Transcript No Slide Title

IPAA Mid-Year Meeting
Colorado Springs, Colorado
June 14, 2004
Plains All American Profile (NYSE: PAA)
Operational Metrics
Aggregate Size


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


Annual Revenue (2003)
Total Assets (3/31/04)
Enterprise Value
Equity Market Cap.
2003 Fortune 500 Rank
# Unitholders (approx.)
$12.6 B
$2.2 B
$3.0 B
$2.1 B
155
30,000
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


-2-
Assets:
Pipelines (miles)
Tankage (MMbbls.)
Truck Fleet (units)
14,000+
36.6
+/- 500
Crude handled (MMbpd)
2.4
Approx. number of grades
& varieties handled
50+
Geographic footprint:
USA (states)
Canada (provinces)
Employees
+/- 40
5
+/- 2,000
PAA’s Role in the Crude Oil Distribution Chain
Plains All American’s Operations
Gathering, Marketing, Terminalling,
Storage and Pipelines
Producers
Refiners
Pipeline
Truck
Pipeline
Pipeline Gathering
Injection Station
Barge
-3-
Terminal / Storage /
Exchange
Location
PAA’s Principal Business Strategy
Paraphrased Excerpt
Provide efficient solutions to the numerous
complexities inherent in the crude oil
industry and the regional crude oil supply
and demand imbalances that exist in the
U.S. and Canada……..
-4-
Is the U.S. Running Out of Oil?
News Flash
The United States:
 Comprises < 5% of World Population
 Generates ~ 10% of World Petroleum
Production
 Consumes ~ 25% of World Petroleum
Production
 Currently Imports ~62% of Its’ Daily
Crude Oil Consumption
-6-
Accordingly, in practical terms, the U. S.
issue is already resolved.
The remaining question is:
World
Is the U.S. Running Out of Oil?
A Popular Topic, but No Clear Public Consensus
“Enough oil to last for
500 years.”
“We’re draining our
reserves dry.”
Houston Chronicle
Houston Chronicle
May 30, 2004
May 30, 2004
Llewellyn King
H. Sterling Burnett
Chairman & CEO
Senior Fellow
King Publishing Co.
National Center for
Publisher for:
Policy Analysis
White House Weekly
& Energy Daily
-8-
GLA Working Hypothesis:
NO
Why Not?
 Free markets work.
 Changing unit economics impact both supply
and demand.
 There are significant, recoverable crude oil
resources remaining – at the right price.
-9-
Free Markets At Work:
Sample Factors
Impact of Rising Prices
Impact of Low Prices
•Conservation & Demand
destruction
•Unrestrained use &
Demand stimulation
•Fuel switching
•Fuel switching
•Reserve & production
expansion
•Reserve & production
contraction
•Increase in service costs
•Pressure on service costs
•Innovation & technology
are rewarded ($$$)
•Low cost operators are
rewarded ($$$) &
technology advances
-10-
Elasticity of Oil Supply and Demand
United States Oil Consumption & Commodity Prices
Texas Production
Full Deregulation
Oil Consumption MMbls/d
Sources: EIA, BP, WTRG, Bloomberg, various.
-11-
$/bbl
'04
'01
95
98
89
92
83
86
77
80
?
71
74
65
68
24
22
20
18
16
14
12
10
Regulated
Arab Embargo &
U.S. Price
Regulated
$40.00
$35.00
$30.00
$25.00
$20.00
$15.00
$10.00
$5.00
$0.00
Audience Participation
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

Conservation
Demand Destruction
Lottery Tickets
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The Forecasts of Today Seldom
Become the Reality of
Tomorrow
Jan
- 95
Jul
-95
Jan
- 96
Jul
-96
Jan
- 97
Jul
-97
Jan
- 98
Jul
-98
Jan
- 99
Jul
-99
Jan
- 00
Jul
-00
Jan
- 01
Jul
-01
Jan
- 02
Jul
-02
Jan
- 03
Jul
-0
Jan 3
- 04
Jul
-04
Jan
- 05
Accuracy of the Market’s Vision on Prices
$45.00
$40.00
Actual Price
Forward Curve
$35.00
$30.00
$25.00
$20.00
$15.00
$10.00
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Economic Jaws of Inventory & Price –
Leading Indicator or Symptomatic Result?
U.S. Crude Oil Inventory vs Oil Price
$40.00
$35.00
$30.00
$25.00
$20.00
$15.00
$10.00
$5.00
$0.00
Inventory
Source: Bloomberg
Oil Price
-15-
$/bo
370
350
330
310
290
270
250
Jan-93
Sep-93
May-94
Jan-95
Sep-95
May-96
Jan-97
Sep-97
May-98
Jan-99
Sep-99
May-00
1-Jan
1-Sep
May-02
Jan-03
Sep-03
May-04
mmbls
(The Last 10+ years)
-16-
OK Greg, if it is that simple,
why is it so hard to drive a
consensus on the subject?
Economic theories (and realities) are
simple, but the inner workings of the
oil industry are very complex.
How Complicated is the U.S.
Crude Oil Industry?
You be the judge.
The U.S. Demand Side of The Equation
Volumes Approximate 2003 Daily Average (MMBLS)
Oil Exports
.001
Other
Liquids
0.9
(1)
Refined Products
Imports Exports
2.6
1.0
Other
Liquids
0.1
Aggregate Output
Mogas
Crude
Oil
Refinery
Input
15.3
Stocks
& Net
Loss/Gain
(0.1)
NGPL
Refinery
Input
0.4
(1) Source: EIA; BP; GLA estimates
Total
Refinery
Input
16.6
Processing
Gain
1.0
44%
Distillate 20%
Output
17.6
NGPL
Direct Use
& Blends
0.7
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LPG
10%
Jet
8%
Resid
4%
Other
14%
Additional Complicating Factors Affecting
Supply, Demand & Product Slate
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

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


Changes in natural gas frac spreads affect availability
of blendstock and raw products
Seasonality (changing feedstock demands)
Weather
Transportation & scheduling logistics
Competing fuels (natural gas, coal, etc.)
Restrictions on product specifications
Product imports/exports
Multiple varieties of crude
Metals content
Emmission issues
Scheduled/Unscheduled downtime
Etc., etc., etc.
-20-
Additional Complicating Factors Affecting
Supply, Demand & Product Slate












Changes in natural gas frac spreads affect availability
of blendstock and raw products
Seasonality (changing feedstock demands)
Weather
Transportation & scheduling logistics
Competing fuels (natural gas, coal, etc.)
Restrictions on product specifications
Product imports/exports
Multiple varieties of crude
Two areas of
Metals content
Emmission issues
Focus.
Scheduled/Unscheduled downtime
Etc., etc., etc.
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Getting 9.6 mmb/d of Oil to The U.S.
Source: BP
-22-
All Regions are Supply Deficient, but the Landlocked
PADD II Region is the Focus Area for Transportation
Petroleum Administration Defense Districts
IV
(0.2 mmb/d)
V
(0.8 mmb/d)
II
(1.5 mmb/d)
(2.8 mmb/d)
I
III
mmb/d
(3.9 mmb/d)
Total Refinery Inputs 15.3
Domestic Production
5.7
Reliance on Imports
9.6
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U.S. Pipeline Infrastructure Designed to Displace
Crude to Meet PADD II Demand
IV
Inter-PADD Movements
Driven Primarily by
Economics of:
II
V
I
•Transportation
differentials
III
•Quality issues (intergrade surplus/shortage &
refinery constraints)
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PADD II Demand to Be Satisfied by Imports from
Canada, Cushing & Gulf Coast
PADD II Supply Shortfall
(Millions of Barrels per Day)
4.0
3.5
Refinery Inputs: 3.3 MMbbls
3.0
2.5
2.0
Supply
Shortfall 2.8 MMbbls
1.5
1.0
0.5
Source: Energy Information Administration
IV
II
V
I
III
BP Pipeline
PAA Basin Pipeline
STG Pipeline
Link Pipeline
PAA Red River Pipeline
Seaway Pipeline
Mid-Continent (Sun) Pipeline
BP Pipeline
Shell (W. Tulsa) Pipeline
Cush-Po Pipeline
Phillips Borger Pipeline
Mid-Continent Pipeline
Osage Pipeline
Ozark Pipeline
Gulf of
Mexico
Foreign
Imports
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Capline Pipeline
System
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
1990
1989
1988
1987
1986
1985
Production: .46 MMbbls
1984
0.0
Multiple Crude Grades Add to Complexity
Domestic
Sour
Sweet
Foreign
Sweet
Sour
Bonny Light
Spraberry
W. Tx. Sour
Scurry
Poseidon
Brent
W. Tx. Int.
Mars Blend
Brass River
Okla. Sweet
Okla. Sour
Oseburg
Kansas Sweet West Coast OCS
Gullfaks
N. TX Sweet
Sunniland
Cano Limon
East TX Sweet W. Central TX
Light LA Sweet Quitman Sour
Cuisana
Heavy LA Sweet San Joaquin LightForties
San Joaquin Heavy
Eugene Island
Bonita
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Mesa 30
Oriente
Maya
Arab Medium
Furiel
Leona 24
Arab Heavy
Mesa 28
Lago Cinco
Olmeca
Basrah
BCF 17
Not All Crude Oil Is Equal
Gross Product
Value in $/bbl
$50.00
$40.00
$43. 31
10%
$39.59
32%
$30.00
45%
38%
$20.00
$10.00
45%
30%
$0.00
1 bbl WTI
1 bbl Arab Medium
Note: Values shown are approximate based on estimated yields and
Platts’ indicated values on June 8, 2004.
-27-
Fuel Oil
Distillate
Gasoline
5
l- 9
Ja 5
n-9
6
Ju
l- 9
Ja 6
n-9
7
Ju
l- 9
Ja 7
n-9
8
Ju
l- 9
Ja 8
n-9
9
Ju
l- 9
Ja 9
n-0
0
Ju
l- 0
Ja 0
n-0
1
Ju
l- 0
Ja 1
n-0
2
Ju
l- 0
Ja 2
n-0
3
Ju
l- 0
Ja 3
n-0
4
Ju
n-9
Ja
Variations in Selected Domestic
Differentials to WTI
$1.00
$0.00
-$1.00
-$2.00
-$3.00
-$4.00
MIDLAND WTI
LLS
HLS
WTS
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EIC
BONITO
POS
MARS
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Apr-04
Mar-04
Feb-04
Jan-04
Dec-03
Nov-03
Oct-03
Sep-03
Aug-03
Jul-03
Jun-03
May-03
Apr-03
Mar-03
Feb-03
Jan-03
Dec-02
Nov-02
Oct-02
Sep-02
Aug-02
Jul-02
Jun-02
May-02
Variations in Selected
Canadian Differentials to WTI
$14.00
$12.00
$10.00
$8.00
$6.00
$4.00
$2.00
$0.00
-$2.00
-$4.00
Example of an Impending Complication:
Storm Clouds Forming or Light Shower?
Situation:
A. U.S. market is currently balanced with foreign
waterborne imports.
B. Canada is projected to ramp up oil sands
production ~500,000 b/d+
C. U.S. GOM is projected to ramp up deepwater
production ~500,000 b/d+
D. U.S. demand is not projected to simultaneously
grow by 1 million b/d.
E. Mideast Politcs are highly unstable.
-30-
Example of an Impending Complication:
Storm Clouds Forming or Light Shower? Continued.
Possible Outcomes:
1. The U.S. begins exporting over 500,000 b/d.
2. U.S. producers shut-in over 500,000 b/d or reduce drilling
activities (at ~ $40.00/bo) to make room for incremental
volumes.
3. Foreign sources of waterborne imports happily withdraw
500,000 b/d from the market (thus losing market share in
the world’s most critical market?).
4. Inventories begin to build; price pressure hits the U.S.
market and competition among grades and qualities
intensifies.
5. Something unexpected happens to balance the market
(strike, Mideast disturbance, explosion in demand, etc.)
6. Some combination of all of the foregoing
-31-
Chinese Proverb (Curse):
“May you live in interesting times.”
Oil Industry Prediction (Challenge):
“We are going to be living in
interesting times.”
GLA View is that both statements are
correct, with slight editing….
, if the price is
high enough.
Cheap
GLA Edit
GLA Edit
“We’re draining our
^
reserves dry.”
“Enough oil to last for
500 years .”
Houston Chronicle
Houston Chronicle
May 30, 2004
May 30, 2004
Llewellyn King
H. Sterling Burnett
Chairman & CEO
Senior Fellow
King Publishing Co.
National Center for
Publisher for:
Policy Analysis
^
White House Weekly
& Energy Daily
-33-
World
Is the U.S. Running Out of Oil?
Not any time soon…
…,but it could get REAL expensive.
NYSE: PAA
Except for the historical information contained herein, the matters
discussed in this presentation are forward-looking statements that
include risks and uncertainties. These risks and uncertainties include,
among other things, market conditions, governmental regulations and
other factors discussed in Plains All American Pipeline, L.P.’s filings
with the Securities and Exchange Commission.