 per unit to $0.5675 per unit for the first quarter of
2006, or $2.27 per unit annualized. This represents an increase of 2.3% over
the fourth quarter 2005 distribution level and 10.7% over the first quarter
2005 distribution level. The distribution will be paid on May 12, 2006, to
holders of record as of May 1, 2006.
“We are pleased to be able to increase our cash distribution again this
quarter,” said Irv Toole, President and CEO. “Although net income per unit for
the first quarter was below our previous guidance, due in large part to the
impact of the unplanned Rocky Mountain refinery downtime, our outlook for the
full year remains positive due to the number and quality of organic growth
projects that are currently under construction or scheduled to commence
construction later this year. We look forward to additional increases in our
distributions as we complete these projects and continue to make accretive
acquisitions.”
Distributable cash flow available to the limited partners’ interest for
the first quarter of 2006 was $21.5 million, compared to $13.0 million in the
first quarter of 2005. On a weighted average and diluted basis, there were
39,313,000 limited partner units outstanding during the first quarter of 2006
compared to 29,673,000 units outstanding in the 2005 quarter. EBITDA (earnings
before interest, tax, depreciation and amortization expenses) was $31.0
million for the three months ended March 31, 2006, compared to $16.1 million
in the first quarter of 2005.

OPERATING RESULTS BY SEGMENT

WEST COAST BUSINESS UNIT

Operating income was $17.6 million for the three months ended March 31,
2006, compared to $9.7 million in the corresponding period in 2005, which
period included a $2.0 million insurance deductible expense relating to an oil
release. This increase was primarily due to increased margins for Pacific
Marketing and Transportation and the addition of the Northern California and
East Coast terminals that were acquired on September 30, 2005, from Valero
L.P. The Northern California terminals are operating at 100% capacity with
450,000 barrels of additional storage capacity currently under construction at
Martinez. This storage is scheduled to be operational early in the third
quarter of 2006. Due to strong customer demand, it is expected that the
capital budget for the West Coast Business Unit will be increased later this
year to construct additional storage capacity at Martinez. At the East Coast
terminals, an expansion of ethanol storage, handling and blending capabilities
will become operational in the second quarter.
PMT’s margins in the first quarter of 2006 were significantly higher than
in the prior year’s quarter. In the 2005 quarter, pricing pressures from
steeply discounted crude oil imports and an unfavorable purchase contract
which expired on March 31, 2005, adversely affected margins. In addition,
crude oil contracts acquired on July 1, 2005, benefited PMT’s business in the
current quarter.
During the first quarter, the impact of the West Coast pipeline volume
decline was largely offset by tariff increases on Line 2000 and Line 63, and a
substantial increase in Bakersfield delivery volumes. West Coast volumes
transported to Los Angeles for the three months ended March 31, 2006 were
approximately 14% lower than in the first quarter of 2005. The primary reasons
for the variance were natural production declines, third-party production
problems, and higher than normal San Francisco area refinery turnarounds in
the first quarter of 2005 which resulted in increased volumes transported
south to Los Angeles area refineries. Partly offsetting this impact, on May 1,
2005, Line 2000 tariffs were increased by $0.065 per barrel, and on August 1,
2005, a temporary surcharge of $0.10 per barrel was implemented on Line 63
long-haul movements to recover the costs of the oil release and other storm
related damages experienced last winter. In addition, deliveries to
Bakersfield refineries almost doubled from the prior year quarter, as a result
of pipeline modifications in the San Joaquin Valley completed October 1, 2005,
which increased delivery capacity to the Bakersfield area refineries.
Pacific Terminals’ storage utilization was 8% lower than in the first
quarter of 2005 when a record utilization of 94% was achieved. This was the
result of extensive refinery maintenance and resultant demand for black oil
storage in the prior year quarter. There are currently two major profit
generating projects under construction: the reactivation of 600,000 barrels of
storage at the Alamitos terminal and infrastructure changes to increase
pumping capacity and improve operating efficiencies. These projects are
expected to be completed in the second half of 2006.

PIER 400

The Partnership continues to advance development of the Pier 400
deepwater import terminal in the Port of Los Angeles. As previously announced,
long term volume commitments have been signed by Valero and ConocoPhillips,
and it is anticipated that with additional customer commitments that are
currently being negotiated, the estimated 250,000 barrels per day of
offloading capacity will be fully subscribed. The draft environmental impact
report is expected to be issued in the second quarter of 2006, and the
Partnership expects to receive the permits necessary to begin construction in
first quarter 2007. Completion of construction and start-up are expected in
the first half of 2008. The total investment is now estimated at $315 million
and provides for four million barrels of storage capacity. The cost estimate
was increased by approximately $65 million, principally to add an additional
1.0 million barrels of storage capacity with a commensurate increase in
expected revenues.

ROCKY MOUNTAIN BUSINESS UNIT

Operating income was $9.8 million for the three months ended March 31,
2006, compared to $9.6 million in the corresponding period in 2005. Extensive
downtime in the first quarter of 2006 at a major Rocky Mountain refinery had a
significant impact on income. Volumes transported south on the Rangeland
system were down 16% compared to the first quarter of 2005, and lower volumes
were also experienced on the Rocky Mountain Products Pipeline. In addition,
the refinery downtime negatively impacted the pricing of crude oil inventory
at the end of the quarter. Volumes on the Western Corridor and Salt Lake City
Core pipeline systems increased by 8% and 14%, respectively.
Several significant capital initiatives were accomplished in the first
quarter of 2006. Construction of the initiating facility for synthetic crude
oil in Edmonton, Alberta, was completed in March 2006, and initial movements
of synthetic crude oil began. This connection provides direct access to
synthetic crude oil in Edmonton for delivery through the Partnership’s
pipeline systems to U.S. Rocky Mountain refineries. In addition, to facilitate
the movement and maintain the quality of synthetic crude oil, three 120,000
barrel tanks were constructed at storage facilities along the pipeline system.
As previously announced, the Partnership is proceeding with the
construction of a new 16-inch crude oil pipeline from the terminus of Frontier
Pipeline near Evanston, Wyoming to the Salt Lake City, Utah refining complex.
This new pipeline, which will be 91 miles in length, will be able to transport
multiple grades of crude oil in segregated batches and will provide 95,000
barrels per day of capacity to meet increased crude oil demand in Salt Lake
City. The project will be constructed in two phases, the first to be completed
in the fourth quarter of 2006 and the second to be completed by October 2007.
The total cost for both phases of the project is expected to be approximately
$77 million and is supported by firm, 10-year transportation agreements with
four Salt Lake City refiners.
In addition, a subsidiary of the Partnership signed a transportation
agreement with Frontier Oil and Refining Company to construct a 24-inch crude
oil pipeline, approximately 10 miles in length, from Guernsey, Wyoming to its
Fort Laramie, Wyoming tank farm and a 16-inch crude oil pipeline,
approximately 85 miles in length, from Fort Laramie to Frontier Oil’s Cheyenne
refinery, in exchange for Frontier Oil’s ten year firm commitment to ship
35,000 barrels per day and lease approximately 300,000 barrels of storage
capacity at Fort Laramie to support the construction of the new pipeline. The
total project cost is estimated at $59 million. Construction will begin in the
second quarter of 2006 and is expected to be completed in the second quarter
of 2007. Initial capacity will be 55,000 barrels per day which can be expanded
to a capacity of 90,000 barrels per day.

CORPORATE ITEMS

General and administrative expenses were $6.9 million in the first
quarter of 2006, approximately $1.7 million higher than in the first quarter
of 2005. This increase was associated with support of newly acquired assets,
professional fees, and costs of a new LB Pacific, LP option plan, which are
required by generally accepted accounting principles to be recorded as a
Pacific Energy expense even though the plan is funded by LB Pacific, LP, not
the Partnership. The first quarter general and administrative expenses, which
include audit and Schedule K-1 costs, were higher than are expected to be
incurred in each quarter of the remainder of 2006.
Interest expense was $9.1 million for the first quarter of 2006, $3.5
million greater than in the same period of 2005, due to the increase in debt
for the new assets, as well as higher floating interest rates.

LOOKING FORWARD

For the quarter ending June 30, 2006, Pacific Energy is forecasting net
income of $0.39 to $0.45 per unit and EBITDA of $35 million to $38 million.
For full year 2006, Pacific Energy is forecasting net income of $1.53 to $1.63
per unit and EBITDA of $142 million to $151 million.
For the full year, Pacific Energy is projecting total capital
expenditures of $166 million, including $150 million for expansion projects,
$7 million for transition capital projects, and $9 million for sustaining
capital projects. The $44 million increase from first quarter’s estimates
includes expenditures associated with the Salt Lake City and Cheyenne pipeline
projects described above.

OTHER MATTERS

The Partnership will host a conference call at 2:00 p.m. EDT (11:00 a.m.
PDT) on Thursday, May 4, 2006, to discuss the results of the first quarter of
2006. Please join Pacific Energy at www.PacificEnergy.com for the live
broadcast. The call, with questions and answers, will continue to be available
on the Partnership’s web site following the call.

About Pacific Energy:

Pacific Energy Partners, L.P. is a master limited partnership
headquartered in Long Beach, California. Pacific Energy is engaged principally
in the business of gathering, transporting, storing and distributing crude
oil, refined products and other related products. Pacific Energy generates
revenues by transporting such commodities on its pipelines, by leasing
capacity in its storage facilities and by providing other terminaling
services. Pacific Energy also buys and sells crude oil, activities that are
generally complementary to its crude oil operations. Pacific Energy conducts
its business through two business units, the West Coast Business Unit, which
includes activities in California and the Philadelphia, PA area, and the Rocky
Mountain Business Unit, which includes activities in five Rocky Mountain
states and Alberta, Canada.