-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, KVwZovBCPXTpEHSXjpeuEFD1jN8G6AOP7DYzaX2XX7EuD4MHvusYBX1ZLLLtllUp DXFDi720XOe2xL2LUgCWSg== 0000899243-00-001331.txt : 20000516 0000899243-00-001331.hdr.sgml : 20000516 ACCESSION NUMBER: 0000899243-00-001331 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000331 FILED AS OF DATE: 20000515 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PLAINS RESOURCES INC CENTRAL INDEX KEY: 0000350426 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-PETROLEUM & PETROLEUM PRODUCTS (NO BULK STATIONS) [5172] IRS NUMBER: 132898764 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-10454 FILM NUMBER: 631010 BUSINESS ADDRESS: STREET 1: 500 DALLAS STREET 2: STE 700 CITY: HOUSTON STATE: TX ZIP: 77002 BUSINESS PHONE: 7136541414 MAIL ADDRESS: STREET 1: 1600 SMITH STREET STREET 2: SUITE 1500 CITY: HOUSTON STATE: TX ZIP: 77002 10-Q 1 FORM 10-Q FOR QUARTER ENDED MARCH 31, 2000 ================================================================================ UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2000 OR [_] TRANSITION REPORT PURSUANT TO SECITON 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 COMMISSION FILE NUMBER: 0-9808 PLAINS RESOURCES INC. (Exact name of Registrant as Specified in Its Charter) Delaware 13-2898764 (State or Other Jurisdiction of (I.R.S. Employer Incorporation or Organization) Identification No.) 500 Dallas Street Houston, Texas 77002 (Address of Principal Executive Offices) (ZIP CODE) (713) 654-1414 (Registrant's Telephone Number, Including Area Code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [_] 17,979,237 shares of common stock $0.10 par value, issued and outstanding at May 9, 2000. ================================================================================ PLAINS RESOURCES INC. AND SUBSIDIARIES TABLE OF CONTENTS Page PART I. FINANCIAL INFORMATION CONSOLIDATED FINANCIAL STATEMENTS: Consolidated Balance Sheets: March 31, 2000 and December 31, 1999................. 3 Consolidated Statements of Operations: For the three months ended March 31, 2000 and 1999... 4 Consolidated Statements of Cash Flows: For the three months ended March 31, 2000 and 1999... 5 Notes to Consolidated Financial Statements................ 6 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.................. 17 PART II. OTHER INFORMATION................................ 26 2 PLAINS RESOURCES INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (in thousands, except share data)
March 31, December 31, 2000 1999 --------------- --------------- (unaudited) ASSETS CURRENT ASSETS Cash and cash equivalents $ 17,626 $ 68,228 Accounts receivable and other 525,612 521,948 Inventory 59,649 78,349 Assets held for sale (Note 4) - 103,615 ----------- ----------- Total current assets 602,887 772,140 ----------- ----------- PROPERTY AND EQUIPMENT Oil and natural gas properties - full cost method Subject to amortization 686,152 671,928 Not subject to amortization 53,140 52,031 Crude oil pipeline, gathering and terminal assets 460,698 458,502 Other property and equipment 6,455 7,706 ----------- ----------- 1,206,445 1,190,167 Less allowance for depreciation, depletion and amortization (410,591) (402,514) ----------- ----------- 795,854 787,653 ----------- ----------- OTHER ASSETS 105,324 129,767 ----------- ----------- $ 1,504,065 $ 1,689,560 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable and other current liabilities $ 541,604 $ 546,393 Notes payable and other current obligations 511 109,880 ----------- ----------- Total current liabilities 542,115 656,273 BANK DEBT 135,800 137,300 BANK DEBT OF A SUBSIDIARY 159,100 259,450 SUBORDINATED DEBT 277,822 277,909 OTHER LONG-TERM DEBT 2,044 2,044 OTHER LONG-TERM LIABILITIES AND DEFERRED CREDITS 14,533 21,107 ----------- ----------- 1,131,414 1,354,083 ----------- ----------- MINORITY INTEREST 176,580 156,045 ----------- ----------- CUMULATIVE CONVERTIBLE PREFERRED STOCK, STATED AT LIQUIDATION PREFERENCE 138,813 138,813 ----------- ----------- NON-REDEEMABLE PREFERRED STOCK, COMMON STOCK AND OTHER STOCKHOLDERS' EQUITY Series D Cumulative Convertible Preferred Stock, $1.00 par value, 46,600 shares authorized, issued and outstanding, 23,300 23,300 Common Stock, $0.10 par value, 50,000,000 shares authorized; issued and outstanding 17,951,856 and 17,924,050 shares at March 31, 2000 and December 31, 1999, respectively 1,795 1,792 Additional paid-in capital 130,268 130,027 Accumulated deficit (98,105) (114,500) ----------- ----------- 57,258 40,619 ----------- ----------- $ 1,504,065 $ 1,689,560 =========== ===========
See notes to consolidated financial statements. 3 PLAINS RESOURCES INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share data) (unaudited)
Three Months Ended March 31, ---------------------------- 2000 1999 ------------- ------------- (restated) REVENUES Oil and natural gas sales $ 33,292 $ 21,142 Marketing, transportation, storage and terminalling revenues 998,928 455,760 Gain on sale of assets (Note 4) 48,188 - Interest and other income 4,814 69 ----------- --------- 1,085,222 476,971 ----------- --------- EXPENSES Production expenses 15,495 11,563 Marketing, transportation, storage and terminalling expenses 962,766 436,565 Unauthorized trading losses and related expenses (Note 3) - 21,205 General and administrative 11,081 4,062 Depreciation, depletion and amortization 15,212 7,170 Interest expense 15,874 8,753 ----------- --------- 1,020,428 489,318 ----------- --------- Income (loss) before income taxes, minority interest and extraordinary item 64,794 (12,347) Minority interest 29,584 (4,289) ----------- --------- Income (loss) before income taxes and extraordinary item 35,210 (8,058) Deferred income tax expense (benefit) 13,732 (2,897) ----------- --------- Income (loss) before extraordinary item 21,478 (5,161) Extraordinary item, net of tax benefit and minority interest (1,365) - ----------- --------- NET INCOME (LOSS) 20,113 (5,161) Less: cumulative preferred stock dividends 3,718 2,361 ----------- --------- NET INCOME (LOSS) AVAILABLE TO COMMON STOCKHOLDERS $ 16,395 $ (7,522) =========== ========= Basic earnings (loss) per share: Income (loss) before extraordinary item $ 0.99 $ (0.45) Extraordinary item (0.08) - ----------- --------- Net income (loss) $ 0.91 $ (0.45) =========== ========= Diluted earnings (loss) per share: Income (loss) before extraordinary item $ 0.73 $ (0.45) Extraordinary item (0.05) - ----------- --------- Net income (loss) $ 0.68 $ (0.45) =========== =========
See notes to consolidated financial statements. 4 PLAINS RESOURCES INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) (unaudited)
Three Months Ended March 31, ----------------------------- 2000 1999 ------------- -------------- (restated) CASH FLOWS FROM OPERATING ACTIVITIES Net income (loss) $ 20,113 $ (5,161) Items not affecting cash flows from operating activities: Depreciation, depletion and amortization 15,212 7,170 Gain on sale of assets (Note 4) (48,188) Minority interest in income of a subsidiary 27,677 (4,289) Deferred income taxes 12,859 (2,897) Other noncash items (3,834) 390 Change in assets and liabilities from operating activities: Accounts receivable and other (28,711) (36,485) Inventory (19,312) 13,863 Pipeline linefill - (2,490) Accounts payable and other current liabilities (11,966) 33,747 --------- -------- Net cash provided by (used in) operating activities (36,150) 3,848 --------- -------- CASH FLOWS FROM INVESTING ACTIVITIES Payments for crude oil pipeline, gathering and terminal assets (2,198) (2,702) Payments for acquisition, exploration and development costs (12,764) (27,936) Payments for additions to other property and assets (137) (532) Proceeds from sale of assets (Note 4) 219,100 - --------- -------- Net cash provided by (used in) investing activities 204,001 (31,170) --------- -------- CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from long-term debt 66,100 78,300 Proceeds from short-term debt 20,000 4,250 Principal payments of long-term debt (192,100) (47,500) Principal payments of short-term debt (105,219) (9,900) Distributions to unitholders of subsidiary (7,234) (2,525) Other - (958) --------- -------- Net cash provided by (used in) financing activities (218,453) 21,667 --------- -------- Net decrease in cash and cash equivalents (50,602) (5,655) Cash and cash equivalents, beginning of period 68,228 6,544 --------- -------- Cash and cash equivalents, end of period $ 17,626 $ 889 ========= ========
See notes to consolidated financial statements. 5 PLAINS RESOURCES INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) NOTE 1 -- ORGANIZATION AND ACCOUNTING POLICIES The consolidated financial statements include the accounts of Plains Resources Inc., our wholly-owned subsidiaries and Plains All American Pipeline, L.P. ("PAA"), in which we have an approximate 54% ownership interest. Plains All American Inc., one of our wholly-owned subsidiaries, serves as PAA's sole general partner. For financial statement purposes, the assets, liabilities and earnings of PAA are included in our consolidated financial statements, with the public unitholders' interest reflected as a minority interest. The accompanying consolidated financial statements and related notes present our consolidated financial position as of March 31, 2000 and December 31, 1999 and the results of our operations and cash flows for the three months ended March 31, 2000 and 1999. The financial statements have been prepared in accordance with the instructions to interim reporting as prescribed by the Securities and Exchange Commission ("SEC"). For further information, refer to our Form 10-K for the year ended December 31, 1999, filed with the SEC. The adjustments, consisting only of normal recurring adjustments, which in the opinion of management were necessary for a fair statement of the results for the interim periods, have been reflected. The results for the three months ended March 31, 2000 are not necessarily indicative of the final results to be expected for the full year. Certain reclassifications have been made to the prior period to conform to the current period presentation. We evaluate the capitalized costs of our oil and natural gas properties on an ongoing basis and have utilized the most recently available information to estimate our reserves at March 31, 2000, in order to determine the realizability of such capitalized costs. Future events, including drilling activities, product prices and operating costs, may affect future estimates of such reserves. Accounting Pronouncements In June 1998, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging Activities ("SFAS 133"). SFAS 133 requires that all derivative instruments be recorded on the balance sheet at their fair value. Changes in the fair value of derivatives are recorded each period in current earnings or other comprehensive income, depending on whether a derivative is designated as part of a hedge transaction and, if so, the type of hedge transaction. For fair value hedge transactions in which we are hedging changes in the fair value of an asset, liability, or firm commitment, changes in the fair value of the derivative instrument will generally be offset in the income statement by changes in the fair value of the hedged item. For cash flow hedge transactions, in which we are hedging the variability of cash flows related to a variable-rate asset, liability, or a forecasted transaction, changes in the fair value of the derivative instrument will be reported in other comprehensive income. The gains and losses on the derivative instrument that are reported in other comprehensive income will be reclassified as earnings in the periods in which earnings are affected by the variability of the cash flows of the hedged item. This statement was amended by Statement of Financial Accounting Standards No. 137, Accounting for Derivative Instruments and Hedging Activities - Deferral of the Effective Date of FASB Statement No. 133 ("SFAS 137") issued in June 1999. SFAS 137 defers the effective date of SFAS 133 to fiscal years beginning after June 15, 2000. We are required to adopt this statement beginning in 2001. We have not yet determined the impact of adopting SFAS 133; however, this standard could increase volatility in earnings and retained earnings (deficit) through comprehensive income. NOTE 2 -- INVENTORY AND OTHER ASSETS Inventory consists of the following (in thousands): March 31, December 31, 2000 1999 --------- ------------ Crude oil $54,887 $73,535 Materials and supplies 4,762 4,814 ------- ------- $59,649 $78,349 ======= ======= 6 Other assets consist of the following (in thousands): March 31, December 31, 2000 1999 --------- ------------ Pipeline linefill $ 17,633 $ 17,633 Deferred tax asset 54,515 67,366 Land 8,853 8,853 Debt issue costs 27,981 35,101 Other 11,600 10,965 -------- -------- 120,582 139,918 Accumulated amortization (15,258) (10,151) -------- -------- $105,324 $129,767 ======== ======== NOTE 3 -- UNAUTHORIZED TRADING LOSSES AND RESTATED FINANCIAL STATEMENTS In November 1999, we discovered that a former employee of PAA had engaged in unauthorized trading activity, resulting in losses of approximately $162.0 million ($174.0 million, including estimated associated costs and legal expenses). A full investigation into the unauthorized trading activities by outside legal counsel and independent accountants and consultants determined that the vast majority of the losses occurred primarily from March through November 1999, and that the impact warranted a restatement of previously reported financial information for 1999 and 1998. Because the financial statements of PAA are consolidated with our financial statements, adverse effects on the financial statements of PAA directly affect our consolidated financial statements. Consequently, the consolidated financial statements for 1999 appearing in this report were previously restated to reflect the unauthorized trading losses. NOTE 4 -- ASSET DISPOSITIONS We initiated the sale of approximately 5.2 million barrels of crude oil linefill from the All American Pipeline in November 1999. This sale was completed in March 2000. The linefill was located in the segment of the All American Pipeline that extends from Emidio, California, to McCamey, Texas. Except for minor third party volumes, one of our subsidiaries has been the sole shipper on this segment of the pipeline since its predecessor acquired the line from Goodyear in July 1998. Proceeds from the sale of the linefill were approximately $100.0 million, net of associated costs, and were used (1) to repay outstanding indebtedness under PAA's $65.0 million senior secured term credit facility entered into in December 1999 to fund short-term working capital requirements resulting from the unauthorized trading losses and (2) for general working capital purposes. We recognized a total gain of $44.6 million, of which $16.5 million was recorded in the fourth quarter of 1999. On March 24, 2000, we completed the sale of the above referenced segment of the All American Pipeline to a unit of El Paso Energy Corporation for proceeds of approximately $124.0 million, which are net of associated transaction costs and estimated costs to remove certain equipment. We recognized a gain of approximately $20.1 million in connection with the sale in the first quarter of 2000. Proceeds from the sale were used to permanently reduce the all American Pipeline, L.P. term loan facility. As a result, $3.1 million of unamortized net gains realized upon termination of interest rate swaps, were recognized in the first quarter of 2000 and are included in interest and other income. NOTE 5 -- ACQUISITIONS Scurlock Acquisition On May 12, 1999, PAA completed the acquisition of Scurlock Permian LLC and certain other pipeline assets from Marathon Ashland Petroleum LLC. Including working capital adjustments and closing and financing costs, the cash purchase price was approximately $141.7 million. 7 Pro Forma Results for the Scurlock Acquisition The following unaudited pro forma data is presented to show pro forma revenues, net loss and basic and diluted net loss per share as if the Scurlock acquisition, which was effective May 1, 1999, had occurred on January 1, 1999 (in thousands, except per share data): Three Months Ended March 31, 1999 -------------- Revenues $749,020 ======== Net loss $ (1,734) ======== Net loss per share available to common stockholders: Basic and diluted $ (0.24) ======== NOTE 6 -- EARNINGS PER SHARE The following is a reconciliation of the numerators and the denominators of the basic and diluted earnings per share computations for income (loss) from continuing operations before extraordinary item for the three months ended March 31, 2000 and 1999 (in thousands, except per share amounts):
For the Three Months Ended March 31, -------------------------------------------------------------------- 2000 1999 (restated) --------------------------------- ---------------------------------- Income Shares Per Income Shares Per (Numera- (Denomi- Share (Numera- (Denomi- Share tor) nator) Amount tor) nator) Amount ------------ ---------- --------- ------------ ----------- --------- Net income (loss) before extraordinary item $ 21,478 $ (5,161) Less: preferred stock dividends (3,718) (2,361) -------- -------- Income (loss) available to common stockholders 17,760 17,947 $ 0.99 (7,522) 16,890 $ (0.45) ====== ======= Effect of dilutive securities: Convertible preferred stock 3,718 10,935 - - Employee stock options and warrants - 670 - - -------- ------ -------- ------ Income (loss) available to common stockholders assuming dilution $ 21,478 29,552 $ 0.73 $ (7,522) 16,890 $ (0.45) ======== ====== ====== ======== ====== ========
NOTE 7 -- EXTRAORDINARY ITEM During the quarter ended March 31, 2000, we recognized an extraordinary loss of $4.1 million, $1.4 million net of minority interest and taxes, related to the early extinguishment of debt. The loss is related to the permanent reduction of the All American Pipeline, L.P. term loan facility with proceeds from the sale of the segment of the All American Pipeline (see Note 4). 8 NOTE 8 -- OPERATING SEGMENTS Our operations consist of two operating segments: (1) Upstream Operations - engages in the acquisition, exploitation, development, exploration and production of crude oil and natural gas and (2) Midstream Operations - engages in pipeline transportation, purchases and resales of crude oil at various points along the distribution chain and the leasing of certain terminalling and storage assets. We evaluate performance based on gross margin, gross profit and income (loss) before income taxes and minority interest.
(in thousands) (unaudited) Upstream Midstream Total - ----------------------------------------------------------------------------------------------------------- For the Three Months Ended March 31, 2000 Revenues: External Customers $ 33,292 $ 998,928 $ 1,032,220 Intersegment (a) - 390 390 Gain on sale of assets - 48,188 48,188 Other income (expense) (2,696) 7,510 4,814 -------- ----------- ----------- Total revenues of reportable segments $ 30,596 $ 1,055,016 $ 1,085,612 ======== =========== =========== Segment gross margin (b) $ 17,797 $ 36,162 $ 53,959 Segment gross profit (c) 15,367 27,511 42,878 Segment income before income taxes, minority interest and extraordinary item 769 64,025 64,794 Total assets 423,604 1,080,461 1,504,065 - ----------------------------------------------------------------------------------------------------------- For the Three Months Ended March 31, 1999 (restated) Revenues: External Customers $ 21,142 $ 455,760 $ 476,902 Intersegment (a) - 327 327 Interest income (28) 97 69 -------- --------- --------- Total revenues of reportable segments $ 21,114 $ 456,184 $ 477,298 ======== ========= ========= Segment gross margin (b) $ 9,579 $ (2,010) $ 7,569 Segment gross profit (c) 7,968 (4,461) 3,507 Segment loss before income taxes and minority interest (1,959) (10,388) (12,347) - -----------------------------------------------------------------------------------------------------------
a) Intersegment sales were conducted on an arm's length basis. b) Gross margin is calculated as revenues less cost of sales and operations expenses. c) Gross profit is calculated as revenues less costs of sales and operations and general and administrative expenses. NOTE 9 -- PREFERRED STOCK DIVIDENDS On April 1, 2000, we paid cash dividends of approximately $6.0 million on our Series D, F and G preferred stock. The dividends on the Series D and F preferred stock are for the period from October 1, 1999 through March 31, 2000. The Series F preferred stock was issued on December 15, 1999 and such dividend covers the period from that date through March 31, 2000. NOTE 10 -- SUBSEQUENT EVENTS On May 8, 2000, PAA entered into new bank credit agreements. The borrower under the new facilities is Plains Marketing, L.P. PAA is a guarantor of the obligations under the credit facilities. The obligations are also guaranteed by the subsidiaries of Plains Marketing, L.P. PAA entered into the credit agreements in order to: . refinance the existing bank debt of Plains Marketing, L.P. and Plains Scurlock Permian, L.P. in conjunction with the merger of these subsidiaries; . refinance existing bank debt of All American Pipeline, L.P.; . repay us up to $114.0 million plus accrued interest of subordinated debt, and . provide additional flexibility for working capital, capital expenditures, and for other general corporate purposes. 9 PAA's new bank credit agreements consist of: . a $400 million senior secured revolving credit facility. At closing, PAA had $256.0 million outstanding under the revolving credit facility. The revolving credit facility is secured by substantially all of PAA's assets and matures in April 2004. No principal is scheduled for payment prior to maturity. The revolving credit facility bears interest at PAA's option at either the base rate, as defined, plus an applicable margin, or LIBOR plus an applicable margin. PAA incurs a commitment fee on the unused portion of the revolving credit facility. . A $300 million senior secured letter of credit and borrowing facility, the purpose of which is to provide standby letters of credit to support the purchase and exchange of crude oil for resale and borrowings to finance crude oil inventory which has been hedged against future price risk. The letter of credit facility is secured by substantially all of PAA's assets and has a sublimit for cash borrowings of $100 million to purchase crude oil which has been hedged against future price risk. The letter of credit facility expires in April 2003. Aggregate availability under the letter of credit facility for direct borrowings and letters of credit is limited to a borrowing base which is determined monthly based on certain of our current assets and current liabilities, primarily accounts receivable and accounts payable related to the purchase and sale of crude oil. At closing, there were letters of credit of approximately $173.8 million and borrowings of approximately $20.3 million outstanding under this facility. PAA's bank credit agreements prohibit distributions on, or purchases or redemptions of, units if any default or event of default is continuing. In addition, the agreements contain various covenants limiting PAA's ability to, among other things: . incur indebtedness; . grant liens; . sell assets; . enter into hedging contracts; . make investments; . extend credit; . engage in transactions with affiliates; . enter into prohibited contracts; and . enter into a merger or consolidation. PAA's bank credit agreements treat a change of control as an event of default and also require PAA to maintain: . a current ratio (as defined) of 1.0 to 1.0; . a debt coverage ratio which is not greater that 4.0 to 1.0 for the period from March 31, 2000 to March 31, 2002 and subsequently 3.75 to 1.0; . an interest coverage ratio which is not less than 2.75 to 1.0; and . a debt to capital ratio of not greater than 0.65 to 1.0. At March 31, 2000, there were letters of credit of approximately $192.9 million and borrowings of $159.1 million outstanding under the credit facilities which were refinanced. Due to the refinancing, we reclassified the current portion of PAA's existing bank debt of $24.2 million at March 31, 2000, to long-term. NOTE 11 -- CONSOLIDATING FINANCIAL STATEMENTS The following financial information presents consolidating financial statements which include: . the parent company only ("Parent"); . the guarantor subsidiaries on a combined basis ("Guarantor Subsidiaries"); . the nonguarantor subsidiaries on a combined basis ("Nonguarantor Subsidiaries"); . elimination entries necessary to consolidate the Parent, the Guarantor Subsidiaries and the Nonguarantor Subsidiaries; and . Plains Resources Inc. on a consolidated basis. These statements are presented because our Series A-E subordinated notes are not guaranteed by PAA and our consolidated financial statements include the accounts of PAA. 10 PLAINS RESOURCES INC. AND SUBSIDIARIES CONDENSED CONSOLIDATING BALANCE SHEET (unaudited) (in thousands) MARCH 31, 2000
Guarantor Nonguarantor Intercompany Parent Subsidiaries Subsidiaries Eliminations Consolidated --------------- --------------- --------------- -------------- -------------- ASSETS CURRENT ASSETS Cash and cash equivalents $ 6,062 $ 312 $ 11,252 $ - $ 17,626 Accounts receivable and other 6,920 15,798 502,894 - 525,612 Inventory - 6,801 52,848 - 59,649 --------- --------- ----------- ---------- ----------- Total current assets 12,982 22,911 566,994 - 602,887 --------- --------- ----------- ---------- ----------- PROPERTY AND EQUIPMENT 235,575 509,446 461,424 - 1,206,445 Less allowance for depreciation, depletion and amortization (216,087) (124,242) (14,876) (55,386) (410,591) --------- --------- ----------- ---------- ----------- 19,488 385,204 446,548 (55,386) 795,854 --------- --------- ----------- ---------- ----------- INVESTMENTS IN SUBSIDIARIES AND INTERCOMPANY ADVANCES 441,302 (227,636) (43,774) (169,892) - OTHER ASSETS 23,368 15,038 66,918 - 105,324 --------- --------- ----------- ---------- ----------- $ 497,140 $ 195,517 $ 1,036,686 $ (225,278) $ 1,504,065 ========= ========= =========== ========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable and other current liabilities 18,929 40,034 482,636 5 $ 541,604 Notes payable and other current obligations - 511 - - 511 --------- --------- ----------- ---------- ----------- Total current liabilities 18,929 40,545 482,636 5 542,115 BANK DEBT 135,800 - - - 135,800 BANK DEBT OF A SUBSIDIARY - - 159,100 - 159,100 SUBORDINATED DEBT 277,822 - 105,000 (105,000) 277,822 OTHER LONG-TERM DEBT - 2,044 - - 2,044 OTHER LONG-TERM LIABILITIES 2,016 - 12,517 - 14,533 --------- --------- ----------- ---------- ----------- 434,567 42,589 759,253 (104,995) 1,131,414 --------- --------- ----------- ---------- ----------- MINORITY INTEREST (70,037) - 246,525 92 176,580 --------- --------- ----------- ---------- ----------- CUMULATIVE CONVERTIBLE PREFERRED STOCK, STATED AT LIQUIDATION PREFERENCE 138,813 - - - 138,813 --------- --------- ----------- ---------- ----------- NON-REDEEMABLE PREFERRED STOCK, COMMON STOCK AND OTHER STOCKHOLDERS' EQUITY Series D Cumulative Convertible Preferred Stock 23,300 - - - 23,300 Common Stock 1,795 78 - (78) 1,795 Additional paid-in capital 130,268 3,951 43,393 (47,344) 130,268 Retained earnings (accumulated deficit) (161,566) 148,899 (12,485) (72,953) (98,105) --------- --------- ----------- ---------- ----------- (6,203) 152,928 30,908 (120,375) 57,258 --------- --------- ----------- ---------- ----------- $ 497,140 $ 195,517 $ 1,036,686 $ (225,278) $ 1,504,065 ========= ========= =========== ========== ===========
11 PLAINS RESOURCES INC. AND SUBSIDIARIES CONDENSED CONSOLIDATING BALANCE SHEET (in thousands) DECEMBER 31, 1999
Guarantor Nonguarantor Intercompany Parent Subsidiaries Subsidiaries Eliminations Consolidated ----------- ------------ ------------- ------------- -------------- ASSETS CURRENT ASSETS Cash and cash equivalents $ 9,241 $ 5,134 $ 53,853 $ - $ 68,228 Accounts receivable and other 1,808 11,221 508,919 - 521,948 Inventory - 5,652 72,697 - 78,349 Assets held for sale - - 103,615 - 103,615 --------- --------- ---------- --------- ---------- Total current assets 11,049 22,007 739,084 - 772,140 --------- --------- ---------- --------- ---------- PROPERTY AND EQUIPMENT 235,158 494,279 460,730 - 1,190,167 Less allowance for depreciation, depletion and amortization (215,463) (120,016) (11,649) (55,386) (402,514) --------- --------- ---------- --------- ---------- 19,695 374,263 449,081 (55,386) 787,653 --------- --------- ---------- --------- ---------- INVESTMENTS IN SUBSIDIARIES AND INTERCOMPANY ADVANCES 440,115 (224,598) (45,683) (169,834) - OTHER ASSETS 40,337 14,752 74,678 - 129,767 --------- --------- ---------- --------- ---------- $ 511,196 $ 186,424 $1,217,160 $(225,220) $1,689,560 ========= ========= ========== ========= ========== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable and other current liabilities $ 23,700 $ 35,457 $ 487,212 $ 24 $ 546,393 Notes payable and other current obligations - 511 109,369 - 109,880 --------- --------- ---------- --------- ---------- Total current liabilities 23,700 35,968 596,581 24 656,273 BANK DEBT 137,300 - - - 137,300 BANK DEBT OF A SUBSIDIARY - - 259,450 - 259,450 SUBORDINATED DEBT 277,909 - 105,000 (105,000) 277,909 OTHER LONG-TERM DEBT - 2,044 - - 2,044 OTHER LONG-TERM LIABILITIES 1,954 - 19,153 - 21,107 --------- --------- ---------- --------- ---------- 440,863 38,012 980,184 (104,976) 1,354,083 --------- --------- ---------- --------- ---------- MINORITY INTEREST (70,037) - 226,082 - 156,045 --------- --------- ---------- --------- ---------- CUMULATIVE CONVERTIBLE PREFERRED STOCK, STATED AT LIQUIDATION PREFERENCE 138,813 - - - 138,813 --------- --------- ---------- --------- ---------- NON-REDEEMABLE PREFERRED STOCK, COMMON STOCK AND OTHER STOCKHOLDERS' EQUITY Series D Cumulative Convertible Preferred Stock 23,300 - - - 23,300 Common Stock 1,792 78 - (78) 1,792 Additional paid-in capital 130,027 3,952 43,261 (47,213) 130,027 Retained earnings (accumulated deficit) (153,562) 144,382 (32,367) (72,953) (114,500) --------- --------- ---------- --------- ---------- 1,557 148,412 10,894 (120,244) 40,619 --------- --------- ---------- --------- ---------- $ 511,196 $ 186,424 $1,217,160 $(225,220) $1,689,560 ========= ========= ========== ========= ==========
12 PLAINS RESOURCES INC. AND SUBSIDIARIES CONSOLIDATING STATEMENT OF OPERATIONS (unaudited) (in thousands) THREE MONTHS ENDED MARCH 31, 2000
Guarantor Nonguarantor Intercompany Parent Subsidiaries Subsidiaries Eliminations Consolidated -------- ------------ ------------ ------------ ------------ REVENUES Oil and natural gas sales $ - $ 32,901 $ - $ 391 $ 33,292 Marketing, transportation, storage and terminalling - - 999,319 (391) 998,928 Gain on sale of assets - - 48,188 - 48,188 Interest and other income (loss) (582) 42 7,510 (2,156) 4,814 ------- ------- --------- ------ --------- (582) 32,943 1,055,017 (2,156) 1,085,222 ------- ------- --------- ------ --------- EXPENSES Production expenses - 15,495 - - 15,495 Marketing, transportation, storage and terminalling - - 962,766 - 962,766 General and administrative 502 1,928 8,651 - 11,081 Depreciation, depletion and amortization 814 4,226 10,172 - 15,212 Interest expense 3,817 5,200 9,013 (2,156) 15,874 ------- ------- --------- ------ --------- 5,133 26,849 990,602 (2,156) 1,020,428 ------- ------- --------- ------ --------- Income (loss) before income taxes, minority interest and extraordinary item (5,715) 6,094 64,415 - 64,794 Minority interest - - 29,584 - 29,584 ------- ------- --------- ------ --------- Income (loss) before income taxes (5,715) 6,094 34,831 - 35,210 Deferred income tax expense (benefit) (1,429) 1,577 13,584 - 13,732 ------- ------- --------- ------ --------- Income (loss) before extraordinary item (4,286) 4,517 21,247 - 21,478 Extraordinary item, net of tax benefit and minority interest - - (1,365) - (1,365) ------- ------- --------- ------ --------- NET INCOME (LOSS) (4,286) 4,517 19,882 - 20,113 Less: cumulative preferred stock dividends 3,718 - - - 3,718 ------- ------- --------- ------ --------- NET INCOME (LOSS) AVAILABLE TO COMMON STOCKHOLDERS $(8,004) $ 4,517 $ 19,882 $ - $ 16,395 ======= ======= ========= ====== =========
13 PLAINS RESOURCES INC. AND SUBSIDIARIES CONSOLIDATING STATEMENT OF OPERATIONS (unaudited) (in thousands) THREE MONTHS ENDED MARCH 31, 1999
Guarantor Nonguarantor Intercompany Parent Subsidiaries Subsidiaries Eliminations Consolidated --------- ------------ ------------- ------------- ------------- REVENUES Oil and natural gas sales $ - $20,815 $ - $ 327 $ 21,142 Marketing, transportation, storage and terminalling - - 455,760 - 455,760 Interest and other income (loss) (39) 12 96 - 69 ------- ------- -------- -------- -------- (39) 20,827 455,856 327 476,971 ------- ------- -------- -------- -------- EXPENSES Production expenses - 11,563 - - 11,563 Marketing, transportation, storage and terminalling - - 436,238 327 436,565 Unauthorized trading losses and related expenses - - 21,205 - 21,205 General and administrative 383 1,228 2,451 - 4,062 Depreciation, depletion and amortization 622 3,717 2,831 - 7,170 Interest expense 1,030 4,530 3,193 - 8,753 ------- ------- -------- -------- -------- 2,035 21,038 465,918 327 489,318 ------- ------- -------- -------- -------- Loss before income taxes and minority interest (2,074) (211) (10,062) - (12,347) Minority interest - - (4,289) - (4,289) ------- ------- -------- -------- -------- Loss before income taxes (2,074) (211) (5,773) - (8,058) Deferred income tax expense (benefit) 680 (1,326) (2,251) - (2,897) ------- ------- -------- -------- -------- NET INCOME (LOSS) (2,754) 1,115 (3,522) - (5,161) Less: cumulative preferred stock dividends 2,361 - - - 2,361 ------- ------- -------- -------- -------- NET INCOME (LOSS) AVAILABLE TO COMMON STOCKHOLDERS $(5,115) $ 1,115 $ (3,522) $ - $ (7,522) ======= ======= ======== ======== ========
14 PLAINS RESOURCES INC. AND SUBSIDIARIES CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS (unaudited) (in thousands) THREE MONTHS ENDED MARCH 31, 2000
Guarantor Nonguarantor Intercompany Parent Subsidiaries Subsidiaries Eliminations Consolidated ---------- ------------- ------------- ------------ -------------- CASH FLOWS FROM OPERATING ACTIVITIES Net income (loss) $ (4,286) $ 4,517 $ 19,882 $ - $ 20,113 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation, depletion, and amortization 814 4,226 10,172 - 15,212 Gain on sale of assets (Note 4) - - (48,188) - (48,188) Minority interest in income of a subsidiary - - 27,677 - 27,677 Deferred income tax (1,429) 1,577 12,711 - 12,859 Other noncash items (873) - (2,961) - (3,834) Change in assets and liabilities resulting from operating activities: Accounts receivable and other (5,112) (5,624) (17,975) - (28,711) Inventory - (1,149) (18,163) - (19,312) Accounts payable and other current liabilities (4,771) 2,666 (9,861) - (11,966) -------- ------- --------- ----------- --------- NET CASH FLOWS PROVIDED BY (USED IN) OPERATING ACTIVITIES (15,657) 6,213 (26,706) - (36,150) -------- ------- --------- ----------- --------- CASH FLOWS FROM INVESTING ACTIVITIES Payments for crude oil pipeline, gathering and terminal assets - - (2,198) - (2,198) Payments for acquisition, exploration, and development costs (339) (12,425) - - (12,764) Payments for additions to other property and assets (78) (59) - - (137) Proceeds from sale of assets (Note 4) - - 219,100 - 219,100 -------- ------- --------- ----------- --------- NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES (417) (12,484) 216,902 - 204,001 -------- ------- --------- ----------- --------- CASH FLOWS FROM FINANCING ACTIVITIES Advances/investments with affiliates 10,445 1,449 (11,894) - - Proceeds from long-term debt 54,100 - 12,000 - 66,100 Proceeds from short-term debt - - 20,000 - 20,000 Principal payments of long-term debt (55,600) - (136,500) - (192,100) Principal payments of short-term debt - - (105,219) - (105,219) Distribution to unitholders 3,950 - (11,184) - (7,234) -------- ------- --------- ----------- --------- NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 12,895 1,449 (232,797) - (218,453) -------- ------- --------- ----------- --------- Net decrease in cash and cash equivalents (3,179) (4,822) (42,601) - (50,602) Cash and cash equivalents, beginning of period 9,241 5,134 53,853 - 68,228 -------- ------- --------- ----------- --------- Cash and cash equivalents, end of period $ 6,062 $ 312 $ 11,252 $ - $ 17,626 ======== ======= ========= =========== =========
15 PLAINS RESOURCES INC. AND SUBSIDIARIES CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS (unaudited) (in thousands) THREE MONTHS ENDED MARCH 31, 1999
Guarantor Nonguarantor Intercompany Parent Subsidiaries Subsidiaries Eliminations Consolidated ------------- ------------- ------------ -------------- --------------- CASH FLOWS FROM OPERATING ACTIVITIES Net income (loss) $ (2,754) $ 1,115 $ (3,522) $ - $ (5,161) Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation, depletion, and amortization 622 3,717 2,831 - 7,170 Minority interest in income of a subsidiary - - (4,289) - (4,289) Deferred income tax 680 (1,326) (2,251) - (2,897) Other noncash items 280 - 110 - 390 Change in assets and liabilities resulting from operating activities: Accounts receivable and other (757) 668 (36,396) - (36,485) Inventory - 547 13,316 - 13,863 Pipeline linefill - - (2,490) - (2,490) Accounts payable and other current liabilities (5,993) 2,774 36,966 - 33,747 -------- -------- -------- ----------- -------- NET CASH FLOWS PROVIDED BY (USED IN) OPERATING ACTIVITIES (7,922) 7,495 4,275 - 3,848 -------- -------- -------- ----------- -------- CASH FLOWS FROM INVESTING ACTIVITIES Payments for crude oil pipeline, gathering and terminal assets - - (2,702) - (2,702) Payments for acquisition, exploration, and development costs (959) (26,977) - - (27,936) Payments for additions to other property and assets (343) (100) (89) - (532) -------- -------- -------- ----------- -------- NET CASH USED IN INVESTING ACTIVITIES (1,302) (27,077) (2,791) - (31,170) -------- -------- -------- ----------- -------- CASH FLOWS FROM FINANCING ACTIVITIES Advances/investments with affiliates (17,736) 19,655 (1,156) (763) - Proceeds from long-term debt 64,200 - 14,100 - 78,300 Proceeds from short-term debt - - 4,250 - 4,250 Principal payments of long-term debt (39,400) - (8,100) - (47,500) Principal payments of short-term debt - - (9,900) - (9,900) Distribution to unitholders 3,401 - (5,926) - (2,525) Other (958) - - - (958) -------- -------- -------- ----------- -------- NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 9,507 19,655 (6,732) (763) 21,667 -------- -------- -------- ----------- -------- Net increase (decrease) in cash and cash equivalents 283 73 (5,248) (763) (5,655) Cash and cash equivalents, beginning of period 142 194 6,408 (200) 6,544 -------- -------- -------- ----------- -------- Cash and cash equivalents, end of period $ 425 $ 267 $ 1,160 $ (963) $ 889 ======== ======== ======== =========== ========
16 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS General We are an independent energy company that acquires, exploits, develops, explores and produces crude oil and natural gas. Through our majority ownership in Plains All American Pipeline, L.P., ("PAA"), we are engaged in the midstream activities of marketing, gathering, transportation, terminalling and storage of crude oil. For financial statement purposes, the assets, liabilities and earnings of PAA are included in our consolidated financial statements, with the public unitholders' interest reflected as a minority interest. Our upstream crude oil and natural gas activities are focused in California (in the Los Angeles Basin, the Arroyo Grande Field, and the Mt. Poso Field), offshore California (in the Point Arguello Field), the Sunniland Trend of South Florida and the Illinois Basin in southern Illinois. Our midstream activities are concentrated in California, Texas, Oklahoma, Louisiana and the Gulf of Mexico. 2000 ASSET DISPOSITIONS On March 24, 2000, we completed the sale of the segment of the All American Pipeline that extends from Emidio, California to McCamey, Texas to a unit of El Paso Energy Corporation for proceeds of approximately $124.0 million, which are net of associated transaction costs and estimated costs to remove certain equipment. We recognized a total gain of $20.1 million in connection with the sale in the first quarter of 2000. In November 1999, we initiated the sale of approximately 5.2 million barrels of crude oil linefill from the All American Pipeline. The sale of the linefill was completed in March 2000. We recognized a total gain of $44.6 million in connection with the sale of the linefill, of which $16.5 million was recorded in the fourth quarter of 1999. UNAUTHORIZED TRADING LOSSES In November 1999, we discovered that a former employee of PAA had engaged in unauthorized trading activity, resulting in losses of approximately $162.0 million ($174.0 million, including estimated associated costs and legal expenses). A full investigation into the unauthorized trading activities by outside legal counsel and independent accountants and consultants determined that the vast majority of the losses occurred primarily from March through November 1999, and that the impact warranted a restatement of previously reported financial information for 1999 and 1998. Because the financial statements of PAA are consolidated with our financial statements, adverse effects on the financial statements of PAA directly affect our consolidated financial statements. Consequently, the consolidated financial statements for 1999 appearing in this report were previously restated to reflect the unauthorized trading losses. RESULTS OF OPERATIONS For the three months ended March 31, 2000, we reported net income of $20.1 million, or $0.91 per common share ($0.68 per share diluted) on total revenue of $1.1 billion, as compared with a net loss of $5.2 million, or $0.45 per share on total revenue of $477.0 million in the first quarter of 1999. Results for the three months ended March 31, 2000 and 1999 include the following nonrecurring or notable items: 2000 . a $28.1 million gain on the portion of the All American Pipeline linefill that was sold in 2000; . a $20.1 million gain on the sale of the segment of the All American Pipeline that extends from Emidio, California, to McCamey, Texas; . $6.8 million of previously deferred gains on interest rate swap terminations recognized due to the early extinguishment of debt; . $3.7 million of previously deferred losses on interest rate swap terminations recognized due to the early extinguishment of debt; . $0.9 million gain recognized upon the transfer of 69,444 of our units in PAA to employees of the general partner upon the vesting of transaction unit grants; . an extraordinary loss of $1.4 million related to the early extinguishment of debt (net of minority interest and tax benefit), and . amortization of $4.6 million of debt issue costs associated with facilities put in place during the fourth quarter of 1999. 17 1999 . $21.2 million of unauthorized trading losses and . restructuring expenses of $0.4 million. Excluding the above mentioned items we would have reported net income of approximately $8.4 million and $2.6 million for the three months ended March 31, 2000 and 1999, respectively. EBITDA increased 77% in 2000 to $43.8 million from the $24.8 million reported in the first quarter of 1999. Cash flow from operations (net income before noncash items) was $23.8 million and $11.8 million for the first quarters of 2000 and 1999, respectively. EBITDA and cash flow from operations also exclude the nonrecurring items discussed above. Upstream Results The following table reflects certain of our upstream operating information for the periods presented: Three Months Ended March 31, ------------------------- 2000 1999 ---------- ---------- Average Daily Production Volumes: Barrels of oil equivalent ("BOE") California onshore (approximately 91% oil) 14.8 14.9 Offshore California (100% oil) 4.0 - Gulf Coast (100% oil) 1.8 2.9 Illinois Basin (100% oil) 2.8 3.2 ------ ------- Total (approximately 94% oil) 23.4 21.0 ====== ======= Unit Economics: Average sales price per BOE $15.61 $ 11.21 Production expense per BOE 7.26 6.13 ------ ------- Gross margin per BOE 8.35 5.08 Upstream G&A expense per BOE 1.14 0.85 ------ ------ Gross profit per BOE $ 7.21 $ 4.23 ====== ====== Total oil equivalent production increased approximately 12% to an average of 23,400 BOE per day as compared to the first quarter 1999 average of 21,000 BOE per day. The increase is primarily attributable to our ongoing acquisition and exploitation activities, offset somewhat by decreased production from certain of our other properties. The offshore California Point Arguello Unit, which we acquired from Chevron in July 1999, accounted for approximately 4,000 barrels per day of the increase. Net daily production from our onshore California properties decreased slightly to 14,800 barrels per day in the first quarter of 2000 from 14,900 barrels per day in the prior period. Net daily production for our Gulf Coast properties averaged approximately 1,800 barrels per day during the first quarter of 2000, compared to 2,900 barrels per day in the prior period. The Gulf Coast production decrease is due to mechanical downtime and the effects of natural decline. This is our most volatile area in terms of maintaining production levels. Net daily production in the Illinois Basin averaged approximately 2,800 barrels per day during the first quarter of 2000, a decrease of approximately 13% compared to 3,200 barrels per day during the first quarter of 1999, due primarily to natural decline. Oil and natural gas revenues were $33.3 million for the first quarter of 2000, an approximate 57% increase from the 1999 first quarter amount of $21.1 million due to higher prices and increased production. Our average product price, which represents a combination of fixed and floating price sales arrangements and incorporates location and quality discounts from the benchmark NYMEX price, was $15.61 per BOE, up 39% as compared to the 1999 first quarter average wellhead price of $11.21 per BOE. The NYMEX benchmark WTI crude oil price averaged $28.77 per barrel during the first quarter of 2000, approximately 120% above the $13.06 per barrel amount in the prior year quarter. We maintained hedges on approximately 83% and 45% of our crude oil production in the first quarter of 2000 and 1999, respectively. Hedging transactions had the effect of decreasing our average price by $8.13 per BOE in the first quarter of 2000 and increasing our average price by $2.21 per BOE in the first quarter of 1999. Upstream unit gross margin (well-head revenue less production expenses) for the first quarter of 2000 was $8.35 per BOE, a 64% increase as compared to $5.08 per BOE reported for the first quarter of 1999. Upstream unit gross profit, which deducts all pre-interest cash costs, was $7.21 per BOE, 70% above the 1999 amount of $4.23 per BOE. The overall 18 improvement in unit economics was generally due to higher wellhead price realizations, offset by higher unit production expenses and unit general and administrative expenses. Unit production expenses averaged $7.26 per BOE for the first quarter of 2000, an approximate 18% increase over the 1999 first quarter average of $6.13 per BOE. This increase is due to (1) increased fuel costs for both gas and electricity, (2) workovers, production and advalorem taxes and (3) what we believe are nonrecurring high levels of expenses during the quarter. Total production expenses were $15.5 million, as compared to $11.6 million for the first quarter of 1999. Unit general and administrative expenses increased to $1.14 per BOE in the first quarter of 2000, compared to $0.85 per BOE in the prior year comparative quarter. Total upstream general and administrative expense was $2.4 million during the first quarter of 2000 compared to $1.6 million in the first quarter of 1999. The increase is primarily attributable to increased personnel costs and increased legal and consulting expenses. Upstream depreciation, depletion, and amortization expense ("DD&A") was $4.7 million in the first quarter of 2000, compared to $4.0 million in the 1999 comparative quarter due to a higher per unit DD&A rate and increased production volumes. DD&A was $2.21 per BOE for the first quarter of 2000 compared to $2.10 per BOE in the 1999 comparative quarter. Midstream Results The following table reflects certain of our midstream operating information for the periods presented (in thousands): Three Months Ended March 31, -------------------------- 2000 1999 ----------- ------------ (restated) Operating Results: Gross margin: Pipeline $ 13,155 $ 11,882 Gathering and marketing and terminalling and storage 23,007 7,313 Unauthorized trading losses - (21,205) -------- -------- Total 36,162 (2,010) General and administrative expense (8,651) (2,451) -------- -------- Gross profit $ 27,511 $ (4,461) ======== ======== Average Daily Volumes (barrels): Pipeline Activities: All American Tariff activities 71 126 Margin activities 44 47 Other 115 - -------- -------- Total 230 173 ======== ======== Lease gathering 228 99 Bulk purchases 29 94 -------- -------- Total 257 193 ======== ======== Terminal throughput 50 75 ======== ======== Storage leased to third parties, monthly average volumes 820 1,710 ======== ======== Pipeline Operations. Gross margin from pipeline operations was $13.2 million for the quarter ended March 31, 2000 compared to $11.9 million for the prior year quarter. The increase resulted primarily from the Scurlock and West Texas gathering systems that were acquired in the second and third quarters of 1999, and which contributed approximately $2.8 million of pipeline gross margin in the first quarter of 2000. The increase was partially offset by lower tariff transport volumes, due to lower production from Exxon's Santa Ynez Field and the Point Arguello Field, both offshore California, and the sale of the segment of the All American Pipeline. The margin between revenue and direct cost of crude purchased was $5.1 million for the quarter ended March 31, 2000 compared to $5.0 million for the prior year first quarter. Pipeline tariff revenues were approximately $11.3 million for the first quarter of 2000 compared to approximately $13.1 million for the same period in 1999. Pipeline operations and 19 maintenance expenses were approximately $3.5 million for the first quarter of 2000 compared to $6.1 million for the first quarter of 1999 primarily due to the sale of the All American Pipeline segment. Tariff transport volumes on the All American Pipeline decreased from an average of 126,000 barrels per day for the quarter ended March 31, 1999 to 71,000 barrels per day in the comparable quarter of 2000, primarily due to a decrease in shipments of offshore California production, which decreased from 87,000 barrels per day to 71,000 barrels per day and the sale of the California to Texas portion of the line. Barrels associated with our merchant activities on the All American Pipeline decreased from 47,000 barrels per day in the first quarter of 1999 to 44,000 barrels per day in the same quarter of 2000 also due to the sale of the line. Tariff volumes shipped on the Scurlock and West Texas gathering systems (acquired subsequent to the first quarter of 1999) averaged 115,000 barrels per day during the first quarter of 2000. The following table sets forth All American Pipeline average deliveries per day within and outside California for the periods presented (in thousands): Three Months Ended March 31, ------------- 2000 1999 ---- ---- Deliveries: Average daily volumes (barrels): Within California 115 112 Outside California(1) - 61 --- --- Total 115 173 === === - ---------- (1) Shipments outside California in 1999 were attributable to the segment of the pipeline that was sold in 2000. Gathering and Marketing Activities and Terminalling and Storage Activities. Gross margin from gathering, marketing, terminalling and storage activities was approximately $23.0 million for the quarter ended March 31, 2000 compared to $7.3 million in the prior year quarter (excluding the unauthorized trading losses). The increase in gross margin is primarily due to an increase in lease gathering volumes, as a result of the Scurlock acquisition and favorable market conditions in the current year quarter. Lease gathering volumes increased from an average of 99,000 barrels per day for the first quarter of 1999 to approximately 228,000 barrels per day in 2000. Bulk purchase volumes decreased from approximately 94,000 barrels per day for the first quarter of 1999 to approximately 29,000 barrels per day in the current period due to the termination of purchase contracts subsequent to the discovery of the unauthorized trading losses. Due to a shift in the market from contango to backwardation, lease capacity decreased to 820,000 barrels per month and use of tankage for proprietary arbitrage opportunities increased. In the period immediately following the disclosure of the unauthorized trading losses, a significant number of our suppliers and trading partners reduced or eliminated the open credit previously extended to us. Consequently, the amount of letters of credit we needed to support the level of our crude oil purchases then in effect increased significantly. In addition, the cost to us of obtaining letters of credit increased under our amended credit facility. In many instances we arranged for letters of credit to secure our obligations to purchase crude oil from our customers, which increased our letter of credit costs and decreased our unit margins. In other instances, primarily involving lower-margin wellhead and bulk purchases, our purchase contracts were terminated. Lease gathering and bulk purchase volumes are down approximately 190,000 barrels per day from the 1999 fourth quarter level. We had previously estimated that our lease gathering and bulk volumes would be down approximately 150,000 barrels per day. The impact during the quarter was negligible as these barrels were predominantly thin margin barrels that did not support the additional cost of a letter of credit. General and administrative expenses were $8.7 million for the quarter ended March 31, 2000, compared to $2.5 million for the first quarter in 1999. The increase in 2000 is primarily due to the Scurlock and West Texas gathering system acquisitions and the resulting increase in activity and increased consulting and legal expenses as a result of the unauthorized trading losses. Midstream depreciation and amortization expense was $10.1 million for the quarter ended March 31, 2000, compared to $2.8 million for the first quarter of 1999. The increase is primarily due to the Scurlock acquisition and the West Texas gathering system acquisition during the second and third quarters of 1999. In addition, during the quarter, we amortized $4.6 million 20 associated with facilities put in place during the fourth quarter of 1999 due to the unauthorized trading losses. Such amounts will not be carried forward into future quarters. These increases were partially offset by decreased depreciation related to the segment of the All American Pipeline that was sold. General Interest expense for the first quarter of 2000 was $15.9 million, an increase of $7.1 million over last year's first quarter. The increase is primarily due to (1) interest associated with the debt incurred for the Scurlock acquisition and West Texas Gathering system acquisition during 1999, (2) increased PAA debt levels as well as interest rates as a result of the unauthorized trading losses and (3) increased borrowings related to our acquisition, exploitation, development and exploration activities. Capitalized interest was approximately $1.0 million for each of the quarters ended March 31, 2000 and 1999. Based on current interest rate and debt levels, we estimate that second quarter interest expense will be approximately $3.0 million lower than the first quarter of this year. During the quarter ended March 31, 2000, we recognized an extraordinary loss of $4.1 million, $1.4 million, net of minority interest and taxes, related to the early extinguishment of debt. The loss is related to the permanent reduction of the All American Pipeline, L.P. term loan facility with proceeds from the sale of the segment of the All American Pipeline. ACCOUNTING PRONOUNCEMENTS In June 1998, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging Activities ("SFAS 133"). SFAS 133 requires that all derivative instruments be recorded on the balance sheet at their fair value. Changes in the fair value of derivatives are recorded each period in current earnings or other comprehensive income, depending on whether a derivative is designated as part of a hedge transaction and, if so, the type of hedge transaction. For fair value hedge transactions in which we are hedging changes in the fair value of an asset, liability, or firm commitment, changes in the fair value of the derivative instrument will generally be offset in the income statement by changes in the fair value of the hedged item. For cash flow hedge transactions, in which we are hedging the variability of cash flows related to a variable-rate asset, liability, or a forecasted transaction, changes in the fair value of the derivative instrument will be reported in other comprehensive income. The gains and losses on the derivative instrument that are reported in other comprehensive income will be reclassified as earnings in the periods in which earnings are affected by the variability of the cash flows of the hedged item. This statement was amended by Statement of Financial Accounting Standards No. 137, Accounting for Derivative Instruments and Hedging Activities - Deferral of the Effective Date of FASB Statement No. 133 ("SFAS 137") issued in June 1999. SFAS 137 defers the effective date of SFAS 133 to fiscal years beginning after June 15, 2000. We are required to adopt this statement beginning in 2001. We have not yet determined the impact of adopting SFAS 133; however, this standard could increase volatility in earnings and retained earnings (deficit) through comprehensive income. CAPITAL RESOURCES, LIQUIDITY AND FINANCIAL CONDITION Asset Dispositions We initiated the sale of approximately 5.2 million barrels of crude oil linefill from the All American Pipeline in November 1999. The sale was completed in March 2000. The linefill was located in the segment of the All American Pipeline that extends from Emidio, California, to McCamey, Texas. Except for minor third party volumes, one of our subsidiaries has been the sole shipper on this segment of the pipeline since its predecessor acquired the line from Goodyear in July 1998. Proceeds from the sale of the linefill were approximately $100.0 million, net of associated costs, and were used (1) to repay outstanding indebtedness under PAA's $65.0 million senior secured term credit facility entered into in December 1999 to fund short-term working capital requirements resulting from the unauthorized trading losses and (2) for general working capital purposes. We recognized a total gain of $44.6 million, of which $16.5 million was recorded in the fourth quarter of 1999. On March 24, 2000, we completed the sale of the above referenced segment of the All American Pipeline to a unit of El Paso Energy Corporation for total proceeds of approximately $124.0 million, which are net of associated transaction costs and estimated costs to remove certain equipment. We recognized a gain of approximately $20.1 million in connection with the sale in the first quarter of 2000. Proceeds from the sale were used to permanently reduce the all American Pipeline, L.P. term loan facility. As a result, $3.1 million of unamortized net gains realized upon the termination of interest rate swaps, were recognized in the first quarter of 2000 and are included in interest and other income. 21 Credit Facilities Amounts outstanding under our credit agreements before and after refinancing were as follows (in thousands):
March 31, May 8, 2000 2000 ------------- ------------- Revolving credit facility $ 135,800 $ 27,600 New Plains Marketing, L.P. revolving credit facility - 256,000 New Plains Marketing, L.P. letter of credit and hedged inventory facility - 20,250 All American Pipeline, L.P. bank credit agreement 63,000 - Plains Scurlock bank credit agreement 82,600 - Plains Marketing, L.P. letter of credit and borrowing facility 13,500 - --------- --------- $ 294,900 $ 303,850 ========= =========
We have a $225.0 million revolving credit facility with a group of banks. The revolving credit facility is guaranteed by all of our upstream subsidiaries and is collateralized by our upstream oil and natural gas properties and those of the guaranteeing subsidiaries and the stock of all upstream subsidiaries. The borrowing base under the revolving credit facility at March 31, 2000, is $225.0 million and is subject to redetermination from time to time by the lenders in good faith, in the exercise of the lenders' sole discretion, and in accordance with customary practices and standards in effect from time to time for crude oil and natural gas loans to borrowers similar to our company. Our borrowing base may be affected from time to time by the performance of our oil and natural gas properties and changes in oil and natural gas prices. We incur a commitment fee of 3/8% per annum on the unused portion of the borrowing base. The revolving credit facility, as amended, matures on July 1, 2001, at which time the remaining outstanding balance converts to a term loan which is repayable in sixteen equal quarterly installments commencing October 1, 2001, with a final maturity of July 1, 2005. The revolving credit facility bears interest, at our option of either LIBOR plus 1 3/8% or Base Rate (as defined therein). At March 31, 2000, letters of credit of $0.6 million and borrowings of approximately $135.8 million were outstanding under the revolving credit facility. The amount outstanding under the revolving credit facility was reduced to $27.6 million with the funds repaid by PAA in May 2000 as further discussed below. On December 30, 1999, PAA entered into a $65.0 million senior secured term credit facility to fund short-term working capital requirements resulting from the unauthorized trading losses. The facility was secured by a portion of the 5.2 million barrels of linefill that was sold and receivables from certain sales contracts applicable to the linefill. The facility was repaid in March 2000 with the proceeds from the sale of the linefill securing the facility. On May 8, 2000, PAA entered into new bank credit agreements. The borrower under the new facilities is Plains Marketing, L.P. PAA is a guarantor of the obligations under the credit facilities. The obligations are also guaranteed by the subsidiaries of Plains Marketing, L.P. PAA entered into the credit agreements in order to: . refinance the existing bank debt of Plains Marketing, L.P. and Plains Scurlock Permian, L.P. in conjunction with the merger of these subsidiaries; . refinance existing bank debt of All American Pipeline, L.P.; . repay us up to $114.0 million plus accrued interest of subordinated debt, and . provide additional flexibility for working capital, capital expenditures, and for other general corporate purposes. PAA's new bank credit agreements consist of: . a $400 million senior secured revolving credit facility. At closing, PAA had $256.0 million outstanding under the revolving credit facility. The revolving credit facility is secured by substantially all of PAA's assets and matures in April 2004. No principal is scheduled for payment prior to maturity. The revolving credit facility bears interest at PAA's option at either the base rate, as defined, plus an applicable margin, or LIBOR plus an applicable margin. PAA incurs a commitment fee on the unused portion of the revolving credit facility. . A $300 million senior secured letter of credit and borrowing facility, the purpose of which is to provide standby letters of credit to support the purchase and exchange of crude oil for resale and borrowings to finance crude oil inventory which has been hedged against future price risk. The letter of credit facility is secured by substantially all of PAA's assets and has a sublimit for cash borrowings of $100 million to purchase crude oil which has been hedged against future price risk. The letter of credit facility expires in April 2003. Aggregate availability under the letter of credit facility for direct borrowings and letters of credit is limited to a borrowing base which is determined monthly based on certain of PAA's current assets and current liabilities, primarily accounts receivable and accounts payable related to the purchase and sale of crude oil. At closing, there were letters of credit of approximately $173.8 million and borrowings of approximately $20.3 million outstanding under this facility. 22 PAA's bank credit agreements prohibit distributions on, or purchases or redemptions of, units if any default or event of default is continuing. In addition, the agreements contain various covenants limiting PAA's ability to, among other things: . incur indebtedness; . grant liens; . sell assets; . enter into hedging contracts; . make investments; . extend credit; . engage in transactions with affiliates; . enter into prohibited contracts; and . enter into a merger or consolidation. PAA's bank credit agreements treat a change of control as an event of default and also require PAA to maintain: . a current ratio (as defined) of 1.0 to 1.0; . a debt coverage ratio which is not greater that 4.0 to 1.0 for the period from March 31, 2000 to March 31, 2002 and subsequently 3.75 to 1.0; . an interest coverage ratio which is not less than 2.75 to 1.0; and . a debt to capital ratio of not greater than 0.65 to 1.0. At March 31, 2000, there were letters of credit of approximately $192.9 million and borrowings of $159.1 million outstanding under the credit facilities which were refinanced. Due to the refinancing, we reclassified the current portion of PAA's existing bank debt of $24.2 million at March 31, 2000, to long-term. Cash Flows Three Months Ended March 31, -------------------- (in millions) 2000 1999 ------------------------------------------------------- Cash provided by (used in): (restated) Operating activities $ (36.2) $ 3.8 Investing activities 204.0 (31.2) Financing activities (218.4) 21.7 ----------------------------------------------------- Operating Activities. Net cash used in operating activities for the first quarter of 2000 resulted from amounts paid during the first quarter of 2000 for the 1999 unauthorized trading losses. Investing Activities. Net cash provided by investing activities for the first quarter of 2000 included $129.0 million and $90.1 million of proceeds from the sales of the segment of the All American Pipeline and pipeline linefill, respectively. The balance of the linefill proceeds of approximately $5.0 million was received in April 2000. Financing activities. Cash used in financing activities for the first quarter of 2000 resulted primarily from net payments of $211.2 million of short- term and long-term debt. Proceeds used to reduce debt primarily came from the asset sales discussed above. Preferred Stock Dividends On April 1, 2000, we paid cash dividends of approximately $6.0 million on our Series D, F and G preferred stock. The dividends on the Series D and F preferred stock are for the period from October 1, 1999 through March 31, 2000. The Series F preferred stock was issued on December 15, 1999 and such dividend covers the period from that date through March 31, 2000. Contingencies Since our announcement in November 1999 of PAA's losses resulting from unauthorized trading by a former employee, numerous class action lawsuits have been filed against PAA, certain of its general partner's officers and directors and in some of these cases, its general partner and us alleging violations of the federal securities laws. In 23 addition, derivative lawsuits were filed in the Delaware Chancery Court against PAA's general partner, its directors and certain of its officers alleging the defendants breached the fiduciary duties owed to PAA and its unitholders by failing to monitor properly the activities of its traders. While we maintain an extensive inspection program designed to prevent and, as applicable, to detect and address releases of crude oil into the environment from our pipeline and storage operations, we may experience such releases in the future, or discover releases that were previously unidentified. Damages and liabilities incurred due to any future environmental releases from our assets may substantially affect our business. See Item 1. - "Legal Proceedings." CHANGING OIL AND NATURAL GAS PRICES Our upstream activities are affected by changes in crude oil prices, which historically have been volatile. The NYMEX benchmark WTI crude oil price averaged $28.77 per barrel during the first quarter of 2000, approximately 120% above the $13.06 per barrel in the first quarter of last year. Substantial future crude oil price declines would adversely affect our overall results, and therefore our liquidity. Furthermore, low crude oil prices could affect our ability to raise capital on favorable terms. In order to manage our exposure to commodity price risk, we have routinely hedged a portion of our crude oil production and intend to continue this practice. For 2000, we have entered into various arrangements which provide for us to receive an average minimum NYMEX WTI price of $16.00 per barrel on 18,500 barrels of oil per day. Approximately 10,000 barrels per day of these volumes will participate in price increases above the $16.00 per barrel floor price, subject to a ceiling limitation of $19.75 per barrel. This hedge position is equivalent to approximately 83% of first quarter 2000 average daily crude oil volumes at an average hedge price of approximately $18.40 per barrel. For 2001, we have entered into various arrangements which will provide for us to receive an average minimum NYMEX of approximately $19.00 per barrel on 12,000 barrels per day (equivalent to 54% of first quarter 2000 crude oil production levels). Of these volumes, 100% have full market price participation up to $27.00 per barrel; 50% have price participation between $27.00 per barrel and $30.00 per barrel and 100% have full market price participation at prices above $30.00 per barrel. The foregoing NYMEX WTI crude oil prices are before quality and location differentials. Management intends to continue to maintain hedging arrangements for a significant portion of our production. Such contracts may expose us to the risk of financial loss in certain circumstances. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS We are exposed to various market risks, including volatility in crude oil commodity prices and interest rates. To manage our exposure, we monitor our inventory levels, and our expectations of future commodity prices and interest rates when making decisions with respect to risk management. We do not enter into derivative transactions for speculative trading purposes that would expose us to price risk. Substantially all of our derivative contracts are exchanged or traded with major financial institutions and the risk of credit loss is considered remote. Commodity Price Risk. The fair value of outstanding derivative commodity instruments and the change in fair value that would be expected from a 10 percent adverse price change are shown in the table below (in millions): March 31, 2000 December 31, 1999 -------------------- -------------------- Effect of Effect of 10% 10% Fair Price Fair Price Value Change Value Change --------- ---------- ---------- --------- Crude oil : Futures contracts $ 6.4 $ 3.1 $ - $(2.8) Swaps and options contracts (26.0) (6.0) (21.9) (6.1) The fair values of the futures contracts are based on quoted market prices obtained from the NYMEX. The fair value of the swaps are estimated based on quoted prices from independent reporting services compared to the contract price of the swap and approximate the gain or loss that would have been realized if the contracts had been closed out at the dates indicated. All hedge positions offset physical positions exposed to the cash market; none of these offsetting physical positions are included in the above table. Price-risk sensitivities were calculated by assuming an across-the-board 10 percent increase in prices regardless of term or historical relationships between the contractual price of the instruments and the underlying commodity price. In the event of an actual 10 percent change in prompt month crude oil prices, the fair value of our derivative portfolio would typically change less than that shown in the table due to lower volatility in out-month prices. 24 Interest Rate Risk. Our debt instruments are sensitive to market fluctuations in interest rates. The table below presents principal payments and the related weighted average interest rates by expected maturity dates for debt outstanding at March 31, 2000. Our variable rate debt bears interest at LIBOR plus the applicable margin. The average interest rates presented below are based upon rates in effect at March 31, 2000. The carrying value of variable rate bank debt approximates fair value as interest rates are variable, based on prevailing market rates. The fair value of fixed rate debt was based on quoted market prices based on trades of subordinated debt. The fair value of the Redeemable Preferred Stock approximates its liquidation value at March 31, 2000.
Expected Year of Maturity ------------------------------------------------------------------------- Fair 2000 2001 2002 2003 2004 Thereafter Total Value --------- --------- --------- --------- --------- ---------- --------- --------- Liabilities: Short-term debt - variable rate $ 13.5 $ - $ - $ - $ - $ - $ 13.5 $ 13.5 Average interest rate 8.22% 8.22% Long-term debt - variable rate 10.6 9.1 34.7 34.7 114.0 78.3 281.4 281.4 Average interest rate 8.21% 7.50% 7.42% 7.42% 8.56% 7.97% 8.07% Long-term debt - fixed rate 0.5 0.5 0.5 0.5 0.5 275.0 277.5 270.7 Average interest rate 8.00% 8.00% 8.00% 8.00% 8.00% 10.25% 10.23% Redeemable Preferred Stock - - - - - $ 138.8 $138.8 $138.8
At December, 1999, the carrying value of all variable rate bank debt and the Redeemable Preferred Stock of $506.1 million and $138.8 million, respectively, approximated the fair value and liquidation value, at that date. The carrying value and fair value of the fixed rate debt was $277.5 million and $270.7 million, respectively, at that date. Interest rate swaps and collars are used to hedge underlying debt obligations. These instruments hedge specific debt issuances and qualify for hedge accounting. The interest rate differential is reflected as an adjustment to interest expense over the life of the instruments. At March 31, 2000, we had interest rate swap and collar arrangements for an aggregate notional principal amount of $240.0 million, which positions had an aggregate value of approximately $1.4 million as of such date. These instruments are based on LIBOR margins and generally provide for a floor of 5% and a ceiling of 6.5% for 90.0 million of debt, a floor of 6% and a ceiling of 8% for 125.0 million of debt and 5.7% for $25.0 million of debt. FORWARD-LOOKING STATEMENTS AND ASSOCIATED RISKS All statements, other than statements of historical fact, included in this report are forward-looking statements, including, but not limited to, statements identified by the words "anticipate," "believe," "estimate," "expect," "plan," "intend" and "forecast" and similar expressions and statements regarding our business strategy, plans and objectives of our management for future operations. These statements reflect our current views with respect to future events, based on what we believe are reasonable assumptions. These statements, however, are subject to certain risks, uncertainties and assumptions, including, but not limited to (1) uncertainties inherent in the exploration for and development and production of oil and gas and in estimating reserves, (2) unexpected future capital expenditures (including the amount and nature thereof), (3) impact of crude oil price fluctuations, (4) the effects of competition, (5) the success of our risk management activities, (6) the availability (or lack thereof) of acquisition or combination opportunities, (7) the availability of adequate supplies of and demand for crude oil in areas of midstream operations, (8) the impact of current and future laws and governmental regulations, (9) environmental liabilities that are not covered by an indemnity or insurance and (10) general economic, market or business conditions. If one or more of these risks or uncertainties materialize, or if underlying assumptions prove incorrect, actual results may vary materially from those in the forward-looking statements. Except as required by applicable securities laws, we do not intend to update these forward-looking statements and information. 25 PART II. OTHER INFORMATION ITEMS 1. LEGAL PROCEEDINGS Texas Securities Litigation. On November 29, 1999, a class action lawsuit was filed in the United States District Court for the Southern District of Texas entitled Di Giacomo v. Plains All American Pipeline, et al. The suit alleged that Plains All American Pipeline, L.P. and certain of the general partner's officers and directors violated federal securities laws, primarily in connection with unauthorized trading by a former employee. An additional nineteen cases were filed in the Southern District of Texas, some of which name the general partner (our wholly-owned subsidiary) and us as additional defendants. Plaintiffs allege that the defendants are liable for securities fraud violations under Rule 10b-5 and Section 20(a) of the Securities Exchange Act of 1934 and for making false registration statements under Sections 11 and 15 of the Securities Act of 1933. The court has consolidated all subsequently filed cases under the first filed action described above. On April 27, 2000 the court appointed two distinct lead plaintiffs to represent two different plaintiff classes: (1) purchasers of Plains Resources common stock and options and (2) purchasers of PAA's common units. No answer or responsive pleading is due until thirty days after the lead plaintiffs have filed a consolidated amended complaint. Delaware Derivative Litigation. On December 3, 1999, two derivative lawsuits were filed in the Delaware Chancery Court, New Castle County, entitled Susser v. Plains All American Inc., et al and Senderowitz v. Plains All American Inc., et al. These suits, and three others which were filed in Delaware subsequently, named the general partner, its directors and certain of its officers as defendants, and allege that the defendants breached the fiduciary duties that they owed to Plains All American Pipeline, L.P. and its unitholders by failing to monitor properly the activities of its employees. The derivative complaints allege, among other things, that Plains All American Pipeline has been harmed due to the negligence or breach of loyalty of the officers and directors that are named in the lawsuits. These cases are currently in the process of being consolidated. No answer or responsive pleading is due until these cases have been consolidated and a consolidated complaint has been filed. We intend to vigorously defend the claims made in the Texas securities litigation and the Delaware derivative litigation. However, there can be no assurance that we will be successful in our defense or that these lawsuits will not have a material adverse effect on our financial position or results of operation. We, in the ordinary course of business, are a claimant and/or a defendant in various other legal proceedings. Management does not believe that the outcome of these other legal proceedings, individually and in the aggregate, will have a materially adverse effect on our financial condition or results of operation. ITEMS 2, 3, 4 & 5 ARE NOT APPLICABLE AND HAVE BEEN OMITTED. Item 6 - Exhibits and Reports on Form 8-K A. Exhibits 27. Financial Data Schedule B. Reports on Form 8-K None. 26 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned and thereunto duly authorized. PLAINS RESOURCES INC. Date: May 15, 2000 By: /s/ Cynthia A. Feeback ----------------------------------------- Cynthia A. Feeback, Vice President - Accounting and Assistant Treasurer (Principal Accounting Officer) 27 EX-27 2 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM PLAINS RESOURCES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET AS OF MARCH 31, 2000 AND CONSOLIDATED STATEMENT OF INCOME FOR THE THREE MONTHS ENDED MARCH 31, 2000, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 3-MOS DEC-31-2000 JAN-01-2000 MAR-31-2000 17,626 0 525,612 0 59,649 602,887 1,206,445 410,591 1,504,065 542,115 0 138,813 23,300 1,795 32,163 1,504,065 1,032,220 1,085,222 978,261 1,004,554 0 0 15,874 35,210 13,732 21,478 0 (1,365) 0 20,113 0.91 0.68
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