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What changed in PLAINS ALL AMERICAN PIPELINE LP's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of PLAINS ALL AMERICAN PIPELINE LP's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+276 added−297 removedSource: 10-K (2024-02-29) vs 10-K (2023-03-01)

Top changes in PLAINS ALL AMERICAN PIPELINE LP's 2023 10-K

276 paragraphs added · 297 removed · 229 edited across 4 sections

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

96 edited+19 added−16 removed323 unchanged
Biggest changeSummary of Risk Factors Risks Related to Our Business Our business, results of operations, financial condition, cash flows and unit price can be adversely affected by many factors including but not limited to: • the volume of crude oil, natural gas and NGL shipped, processed, purchased, stored, fractionated and/or gathered at or through the use of our facilities, which can be negatively impacted by a variety of factors outside of our control; • competition in our industry, including recontracting and other risks associated with the general capacity overbuild of midstream energy infrastructure in some of the areas where we operate; • changes in supply and demand for the products we handle and the services we provide, which can be caused by a variety of factors outside of our control; • natural disasters, catastrophes, terrorist attacks (including eco-terrorist attacks), process safety failures, equipment failures or other events, including pipeline or facility accidents and cyber or other attacks on our electronic and computer systems, could interrupt our operations, hinder our ability to fulfil our contractual obligations and/or result in severe personal injury, property damage and environmental damage; • cybersecurity attacks, data breaches and other disruptions affecting us, or our service providers, could materially and adversely affect our business, operations, reputation and financial results; • pandemics, epidemics or other public health events; • societal and political pressures from various groups, including opposition to the development or operation of our pipelines and facilities; • increased concern by financial stakeholders with respect to our governance structure and the perceived social and environmental cost of our industry; • the overall forward market for crude oil and NGL, and certain market structures, the absence of pricing volatility and other market factors; • an inability to fully implement or realize expected returns or other anticipated benefits associated with joint venture and joint ownership arrangements, acquisitions, divestitures and other projects; • entering into new businesses in connection with our strategy to participate in emerging energy opportunities; • loss of our investment grade credit rating or a significant reduction in our ability to receive open credit; • the credit risk of our customers and other counterparties we transact with in the ordinary course of business activities; • tightened capital markets or other factors that increase our cost of capital or otherwise limit our access to capital; • the insufficiency of, or non-compliance with, our risk policies; • our insurance coverage may not fully cover our losses and we may in the future encounter increased costs related to, and lack of availability of, insurance; • our current or future debt levels, or inability to borrow additional funds or capitalize on business opportunities; • changes in currency exchange rates; • difficulties recruiting and retaining our workforce; • an impairment of long-term assets; • significant under-utilization of certain assets due to fixed costs incurred to obtain the right to use such assets; • the cost to repair and maintain our assets; • we do not own all of the land on which our pipelines and facilities are located, which could result in disruptions to our operations; and • failure to obtain materials or commodities in the quantity and the quality we need, and at commercially acceptable prices, whether due to supply disruptions, inflation, tariffs, quotas or other factors. 37 Table of Contents Index to Financial Statements Risks Related to Laws and Regulations Our business may be adversely impacted by existing or new laws, executive orders and regulations relating to protection of the environment and wildlife, operational safety, pandemics, cross-border import/export and tax matters, financial and hedging activities, climate change and related matters.
Biggest changeSummary of Risk Factors Risks Related to Our Business Our business, results of operations, financial condition, cash flows and unit price can be adversely affected by many factors including but not limited to: • the volume of crude oil, natural gas and NGL shipped, processed, purchased, stored, fractionated and/or gathered at or through the use of our pipelines and facilities, which can be negatively impacted by a variety of factors outside of our control; • competition in our industry, including recontracting and other risks associated with the general capacity overbuild of midstream energy infrastructure in some of the areas where we operate; • changes in supply and demand for the products we handle and the services we provide, which can be caused by a variety of factors outside of our control; • natural disasters, catastrophes, terrorist attacks (including eco-terrorist attacks), process safety failures, equipment failures or other events, including pipeline or facility accidents and cyber or other attacks on our electronic and computer systems, could interrupt our operations, hinder our ability to fulfil our contractual obligations and/or result in severe personal injury, property damage and environmental damage; • cybersecurity attacks, data breaches and other disruptions affecting us, or our service providers, could materially and adversely affect our business, operations, reputation and financial results; • risks arising from climate change, energy conservation measures, or initiatives that stimulate demand for alternative forms of energy; • societal and political pressures from various groups, including opposition to the development or operation of our pipelines and facilities; • increased concern by financial stakeholders with respect to our governance structure and the perceived social and environmental cost of our industry; • the overall forward market for crude oil and NGL, and certain market structures, the absence of pricing volatility and other market factors; • an inability to fully implement or realize expected returns or other anticipated benefits associated with acquisitions, joint venture and joint ownership arrangements, divestitures and other projects; • entering into new businesses in connection with our strategy to participate in emerging energy opportunities; • pandemics, epidemics or other public health events; • loss of our investment grade credit rating or a significant reduction in our ability to receive open credit; • the credit risk of our customers and other counterparties we transact with in the ordinary course of business activities; • tightened capital markets or other factors that increase our cost of capital or otherwise limit our access to capital; • the insufficiency of, or non-compliance with, our risk policies; • our insurance coverage may not fully cover our losses and we may in the future encounter increased costs related to, and lack of availability of, insurance; • our current or future debt levels, or inability to borrow additional funds or capitalize on business opportunities; • changes in interest rates and currency exchange rates; • difficulties recruiting and retaining our workforce; • an impairment of long-term assets; • significant under-utilization of certain assets due to fixed costs incurred to obtain the right to use such assets; • the cost to repair and maintain our assets; • we do not own all of the land on which our pipelines and facilities are located, which could result in disruptions to our operations; • failure to obtain materials or commodities in the quantity and the quality we need, and at commercially acceptable prices, whether due to supply disruptions, inflation, tariffs, quotas or other factors; and 37 Table of Contents Index to Financial Statement s • the pace of development of natural gas infrastructure could have an adverse impact on expected crude oil production growth in the Permian Basin.
Our business, results of operations, financial condition, cash flows and unit price can be adversely affected by pandemics, epidemics or other public health events.
Our business, results of operations, financial condition, cash flows and unit price can be adversely affected by pandemics, epidemics or other public health events. Our business, results of operations, financial condition, cash flows and unit price can be adversely affected by pandemics, epidemics or other public health events.
Tax Risks to Common Unitholders and Series B Preferred Unitholders Our Common Units and Series B Preferred Units are subject to tax risks, which may adversely impact the value of or market for our units and may reduce our cash available for distribution or debt service, including but not limited to: • our status as a partnership for U.S. federal income tax purposes and not being subject to a material amount of entity-level taxation; • potential legislative, judicial or administrative changes or differing interpretations, possibly applied on a retroactive basis; • potential audit adjustments to our income tax returns for tax years beginning after December 31, 2017, by the IRS or state tax authorities; • IRS or Canada Revenue Agency (“CRA”) contests to the federal income tax positions or inter-country allocations we take; • our unitholders may be required to pay taxes on their share of our income even if they do not receive any cash distributions from us; • tax-exempt entities and non-U.S. unitholders face unique tax issues from owning our units; • taxable gain or loss on the disposition of our common units could be more or less than expected; • unitholders may be subject to limitation on their ability to deduct interest expense incurred by us; • our unitholders will likely be subject to state, local and non-U.S. taxes and return filing requirements in states and jurisdictions where they do not live as a result of investing in our units; and • the tax treatment of income attributable to distributions on our Series B Preferred Units as guaranteed payments for the use of capital creates a different tax treatment for the holders of our Series B Preferred Units than the holders of our common units and such income is not eligible for the 20% deduction for qualified publicly traded partnership income. 38 Table of Contents Index to Financial Statements Risks Related to Our Business Our profitability depends on the volume of crude oil, natural gas and NGL shipped, processed, purchased, stored, fractionated and/or gathered at or through the use of our facilities, which can be negatively impacted by a variety of factors outside of our control.
Tax Risks to Common Unitholders and Series B Preferred Unitholders Our Common Units and Series B Preferred Units are subject to tax risks, which may adversely impact the value of or market for our units and may reduce our cash available for distribution or debt service, including but not limited to: • our status as a partnership for U.S. federal income tax purposes and not being subject to a material amount of entity-level taxation; • potential legislative, judicial or administrative changes or differing interpretations, possibly applied on a retroactive basis; • potential audit adjustments to our income tax returns for tax years beginning after December 31, 2017, by the IRS or state tax authorities; • IRS or Canada Revenue Agency (“CRA”) contests to the federal income tax positions or inter-country allocations we take; • our unitholders may be required to pay taxes on their share of our income even if they do not receive any cash distributions from us; • tax-exempt entities and non-U.S. unitholders face unique tax issues from owning our units; • taxable gain or loss on the disposition of our common units could be more or less than expected; • unitholders may be subject to limitation on their ability to deduct interest expense incurred by us; • our unitholders will likely be subject to state, local and non-U.S. taxes and return filing requirements in states and jurisdictions where they do not live as a result of investing in our units; and • the tax treatment of income attributable to distributions on our Series B Preferred Units as guaranteed payments for the use of capital creates a different tax treatment for the holders of our Series B Preferred Units than the holders of our common units and such income is not eligible for the 20% deduction for qualified publicly traded partnership income. 38 Table of Contents Index to Financial Statement s Risks Related to Our Business Our profitability depends on the volume of crude oil, natural gas and NGL shipped, processed, purchased, stored, fractionated and/or gathered at or through the use of our pipelines and facilities, which can be negatively impacted by a variety of factors outside of our control.
In addition, our merchant activities include purchasing crude oil and NGL that is carried on railcars, tankers or barges. Such cargos are at risk of being damaged or lost because of events such as derailment, marine disaster, inclement weather, mechanical failures, grounding or collision, fire, explosion, environmental accidents, piracy, terrorism and political instability.
In addition, our merchant activities may include purchasing crude oil and NGL that is carried on railcars, tankers or barges. Such cargos are at risk of being damaged or lost because of events such as derailment, marine disaster, inclement weather, mechanical failures, grounding or collision, fire, explosion, environmental accidents, piracy, terrorism and political instability.
Many of these projects involve numerous regulatory, environmental, commercial, economic, weather-related, political and legal uncertainties that are beyond our control, including the following: • We may be unable to realize our forecasted commercial, operational or administrative synergies in connection with our joint ventures and joint ownership arrangements, including the Plains Oryx Permian Basin LLC joint venture; • Joint ventures and other joint ownership arrangements may demand substantial internal resources and may divert resources and attention from other areas of our business; 43 Table of Contents Index to Financial Statements • We may construct pipelines, facilities or other assets in anticipation of market demand that dissipates or market growth that never materializes; • Despite the fact that we will expend significant amounts of capital during the construction phase of growth or expansion projects, revenues associated with these organic growth projects will not materialize until the projects have been completed and placed into commercial service, and the amount of revenue generated from these projects could be significantly lower than anticipated for a variety of reasons; • As these projects are undertaken, required approvals, permits and licenses may not be obtained, may be delayed, may be obtained with conditions that materially alter the expected return associated with the underlying projects or may be granted and then subsequently withdrawn; • We may face opposition to our planned projects from environmental groups, landowners, local groups and other advocates, including lawsuits or other actions designed to disrupt or delay our planned projects; • We may not be able to obtain, or we may be significantly delayed in obtaining, all of the rights of way or other real property interests we need to complete such projects, or the costs we incur in order to obtain such rights of way or other interests may be greater than we anticipated; • Due to unavailability or costs of materials, supplies, power, labor or equipment, including increased costs associated with any import duties or requirements to source certain supplies or materials from U.S. suppliers or manufacturers, the cost of completing these projects could turn out to be significantly higher than we budgeted and the time it takes to complete construction of these projects and place them into commercial service could be significantly longer than planned; and • The completion or success of our projects may depend on the completion or success of third-party facilities over which we have no control.
Many of these projects involve numerous regulatory, environmental, commercial, economic, weather-related, political and legal uncertainties that are beyond our control, including the following: • We may be unable to realize our forecasted commercial, operational or administrative synergies in connection with our joint ventures and joint ownership arrangements, including the Plains Oryx Permian Basin LLC joint venture; • Joint ventures and other joint ownership arrangements may demand substantial internal resources and may divert resources and attention from other areas of our business; • We may construct pipelines, facilities or other assets in anticipation of market demand that dissipates or market growth that never materializes; • Despite the fact that we will expend significant amounts of capital during the construction phase of growth or expansion projects, revenues associated with these organic growth projects will not materialize until the projects have been completed and placed into commercial service, and the amount of revenue generated from these projects could be significantly lower than anticipated for a variety of reasons; • As these projects are undertaken, required approvals, permits and licenses may not be obtained, may be delayed, may be obtained with conditions that materially alter the expected return associated with the underlying projects or may be granted and then subsequently withdrawn; • We may face opposition to our planned projects from environmental groups, landowners, local groups and other advocates, including lawsuits or other actions designed to disrupt or delay our planned projects; • We may not be able to obtain, or we may be significantly delayed in obtaining, all of the rights of way or other real property interests we need to complete such projects, or the costs we incur in order to obtain such rights of way or other interests may be greater than we anticipated; • Due to unavailability or costs of materials, supplies, power, labor or equipment, including increased costs associated with any import duties or requirements to source certain supplies or materials from U.S. suppliers or manufacturers, the cost of completing these projects could turn out to be significantly higher than we budgeted and the time it takes to complete construction of these projects and place them into commercial service could be significantly longer than planned; and • The completion or success of our projects may depend on the completion or success of third-party facilities over which we have no control.
If we are unable to successfully complete, integrate or realize the anticipated benefits of future acquisitions or planned divestitures (due to reduced investment in the energy sector, governmental action, litigation, counterparty non-performance or other factors), it may be more difficult for us to implement our business strategies, achieve our desired leverage levels, increase returns to equity holders or otherwise accomplish our financial goals.
If we are unable to successfully complete, integrate or realize the anticipated benefits of future acquisitions or planned divestitures (due to reduced investment in the energy sector, governmental action, litigation, counterparty non-performance or other factors), it may be more difficult for us to implement our business strategies, maintain our desired leverage levels, increase returns to equity holders or otherwise accomplish our financial goals.
Significant under-utilization of assets we lease or otherwise secure the right to use in connection with our business could have a significant negative impact on our profitability and cash flows. Many of our assets have been in service for many years and require significant expenditures to maintain them.
Significant under-utilization of assets we lease or otherwise secure the right to use in connection with our business could have a significant negative impact on our profitability and cash flows. Many of our assets have been in service for many years and require significant expenditures to maintain them or remove them from service.
Terrorists may target our physical facilities and hackers may attack our electronic and computer systems. 40 Table of Contents Index to Financial Statements If one or more of our pipelines or other facilities, including electronic and computer systems, or any facilities or businesses that deliver products, supplies or services to us or that we rely on in order to operate our business, are damaged by severe weather or any other disaster, accident, catastrophe, terrorist attack or event, our operations could be significantly interrupted.
Terrorists may target our physical facilities and hackers may attack our electronic and computer systems. 40 Table of Contents Index to Financial Statement s If one or more of our pipelines or other facilities, including electronic and computer systems, or any facilities or businesses that deliver products, supplies or services to us or that we rely on in order to operate our business, are damaged by severe weather or any other disaster, accident, catastrophe, terrorist attack or event, our operations could be significantly interrupted.
As a result, our maintenance or repair costs may increase in the future. Our pipelines, terminals, storage and processing and fractionation assets are generally long-lived assets, and many of them have been in service for many years. The age and condition of our assets could result in increased maintenance or repair expenditures in the future.
As a result, our maintenance, repair or asset retirement costs may increase in the future. Our pipelines, terminals, storage and processing and fractionation assets are generally long-lived assets, and many of them have been in service for many years. The age and condition of our assets could result in increased maintenance, repair or asset retirement expenditures in the future.
Because AAP owns approximately 31% of our outstanding Common Unit Equivalents and the owners of our general partner, along with directors and executive officers and their affiliates, own a significant percentage of our outstanding common units, the removal of our general partner would be difficult without the consent of both our general partner and its affiliates.
Because AAP owns approximately 30% of our outstanding Common Unit Equivalents and the owners of our general partner, along with directors and executive officers and their affiliates, own a significant percentage of our outstanding common units, the removal of our general partner would be difficult without the consent of both our general partner and its affiliates.
We compete against these companies on the basis of many factors, including geographic proximity to production areas, market access, rates, terms of service, connection costs and other factors. 39 Table of Contents Index to Financial Statements With regard to our NGL operations, we compete with large oil, natural gas and natural gas liquids companies that may, relative to us, have greater financial resources and access to supplies of natural gas and NGL.
We compete against these companies on the basis of many factors, including geographic proximity to production areas, market access, rates, terms of service, connection costs and other factors. 39 Table of Contents Index to Financial Statement s With regard to our NGL operations, we compete with large oil, natural gas and natural gas liquids companies that may, relative to us, have greater financial resources and access to supplies of natural gas and NGL.
We cannot provide any assurance as to the ultimate amount or timing of future pipeline integrity expenditures but any such expenditures could be significant. See “Environmental — General” in Note 19 to our Consolidated Financial Statements.
We cannot provide any assurance as to the ultimate amount or timing of future pipeline integrity expenditures but any such expenditures could be significant. See “Environmental — General” in Note 18 to our Consolidated Financial Statements.
Acquisitions also involve potential risks, including: • performance from the acquired businesses or assets that is below the forecasts we used in evaluating the acquisition; • a significant increase in our indebtedness and working capital requirements; • the inability to timely and effectively integrate the operations of recently acquired businesses or assets; 45 Table of Contents Index to Financial Statements • the incurrence of substantial unforeseen environmental and other liabilities arising out of the acquired businesses or assets for which we are either not fully insured or indemnified, including liabilities arising from the operation of the acquired businesses or assets prior to our acquisition; • risks associated with operating in lines of business that are distinct and separate from our historical operations; • customer or key employee loss from the acquired businesses; and • the diversion of management’s attention from other business concerns.
Acquisitions also involve potential risks, including: • performance from the acquired businesses or assets that is below the forecasts we used in evaluating the acquisition; • a significant increase in our indebtedness and working capital requirements; • the inability to timely and effectively integrate the operations of recently acquired businesses or assets; • the incurrence of substantial unforeseen environmental and other liabilities arising out of the acquired businesses or assets for which we are either not fully insured or indemnified, including liabilities arising from the operation of the acquired businesses or assets prior to our acquisition; • risks associated with operating in lines of business that are distinct and separate from our historical operations; • customer or key employee loss from the acquired businesses; and • the diversion of management’s attention from other business concerns.
Following a decision issued in May 2017 by the Tenth Circuit Court of Appeals, tribal ownership of even a very small fractional interest in tribal land owned or at one time owned by an individual Indian landowner bars condemnation of any interest in the allotment.
Following a decision issued in May 2017 by the Tenth Circuit Court of Appeals, tribal ownership of even a very small fractional interest in tribal land owned or at one time owned by an individual Native American landowner bars condemnation of any interest in the allotment.
Increasing attention to climate change, societal expectations on companies to address climate change, investor expectations regarding voluntary ESG related disclosures, increasing mandatory ESG disclosures, and consumer demand for alternative forms of energy may result in increased costs, reduced demand for our services or the products we handle, reduced profits, increased legislative and judicial scrutiny, investigations and litigation, reputational damage, and negative impacts on our access to capital markets.
A focus on climate change, societal expectations on companies to address climate change, investor expectations regarding voluntary sustainability-related disclosures, increasing mandatory sustainability disclosures, and consumer demand for alternative forms of energy may result in increased costs, reduced demand for our services or the products we handle, reduced profits, increased legislative and judicial scrutiny, investigations and litigation, reputational damage, and negative impacts on our access to capital markets.
“Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Credit Agreements, Commercial Paper Program and Indentures.” 47 Table of Contents Index to Financial Statements Our ability to access capital markets to raise capital on favorable terms will be affected by our debt level, our operating and financial performance, the amount of our current maturities and debt maturing in the next several years, and by prevailing market conditions.
“Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Credit Agreements, Commercial Paper Program and Indentures.” Our ability to access capital markets to raise capital on favorable terms will be affected by our debt level, our operating and financial performance, the amount of our current maturities and debt maturing in the next several years, and by prevailing market conditions.
There have been a variety of legislative and regulatory proposals to prohibit, restrict, or more closely regulate various forms of hydraulic fracturing; for example, the Governor of California issued an order in April 2021 directing the Department of Conservation’s Geologic Energy Management Division to initiate regulatory action to end the issuance of new permits for hydraulic fracturing by January 2024.
There have been a variety of legislative and regulatory proposals to prohibit, restrict, or more closely regulate various forms of hydraulic fracturing; for example, the Governor of California issued an order directing the Department of Conservation’s Geologic Energy Management Division to initiate regulatory action to end the issuance of new permits for hydraulic fracturing by early 2024.
The Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”), enacted on July 21, 2010, established federal oversight and regulation of derivative markets and entities, such as us, that participate in those markets. The Dodd-Frank Act requires the CFTC and the SEC to promulgate rules and regulations implementing the Dodd-Frank Act.
The Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) established federal oversight and regulation of derivative markets and entities, such as us, that participate in those markets. The Dodd-Frank Act requires the CFTC and the SEC to promulgate rules and regulations implementing the Dodd-Frank Act.
If at any time the availability of these assets is limited or denied, and if access to alternative assets cannot be arranged, it could have an adverse effect on our business, results of operations and cash flow. Significant under-utilization of certain assets could significantly reduce our profitability due to fixed costs incurred to obtain the right to use such assets.
If at any time the availability of these assets is limited or denied, and if access to alternative assets cannot be arranged, it could have an adverse effect on our business, results of operations and cash flow. 49 Table of Contents Index to Financial Statement s Significant under-utilization of certain assets could significantly reduce our profitability due to fixed costs incurred to obtain the right to use such assets.
You are urged to consult with your own tax advisor with respect to the status of regulatory or administrative developments and proposals and their potential effect on your investment in our units. Non-U.S. unitholders will be subject to U.S. taxes and withholding with respect to their income and gain from owning our units.
You are urged to consult with your own tax advisor with respect to the status of regulatory or administrative developments and proposals and their potential effect on your investment in our units. 60 Table of Contents Index to Financial Statement s Non-U.S. unitholders will be subject to U.S. taxes and withholding with respect to their income and gain from owning our units.
These conflicts may include the following: • under our partnership agreement, we reimburse the general partner for the costs of managing and for operating the partnership; 56 Table of Contents Index to Financial Statements • the amount of cash expenditures, borrowings and reserves in any quarter may affect available cash to pay quarterly distributions to unitholders; • the general partner tries to avoid being liable for partnership obligations.
These conflicts may include the following: • under our partnership agreement, we reimburse the general partner for the costs of managing and for operating the partnership; • the amount of cash expenditures, borrowings and reserves in any quarter may affect available cash to pay quarterly distributions to unitholders; • the general partner tries to avoid being liable for partnership obligations.
Accordingly, loss of our investment grade credit ratings could adversely impact our cash flows, our ability to make distributions and the value of our outstanding equity and debt securities. 44 Table of Contents Index to Financial Statements We are exposed to the credit risk of our customers and other counterparties we transact with in the ordinary course of our business activities.
Accordingly, loss of our investment grade credit ratings could adversely impact our cash flows, our ability to make distributions and the value of our outstanding equity and debt securities. We are exposed to the credit risk of our customers and other counterparties we transact with in the ordinary course of our business activities.
We can give no assurance that we would be able to refinance our debt securities. 58 Table of Contents Index to Financial Statements We do not have the same flexibility as other types of organizations to accumulate cash, which may limit cash available to service our debt securities or to repay them at maturity.
We can give no assurance that we would be able to refinance our debt securities. We do not have the same flexibility as other types of organizations to accumulate cash, which may limit cash available to service our debt securities or to repay them at maturity.
As of December 31, 2022, we had approximately $3 billion of liquidity available, including cash and cash equivalents and available borrowing capacity under our senior unsecured revolving credit facility and our senior secured hedged inventory facility, subject to continued covenant compliance. Lower Adjusted EBITDA could increase our leverage ratios and effectively reduce our ability to incur additional indebtedness.
As of December 31, 2023, we had over $2.6 billion of liquidity available, including cash and cash equivalents and available borrowing capacity under our senior unsecured revolving credit facility and our senior secured hedged inventory facility, subject to continued covenant compliance. Lower Adjusted EBITDA could increase our leverage ratios and effectively reduce our ability to incur additional indebtedness.
In addition, our general partner and its affiliates may provide us with services for which we will be charged reasonable fees as determined by the general partner. 54 Table of Contents Index to Financial Statements Cash distributions are not guaranteed and may fluctuate with our performance and the establishment of financial reserves.
In addition, our general partner and its affiliates may provide us with services for which we will be charged reasonable fees as determined by the general partner. Cash distributions are not guaranteed and may fluctuate with our performance and the establishment of financial reserves.
As a result of these provisions, the price at which our common units will trade may be lower because of the absence or reduction of a takeover premium in the trading price. 55 Table of Contents Index to Financial Statements We may issue additional common units without unitholder approval, which would dilute a unitholder’s existing ownership interests.
As a result of these provisions, the price at which our common units will trade may be lower because of the absence or reduction of a takeover premium in the trading price. We may issue additional common units without unitholder approval, which would dilute a unitholder’s existing ownership interests.
The incurrence of such expenses not covered by insurance, indemnity or reserves could materially adversely affect our results of operations. 50 Table of Contents Index to Financial Statements We currently devote substantial resources to comply with DOT-mandated pipeline integrity rules.
The incurrence of such expenses not covered by insurance, indemnity or reserves could materially adversely affect our results of operations. We currently devote substantial resources to comply with DOT-mandated pipeline integrity rules.
Drilling activity, crude oil production and benchmark crude oil prices can fluctuate significantly over time for a wide variety of reasons, including prevailing economic conditions, reduced demand by consumers for end products made with hydrocarbons, increased competition, adverse weather conditions, public health emergencies, and government laws and regulations affecting prices and production levels.
Drilling activity, crude oil production and benchmark crude oil prices can fluctuate significantly over time for a wide variety of reasons, including prevailing economic conditions, geopolitical conflicts or events, reduced demand by consumers for end products made with hydrocarbons, increased competition, adverse weather conditions, public health emergencies, and governmental actions and regulations affecting prices and production levels.
Businesses that do not adapt to or comply with investor or stakeholder expectations and standards, which are continuing to evolve, or businesses that are perceived to have not responded appropriately to the growing concern for ESG issues, regardless of whether there is a legal requirement to do so, may suffer from reputational damage and the business, financial condition, and/or equity value of such business entity could be materially and adversely affected.
Businesses that do not adapt to or comply with investor or stakeholder expectations and standards, which are continuing to evolve, or businesses that are perceived to have not responded appropriately to concerns related to sustainability matters, regardless of whether there is a legal requirement to do so, may suffer reputational damage and the business, financial condition, and/or equity value of such business entity could be materially and adversely affected.
Although we expect that a substantial portion of the income we earn will be eligible for the 20% deduction for qualified publicly traded partnership income, Treasury Regulations provide that income attributable to a guaranteed payment for the use of capital is not eligible for the 20% deduction for qualified business income.
Although we expect that a substantial portion of the income we earn will be eligible for the 20% deduction for qualified publicly traded partnership income for taxable years beginning before December 31, 2025, Treasury Regulations provide that income attributable to a guaranteed payment for the use of capital is not eligible for the 20% deduction for qualified business income.
We are subject to increased concern by institutional investors with respect to the perceived social and environmental cost of our industry and our governance structure, which may adversely impact our ability to raise capital from such investors.
We are subject to scrutiny by financial stakeholders with respect to the perceived social and environmental cost of our industry and our governance structure, which may adversely impact our ability to raise capital from such investors.
As of December 31, 2022, the face value of our consolidated debt was approximately $8.5 billion (excluding unamortized discounts and debt issuance costs of approximately $46 million), substantially all of which was at fixed interest rates.
As of December 31, 2023, the face value of our consolidated debt was approximately $7.8 billion (excluding unamortized discounts and debt issuance costs of approximately $41 million), substantially all of which was at fixed interest rates.
At December 31, 2022, we had approximately $15.3 billion of net property and equipment, $961 million of linefill, $3.1 billion of investments accounted for under the equity method of accounting and approximately $2.1 billion of net intangible assets capitalized on our balance sheet.
At December 31, 2023, we had approximately $15.8 billion of net property and equipment, $976 million of linefill, $2.8 billion of investments accounted for under the equity method of accounting and approximately $1.9 billion of net intangible assets capitalized on our balance sheet.
Therefore, cash distributions might be made during periods when we record losses and might not be made during periods when we record profits. Our preferred units have rights, preferences and privileges that are not the same as, and are preferential to, the rights of holders of our common units.
Therefore, cash distributions might be made during periods when we record losses and might not be made during periods when we record profits. 55 Table of Contents Index to Financial Statement s Our preferred units have rights, preferences and privileges that are not the same as, and are preferential to, the rights of holders of our common units.
ESG factors are playing an increasingly important role in the investment decisions made by investors, and companies involved in certain industries or with certain governance structures, such as master limited partnerships, are receiving increased scrutiny. Investors’ increased focus and activism related to ESG and similar matters could constrain our ability to raise capital.
Sustainability factors play an important role in the investment decisions made by certain investors and banks, and companies involved in certain industries or with certain governance structures, such as master limited partnerships, are receiving increased scrutiny. Financial stakeholders’ focus and activism related to sustainability and similar matters could constrain our ability to raise capital.
We have a number of minimum volume commitment contracts that support our pipelines. In addition, certain of the pipelines in which we own a joint venture interest have minimum volume commitment contracts.
In addition, certain of the pipelines in which we own a joint venture interest have minimum volume commitment contracts.
If we are unable to source such materials, it could materially and adversely affect our ability to construct new infrastructure and operate and maintain our existing assets. In addition, some of the materials used in our business are imported.
If we are unable to source such materials, it could materially and adversely affect our ability to construct new infrastructure and operate and maintain our existing assets. 50 Table of Contents Index to Financial Statement s In addition, some of the materials used in our business are imported.
As of December 31, 2022, the face value of our consolidated debt outstanding was approximately $8.5 billion (excluding unamortized discounts and debt issuance costs of approximately $46 million), consisting of approximately $7.3 billion face value of long-term debt (including senior notes and finance lease obligations) and approximately $1.2 billion of short-term borrowings.
As of December 31, 2023, the face value of our consolidated debt outstanding was approximately $7.8 billion (excluding unamortized discounts and debt issuance costs of approximately $41 million), consisting of approximately $7.3 billion face value of long-term debt (including senior notes and finance lease obligations) and approximately $446 million of short-term borrowings.
Although we have credit risk management policies and procedures that are designed to mitigate and limit our exposure in this area, there can be no assurance that we have adequately assessed and managed the creditworthiness of our existing or future counterparties or that there will not be an unanticipated deterioration in their creditworthiness or unexpected instances of nonpayment or nonperformance, all of which could have an adverse impact on our cash flow and our ability to pay or increase our cash distributions to our partners.
Although we have credit risk management policies and procedures that are designed to mitigate and limit our exposure in this area, there can be no assurance that we have adequately assessed and managed the creditworthiness of our existing or future counterparties or that there will not be an unanticipated deterioration in their creditworthiness or unexpected instances of nonpayment or nonperformance, all of which could have an adverse impact on our cash flow and our ability to pay or increase our cash distributions to our partners. 45 Table of Contents Index to Financial Statement s We have a number of minimum volume commitment contracts that support our pipelines.
In addition, our costs of any contest with the IRS or CRA and any incremental taxes required to be paid will be borne indirectly by our unitholders and our general partner because the costs will reduce our cash available for distribution or debt service. See Note 15 for additional information regarding CRA challenge of intercompany transactions.
In addition, our costs of any contest with the IRS or CRA and any incremental taxes required to be paid will be borne indirectly by our unitholders and our general partner because the costs will reduce our cash available for distribution or debt service.
If our “business interest” is subject to limitation under these rules, our unitholders will be limited in their ability to deduct their share of any interest expense that has been allocated to them.
If our “business interest” is subject to limitation under these rules, our unitholders will be limited in their ability to deduct their share of any interest expense that has been allocated to them. As a result, unitholders may be subject to limitation on their ability to deduct interest expense incurred by us.
The adoption and implementation of any international, federal, regional or state legislation, executive actions, regulations or other regulatory and policy initiatives that impose more stringent standards for GHG emissions from the oil and natural gas industry, restrict the areas in which this industry may produce crude oil and natural gas or generate GHG emissions, increase scrutiny of environmental permitting or delay such permitting reviews, or require enhanced disclosure of such GHG emission and other climate-related information, could result in increased compliance costs, which if passed on to the customer could also result in increased fossil fuel consumption costs, and thereby reduce demand for crude oil and natural gas, and thus our services.
The adoption and implementation of any international, federal, regional or state legislation, executive actions, regulations or other regulatory and policy initiatives that impose more stringent standards for GHG emissions, restrict the areas in which the oil and gas industry may produce crude oil and natural gas or generate GHG emissions, increase scrutiny of environmental permitting or delay such permitting reviews, or require enhanced disclosure of such GHG emission and other climate-related information, could result in reduced demand for crude oil and natural gas, and thus our services, as well as increase our compliance costs.
Supply and demand for crude oil and other hydrocarbon products we handle is dependent upon a variety of factors, including price, current and future economic conditions, fuel conservation measures, alternative fuel adoption, governmental regulation, including climate change regulations, and technological advances in fuel economy and energy generation and storage technologies.
Supply and demand for crude oil and other hydrocarbon products we handle can fluctuate based on a variety of factors, including price, current and future economic conditions, geopolitical conflicts or events, fuel conservation measures, alternative fuel adoption, governmental regulation, including climate change regulations, and technological advances in fuel economy and energy generation and storage technologies.
Taxable income from our non-U.S. businesses is not eligible for the 20% deduction for qualified publicly traded partnership income. For taxable years beginning after December 31, 2017 and ending on or before December 31, 2025, an individual unitholder is generally allowed a deduction equal to 20% of our “qualified publicly traded partnership income” that is allocated to such unitholder.
For taxable years beginning after December 31, 2017 and ending on or before December 31, 2025, an individual unitholder is generally allowed a deduction equal to 20% of our “qualified publicly traded partnership income” that is allocated to such unitholder.
We may face opposition from various groups to the development or operation of our pipelines and facilities and our business may be subject to societal and political pressures. We may face opposition to the development or operation of our pipelines and facilities from environmental groups, landowners, indigenous groups, local groups and other advocates.
We may face opposition to the development or operation of our pipelines and facilities from environmental groups, landowners, indigenous groups, local groups and other advocates.
In recent years, certain financial stakeholders, including institutional investors such as public pension funds, have placed increased importance on the implications and social cost of ESG matters.
Certain financial stakeholders, including certain institutional investors such as public pension funds and banks, have placed importance on the implications and social cost of sustainability matters.
The SEC missed its self-imposed October 2022 deadline for issuing a final rule and most commentators now expect a final rule to be issued in 2023.
The SEC missed its self-imposed October 2022 deadline for issuing a final rule and many commentators now expect a final rule to be issued in the first half of 2024.
Investment in our common units by tax-exempt entities, such as employee benefit plans and individual retirement accounts (known as IRAs) raises issues unique to them.
Tax-exempt entities face unique tax issues from owning our common units that may result in adverse tax consequences to them. Investment in our common units by tax-exempt entities, such as employee benefit plans and individual retirement accounts (known as IRAs) raises issues unique to them.
We may enter into new businesses in connection with our strategy to participate in emerging energy opportunities. If we are unable to execute on this strategy or operate these new lines of business effectively, our future growth could be limited. These new lines of business may never develop or may present risks that we cannot effectively manage.
If we are unable to execute on this strategy or operate these new lines of business effectively, our future growth could be limited. These new lines of business may never develop or may present risks that we cannot effectively manage.
Any new laws, executive orders or regulations, or changes to or interpretations of existing laws or regulations, adverse to us could have a material adverse effect on our operations, revenues, expenses and profitability. We have a history of making incremental additions to the miles of pipelines we own, both through acquisitions and investment capital projects.
Any new laws, executive orders or regulations, or changes to or interpretations of existing laws or regulations, adverse to us could have a material adverse effect on our financial position, results of operations and cash flows. 51 Table of Contents Index to Financial Statement s We have a history of making incremental additions to the miles of pipelines we own, both through acquisitions and investment capital projects.
In addition, enhanced climate-related disclosure requirements could accelerate the trend of certain stakeholders and lenders restricting or seeking more stringent conditions with respect to their investments in certain carbon-intensive sectors.
In addition, enhanced climate-related disclosure requirements could influence stakeholders and lenders to restrict or seek more stringent conditions with respect to their investments in certain carbon-intensive sectors.
Our leverage may also make our results of operations more susceptible to adverse economic and industry conditions by limiting our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate and may place us at a competitive disadvantage as compared to our competitors that have less debt.
Our leverage may also make our results of operations more susceptible to adverse economic and industry conditions by limiting our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate and may place us at a competitive disadvantage as compared to our competitors that have less debt. 58 Table of Contents Index to Financial Statement s The ability to transfer our debt securities may be limited by the absence of an organized trading market.
Our leverage is significant in relation to our partners’ capital. At December 31, 2022, the face value of our total outstanding long-term debt was approximately $7.3 billion, and the face value of our total outstanding short-term debt was approximately $1.2 billion. We will be prohibited from making cash distributions during an event of default under any of our indebtedness.
At December 31, 2023, the face value of our total outstanding long-term debt was approximately $7.3 billion, and the face value of our total outstanding short-term debt was approximately $446 million. We will be prohibited from making cash distributions during an event of default under any of our indebtedness.
For a discussion of our Line 901 Incident insurance receivable, please read Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Estimates— Line 901 Incident Insurance Receivable” and Note 19 to our Consolidated Financial Statements. The terms of our indebtedness may limit our ability to borrow additional funds or capitalize on business opportunities.
“Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Estimates— Line 901 Incident Insurance Receivable” and Note 18 to our Consolidated Financial Statements. 47 Table of Contents Index to Financial Statement s The terms of our indebtedness may limit our ability to borrow additional funds or capitalize on business opportunities.
In addition, implementation of the Dodd-Frank Act and related rules and regulations could reduce the overall liquidity and depth of the markets for financial and other derivatives we utilize in connection with our business, which could expose us to additional risks or limit the opportunities we are able to capture by limiting the extent to which we are able to execute our hedging strategies. 52 Table of Contents Index to Financial Statements Finally, the Dodd-Frank Act was intended, in part, to reduce the volatility of oil and gas prices, which some legislators attributed to speculative trading in derivatives and commodity instruments related to oil and gas.
In addition, implementation of the Dodd-Frank Act and related rules and regulations could reduce the overall liquidity and depth of the markets for financial and other derivatives we utilize in connection with our business, which could expose us to additional risks or limit the opportunities we are able to capture by limiting the extent to which we are able to execute our hedging strategies.
The process involves the injection of water, sand and chemicals under pressure into the formation to fracture the surrounding rock and stimulate production, and it is typically regulated by state and provincial oil and gas commissions.
Hydraulic fracturing is an important and common practice that is used to stimulate production of hydrocarbons from unconventional geological formations. The process involves the injection of water, sand and chemicals under pressure into the formation to fracture the surrounding rock and stimulate production, and it is typically regulated by state and provincial oil and gas commissions.
If, as a result of any such audit adjustment, we are required to make payments of taxes, penalties and interest, our cash available for distribution to our unitholders might be substantially reduced.
If, as a result of any such audit adjustment, we are required to make payments of taxes, penalties and interest, our cash available for distribution to our unitholders might be substantially reduced. These rules are not applicable for tax years beginning on or prior to December 31, 2017.
Our financial results could be adversely affected if a consequence of the Dodd-Frank Act and implementing regulations is lower commodity prices. The full impact of the Dodd-Frank Act and related regulatory requirements upon our business will not be known until the regulations are implemented and the market for derivatives contracts has adjusted.
The full impact of the Dodd-Frank Act and related regulatory requirements upon our business will not be known until the regulations are implemented and the market for derivatives contracts has adjusted.
In the event of the insolvency, bankruptcy, liquidation, reorganization, dissolution or winding up of the business of a subsidiary, other than a subsidiary that may guarantee our debt securities in the future, creditors of that subsidiary would generally have the right to be paid in full before any distribution is made to us or the holders of our debt securities. 57 Table of Contents Index to Financial Statements Our leverage may limit our ability to borrow additional funds, comply with the terms of our indebtedness or capitalize on business opportunities.
In the event of the insolvency, bankruptcy, liquidation, reorganization, dissolution or winding up of the business of a subsidiary, other than a subsidiary that may guarantee our debt securities in the future, creditors of that subsidiary would generally have the right to be paid in full before any distribution is made to us or the holders of our debt securities.
Similarly, such activism could negatively impact our unit price, limiting our ability to raise capital through equity issuances or debt financing, or could negatively affect our ability to engage in, expand or pursue our business activities, and could also prevent us from engaging in certain transactions that might otherwise be considered beneficial to us. 42 Table of Contents Index to Financial Statements Businesses across all industries are facing increasing attention from stakeholders related to their ESG practices.
Similarly, such activism could negatively impact our unit price or the price of our debt, limiting our ability to raise capital through equity issuances or debt financing, or could negatively affect our ability to engage in, expand or pursue our business activities, and could also prevent us from engaging in certain transactions that might otherwise be considered beneficial to us.
The ability to transfer our debt securities may be limited by the absence of an organized trading market. Our debt securities are not listed for trading on any securities exchange or stock market and we do not currently intend to apply for any such listing.
Our debt securities are not listed for trading on any securities exchange or stock market and we do not currently intend to apply for any such listing.
The issuance of additional common units or other equity securities of equal or senior rank may have the following effects: • an existing unitholder’s proportionate ownership interest in the Partnership will decrease; • the amount of cash available for distribution on each unit may decrease; • the ratio of taxable income to distributions may increase; • the relative voting strength of each previously outstanding unit may be diminished; and • the market price of the common units may decline.
The issuance of additional common units or other equity securities of equal or senior rank may have the following effects: • an existing unitholder’s proportionate ownership interest in the Partnership will decrease; • the amount of cash available for distribution on each unit may decrease; • the ratio of taxable income to distributions may increase; • the relative voting strength of each previously outstanding unit may be diminished; and • the market price of the common units may decline. 56 Table of Contents Index to Financial Statement s In addition, our Series A preferred units are convertible into common units at any time by the holders of such units, or under certain circumstances, at our option.
The control of our general partner may be transferred to a third party without unitholder consent. A change of control may result in defaults under certain of our debt instruments and the triggering of payment obligations under compensation arrangements.
A change of control may result in defaults under certain of our debt instruments and the triggering of payment obligations under compensation arrangements. Our general partner may transfer its general partner interest to a third party in a merger or in a sale of all or substantially all of its assets without the consent of our unitholders.
These rules are not applicable for tax years beginning on or prior to December 31, 2017. 60 Table of Contents Index to Financial Statements If the IRS or CRA contests the federal income tax positions or inter-country allocations we take, the market for our common units may be adversely impacted and the cost of any IRS or CRA contest or incremental taxes paid will reduce our cash available for distribution or debt service.
If the IRS or CRA contests the federal income tax positions or inter-country allocations we take, the market for our common units may be adversely impacted and the cost of any IRS or CRA contest or incremental taxes paid will reduce our cash available for distribution or debt service.
Agreements or contracts between us and our general partner (and its affiliates) are not necessarily the result of arms length negotiations; and • the general partner would not breach our partnership agreement by exercising its call rights to purchase limited partnership interests or by assigning its call rights to one of its affiliates or to us.
Agreements or contracts between us and our general partner (and its affiliates) are not necessarily the result of arms length negotiations; and • the general partner would not breach our partnership agreement by exercising its call rights to purchase limited partnership interests or by assigning its call rights to one of its affiliates or to us. 57 Table of Contents Index to Financial Statement s The control of our general partner may be transferred to a third party without unitholder consent.
Although our payment obligations to our unitholders are subordinate to our payment obligations to debtholders, the value of our units may decrease in direct correlation with decreases in the amount we distribute per unit. Accordingly, if we experience a liquidity problem in the future, we may not be able to issue equity to recapitalize.
Although our payment obligations to our unitholders are subordinate to our payment obligations to debtholders, the value of our units may decrease in direct correlation with decreases in the amount we distribute per unit.
As a result of these uncertainties, the anticipated benefits associated with our joint ventures and joint ownership arrangements may not be achieved or could be delayed. In turn, this could negatively impact our cash flow and our ability to make or increase cash distributions to our partners.
As a result of these uncertainties, the anticipated benefits associated with our joint ventures and joint ownership arrangements may not be achieved or could be delayed.
Members of Congress have proposed and considered substantive changes to the existing U.S. federal income tax laws that would affect publicly traded partnerships, including proposals that would eliminate our ability to qualify for partnership tax treatment. 59 Table of Contents Index to Financial Statements In addition, the Treasury Department has issued, and in the future may issue, regulations interpreting those laws that affect publicly traded partnerships.
Members of Congress have proposed and considered substantive changes to the existing U.S. federal income tax laws that would affect publicly traded partnerships, including proposals that would eliminate our ability to qualify for partnership tax treatment.
Our inability to maintain our targeted credit profile, including maintaining our credit ratings, could adversely affect our cost of capital as well as our ability to execute our strategy.
Any limitations on our access to capital or increase in the cost of that capital could significantly impair the implementation of our strategy. Our inability to maintain our targeted credit profile, including maintaining our credit ratings, could adversely affect our cost of capital as well as our ability to execute our strategy.
The potential impact of changing demand for crude oil and natural gas services and products may have a material adverse effect on our business, financial condition, results of operations and cash flows.
The potential impact of changing demand for crude oil and natural gas services and products may have a material adverse effect on our business, financial condition, results of operations and cash flows. Additionally, the threat of climate change may negatively impact our business if it results in us restricting, delaying or canceling development activities and new projects.
We have taken steps within our organization to implement processes and procedures designed to detect unauthorized trading; however, we can provide no assurance that these steps will detect and prevent all violations of our risk policies and procedures, particularly if deception, collusion or other intentional misconduct is involved. 46 Table of Contents Index to Financial Statements Our insurance coverage may not fully cover our losses and we may in the future encounter increased costs related to, and lack of availability of, insurance.
We have taken steps within our organization to implement processes and procedures designed to detect unauthorized trading and non-compliance with our risk policies; however, we can provide no assurance that these steps will detect and prevent all violations of our risk policies and procedures, particularly if deception, collusion or other intentional misconduct is involved.
If we were to incur a significant liability for which we were not fully insured, or if we incurred costs in excess of reserves established for uninsured or self-insured risks, it could have a material adverse effect on our financial position, results of operations and cash flows. 41 Table of Contents Index to Financial Statements Our business, results of operations, financial condition, cash flows and unit price can be adversely affected by pandemics, epidemics or other public health events.
If we were to incur a significant liability for which we were not fully insured, or if we incurred costs in excess of reserves established for uninsured or self-insured risks, it could have a material adverse effect on our financial position, results of operations and cash flows. 41 Table of Contents Index to Financial Statement s Our and our customers’ operations are subject to various risks arising out of the threat of climate change.
Although it is not possible at this time to predict how legislation or new regulations that may be adopted to address GHG emissions and climate change would impact our business, any such future laws and regulations could result in increased compliance costs or additional operating restrictions, and could have a material adverse effect on our business, demand for our services, financial condition, results of operations and cash flows.
Although it is not possible at this time to predict how legislation or new regulations that may be adopted to address GHG emissions and climate change could impact our business, any such future laws and regulations could have a material adverse effect on our business, demand for our services, financial condition, results of operations and cash flows. 54 Table of Contents Index to Financial Statement s Legislation, executive orders and regulatory initiatives relating to hydraulic fracturing or other hydrocarbon development activities could reduce domestic production of crude oil and natural gas.
Activists concerned about the potential effects of climate change have directed their attention towards sources of funding for hydrocarbon energy companies, which has resulted in certain financial institutions, funds and other sources of capital restricting or eliminating their investment in energy-related activities.
Such negative sentiment regarding the hydrocarbon energy industry could influence consumer preferences and government or regulatory actions, which could, in turn, have an adverse impact on our business. 42 Table of Contents Index to Financial Statement s Activists concerned about the potential effects of climate change have directed their attention towards sources of funding for hydrocarbon energy companies, which has resulted in certain financial institutions, funds and other sources of capital restricting or eliminating their investment in energy-related activities.
The CFTC has designated certain interest rate swaps and credit default swaps for mandatory clearing, and the associated rules require us, in connection with covered derivative activities, to comply with clearing and trade-execution requirements or take steps to qualify for an exemption from such requirements.
Although the CFTC has finalized certain regulations, others remain to be finalized or implemented and it is not possible at this time to predict when this will be accomplished. 53 Table of Contents Index to Financial Statement s The CFTC has designated certain interest rate swaps and credit default swaps for mandatory clearing, and the associated rules require us, in connection with covered derivative activities, to comply with clearing and trade-execution requirements or take steps to qualify for an exemption from such requirements.
Any of these factors could adversely affect our ability to achieve anticipated levels of cash flows or other benefits from our acquisitions, pay distributions to our partners or meet our debt service requirements.
Any of these factors could adversely affect our ability to achieve anticipated levels of cash flows or other benefits from our acquisitions, pay distributions to our partners or meet our debt service requirements. 46 Table of Contents Index to Financial Statement s Tightened capital markets or other factors that increase our cost of capital or otherwise limit our access to capital could impair our ability to achieve our strategic objectives.
If the amount of withholding exceeds the amount of U.S. federal income tax actually due, non-U.S. holders may be required to file U.S. federal income tax returns in order to seek a refund of such excess.
If the amount of withholding exceeds the amount of U.S. federal income tax actually due, non-U.S. holders may be required to file U.S. federal income tax returns in order to seek a refund of such excess. 64 Table of Contents Index to Financial Statement s All holders of our Series B Preferred Units are urged to consult a tax advisor with respect to the consequences of owning our Series B Preferred Units.
Tax Risks to Unitholders Our tax treatment depends on our status as a partnership for U.S. federal income tax purposes and not being subject to a material amount of entity-level taxation.
Accordingly, if we experience a liquidity problem in the future, we may not be able to issue equity to recapitalize. 59 Table of Contents Index to Financial Statement s Tax Risks to Unitholders Our tax treatment depends on our status as a partnership for U.S. federal income tax purposes and not being subject to a material amount of entity-level taxation.
Our unitholders may be required to pay taxes on their share of our income even if they do not receive any cash distributions from us.
See Note 14 for additional information regarding CRA challenge of intercompany transactions. 61 Table of Contents Index to Financial Statement s Our unitholders may be required to pay taxes on their share of our income even if they do not receive any cash distributions from us.
Unitholders desiring to assure their status as partners and avoid the risk of gain recognition from a securities loan are urged to consult a tax advisor to determine whether it is advisable to modify any applicable brokerage account agreements to prohibit their brokers from borrowing their common units. 62 Table of Contents Index to Financial Statements We generally prorate our items of income, gain, loss and deduction between transferors and transferees of our units each month based upon the ownership of our units on the first day of each month, instead of on the basis of the date a particular unit is transferred.
Unitholders desiring to assure their status as partners and avoid the risk of gain recognition from a securities loan are urged to consult a tax advisor to determine whether it is advisable to modify any applicable brokerage account agreements to prohibit their brokers from borrowing their common units.

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Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

4 edited+0 added−0 removed5 unchanged
Biggest changeThe graph assumes that $100 was invested in our common units and each comparison index beginning on December 31, 2017 and that all distributions were reinvested on a quarterly basis. 12/31/2017 12/31/2018 12/31/2019 12/31/2020 12/31/2021 12/31/2022 PAA $ 100.00 $ 102.34 $ 100.01 $ 49.18 $ 60.09 $ 81.52 S&P 500 $ 100.00 $ 95.62 $ 125.72 $ 148.85 $ 191.58 $ 156.89 AMNA $ 100.00 $ 86.71 $ 107.56 $ 82.43 $ 114.10 $ 138.67 65 Table of Contents Index to Financial Statements This information shall not be deemed to be “soliciting material” or to be “filed” with the Commission or subject to Regulation 14A or 14C under the Exchange Act, other than as provided in Item 201(e) of Regulation S-K, or to the liabilities of Section 18 of the Exchange Act, and shall not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent that we specifically request that such information be treated as soliciting material or specifically incorporate it by reference into a filing under the Securities Act or the Exchange Act.
Biggest changeThe graph assumes that $100 was invested in our common units and each comparison index beginning on December 31, 2018 and that all distributions were reinvested on a quarterly basis. 12/31/2018 12/31/2019 12/31/2020 12/31/2021 12/31/2022 12/31/2023 PAA $ 100.00 $ 97.72 $ 48.06 $ 58.72 $ 79.65 $ 110.89 S&P 500 $ 100.00 $ 131.49 $ 155.68 $ 200.37 $ 164.08 $ 207.21 AMNA $ 100.00 $ 124.04 $ 95.06 $ 131.58 $ 159.92 $ 182.34 67 Table of Contents Index to Financial Statement s This information shall not be deemed to be “soliciting material” or to be “filed” with the Commission or subject to Regulation 14A or 14C under the Exchange Act, other than as provided in Item 201(e) of Regulation S-K, or to the liabilities of Section 18 of the Exchange Act, and shall not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent that we specifically request that such information be treated as soliciting material or specifically incorporate it by reference into a filing under the Securities Act or the Exchange Act.
See Note 18 to our Consolidated Financial Statements for additional information regarding our equity-indexed compensation plans. Performance Graph The following graph compares the total unitholder return performance of our common units with the performance of: (i) the Standard & Poor’s 500 Stock Index (“S&P 500”) and (ii) the Alerian Midstream Energy Index (“AMNA”).
See Note 17 to our Consolidated Financial Statements for additional information regarding our equity-indexed compensation plans. Performance Graph The following graph compares the total unitholder return performance of our common units with the performance of: (i) the Standard & Poor’s 500 Stock Index (“S&P 500”) and (ii) the Alerian Midstream Energy Index (“AMNA”).
The following table presents cash distributions per common unit pertaining to the quarter presented, which were declared and paid in the following calendar quarter (see the “Cash Distribution Policy” section below for a discussion of our policy regarding distribution payments): First Quarter Second Quarter Third Quarter Fourth Quarter 2022 $ 0.2175 $ 0.2175 $ 0.2175 $ 0.2675 2021 $ 0.1800 $ 0.1800 $ 0.1800 $ 0.1800 Our common units are also used as a form of compensation to our employees.
The following table presents cash distributions per common unit pertaining to the quarter presented, which were declared and paid in the following calendar quarter (see the “Cash Distribution Policy” section below for a discussion of our policy regarding distribution payments): First Quarter Second Quarter Third Quarter Fourth Quarter 2023 $ 0.2675 $ 0.2675 $ 0.2675 $ 0.3175 2022 $ 0.2175 $ 0.2175 $ 0.2175 $ 0.2675 Our common units are also used as a form of compensation to our employees.
Market for Registrant’s Common Units, Related Unitholder Matters and Issuer Purchases of Equity Securities Market Information, Holders and Distributions Our common units are listed and traded on The Nasdaq Global Select Market under the symbol “PAA.” As of February 14, 2023, there were 698,390,006 common units outstanding and approximately 103,000 record holders and beneficial owners (held in street name).
Market for Registrant’s Common Units, Related Unitholder Matters and Issuer Purchases of Equity Securities Market Information, Holders and Distributions Our common units are listed and traded on The Nasdaq Global Select Market under the symbol “PAA.” As of February 16, 2024, there were 701,071,031 common units outstanding and approximately 105,000 record holders and beneficial owners (held in street name).

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

120 edited+25 added−47 removed87 unchanged
Biggest changeVariations in our operating results are also caused by changes in volumes, prices, exchange rates, mechanical interruptions, acquisitions, divestitures, investment capital projects and numerous other factors as discussed, as applicable, in “—Analysis of Operating Segments.” The following tables set forth the reconciliation of the non-GAAP financial performance measures Adjusted EBITDA, Adjusted EBITDA attributable to PAA and Implied DCF from Net Income (in millions): 72 Table of Contents Index to Financial Statements Year Ended December 31, Variance 2022 2021 $ % Net income $ 1,228 $ 648 $ 580 90 % Interest expense, net 405 425 (20) (5) % Income tax expense 189 73 116 159 % Depreciation and amortization 965 774 191 25 % (Gains)/losses on asset sales and asset impairments, net 269 592 (323) (55) % (Gains)/losses on investments in unconsolidated entities, net (346) (2) (344) ** Depreciation and amortization of unconsolidated entities (1) 85 123 (38) (31) % Selected Items Impacting Comparability: Derivative activities and inventory valuation adjustments (280) (271) (9) ** Long-term inventory costing adjustments (4) (94) 90 ** Deficiencies under minimum volume commitments, net 7 (7) 14 ** Equity-indexed compensation expense 32 19 13 ** Foreign currency revaluation 4 (4) 8 ** Line 901 incident 95 15 80 ** Significant transaction-related expenses — 16 (16) ** Selected Items Impacting Comparability - Segment Adjusted EBITDA (2) (146) (326) 180 ** Mark-to-market adjustment of Preferred Distribution Rate Reset Option embedded derivative (3) 189 (14) 203 ** Foreign currency revaluation (4) 37 (3) 40 ** Selected Items Impacting Comparability - Adjusted EBITDA (5) 80 (343) 423 ** Adjusted EBITDA (5) $ 2,875 $ 2,290 $ 585 26 % Adjusted EBITDA attributable to noncontrolling interests (6) (365) (94) (271) (288) % Adjusted EBITDA attributable to PAA $ 2,510 $ 2,196 $ 314 14 % Year Ended December 31, Variance 2022 2021 $ % Adjusted EBITDA (5) $ 2,875 $ 2,290 $ 585 26 % Interest expense, net of certain non-cash items (7) (391) (401) 10 2 % Maintenance capital (8) (211) (168) (43) (26) % Investment capital of noncontrolling interests (9) (69) (9) (60) ** Current income tax expense (84) (50) (34) (68) % Distributions from unconsolidated entities in excess of/(less than) adjusted equity earnings (10) (28) 16 (44) ** Distributions to noncontrolling interests (11) (298) (14) (284) ** Implied DCF $ 1,794 $ 1,664 $ 130 8 % Preferred unit cash distributions (11) (198) (198) Implied DCF Available to Common Unitholders $ 1,596 $ 1,466 Common unit cash distributions (11) (584) (517) Implied DCF Excess (12) $ 1,012 $ 949 ** Indicates that variance as a percentage is not meaningful.
Biggest changeVariations in our operating results are also caused by changes in volumes, prices, exchange rates, mechanical interruptions, acquisitions, divestitures, investment capital projects and numerous other factors as discussed, as applicable, in “—Analysis of Operating Segments.” 74 Table of Contents Index to Financial Statement s The following tables set forth the reconciliation of the non-GAAP financial performance measures Adjusted EBITDA, Adjusted EBITDA attributable to PAA and Implied DCF from Net Income (in millions): Year Ended December 31, Variance 2023 2022 $ % Net income $ 1,502 $ 1,228 $ 274 22 % Interest expense, net 386 405 (19) (5) % Income tax expense 121 189 (68) (36) % Depreciation and amortization 1,048 965 83 9 % (Gains)/losses on asset sales and asset impairments, net (152) 269 (421) (157) % (Gains)/losses on investments in unconsolidated entities, net (28) (346) 318 92 % Depreciation and amortization of unconsolidated entities (1) 87 85 2 2 % Selected Items Impacting Comparability: Derivative activities and inventory valuation adjustments 159 (280) 439 ** Long-term inventory costing adjustments 35 (4) 39 ** Deficiencies under minimum volume commitments, net 12 7 5 ** Equity-indexed compensation expense 36 32 4 ** Foreign currency revaluation 24 4 20 ** Line 901 incident 10 95 (85) ** Transaction-related expenses 1 — 1 ** Selected Items Impacting Comparability - Segment Adjusted EBITDA (2) 277 (146) 423 ** Mark-to-market adjustment of Preferred Distribution Rate Reset Option embedded derivative (3) (58) 189 (247) ** Foreign currency revaluation (4) (16) 37 (53) ** Selected Items Impacting Comparability - Adjusted EBITDA (5) 203 80 123 ** Adjusted EBITDA (5) $ 3,167 $ 2,875 $ 292 10 % Adjusted EBITDA attributable to noncontrolling interests (6) (456) (365) (91) (25) % Adjusted EBITDA attributable to PAA $ 2,711 $ 2,510 $ 201 8 % Year Ended December 31, Variance 2023 2022 $ % Adjusted EBITDA (5) (7) $ 3,167 $ 2,875 $ 292 10 % Interest expense, net of certain non-cash items (8) (367) (391) 24 6 % Maintenance capital (9) (231) (211) (20) (9) % Investment capital of noncontrolling interests (10) (87) (69) (18) (26) % Current income tax expense (145) (84) (61) (73) % Distributions from unconsolidated entities in excess of/(less than) adjusted equity earnings (11) (37) (28) (9) ** Distributions to noncontrolling interests (12) (333) (298) (35) (12) % Implied DCF $ 1,967 $ 1,794 $ 173 10 % Preferred unit cash distributions (12) (241) (198) Implied DCF Available to Common Unitholders $ 1,726 $ 1,596 Common unit cash distributions (12) (748) (584) Implied DCF Excess (13) $ 978 $ 1,012 ** Indicates that variance as a percentage is not meaningful. 75 Table of Contents Index to Financial Statement s (1) We exclude our proportionate share of the depreciation and amortization expense (including write-downs related to cancelled projects and impairments) of unconsolidated entities when reviewing Adjusted EBITDA, similar to our consolidated assets.
Our assets and the services we provide are primarily focused on crude oil and NGL. Market Overview and Outlook Crude oil and other petroleum liquids are supplied to the global market by producers around the world, with the majority coming from the Organization of Petroleum Exporting Countries (“OPEC”), the Russian Federation and North American producers, among others.
Our assets and the services we provide are primarily focused on crude oil and NGL. Market Overview and Outlook Crude oil and other petroleum liquids are supplied to the global market by producers around the world, with the majority coming from the Organization of Petroleum Exporting Countries (“OPEC”), North American producers and the Russian Federation, among others.
Performance Measures Management believes that the presentation of Adjusted EBITDA, Adjusted EBITDA attributable to PAA and Implied DCF provides useful information to investors regarding our performance and results of operations because these measures, when used to supplement related GAAP financial measures, (i) provide additional information about our core operating performance and ability to fund distributions to our unitholders through cash generated by our operations, (ii) provide investors with the same financial analytical framework upon which management bases financial, operational, compensation and planning/budgeting decisions and (iii) present measures that investors, rating agencies and debt holders have indicated are useful in assessing us and our results of operations.
Management believes that the presentation of Adjusted EBITDA, Adjusted EBITDA attributable to PAA and Implied DCF provides useful information to investors regarding our performance and results of operations because these measures, when used to supplement related GAAP financial measures, (i) provide additional information about our core operating performance and ability to fund distributions to our unitholders through cash generated by our operations, (ii) provide investors with the same financial analytical framework upon which management bases financial, operational, compensation and planning/budgeting decisions and (iii) present measures that investors, rating agencies and debt holders have indicated are useful in assessing us and our results of operations.
(1) Revenues and costs and expenses include intersegment amounts. (2) Segment general and administrative expenses reflect direct costs attributable to each segment and an allocation of other expenses to the segments. The proportional allocations by segment require judgment by management and are based on the business activities that exist during each period.
(1) Revenues and costs and expenses include intersegment amounts. (2) Segment general and administrative expenses reflect direct costs attributable to each segment and an allocation of other expenses to the segments. The proportional allocations by segment require judgment by management and are based on the business activities that exist during each period.
Our primary cash requirements include, but are not limited to, (i) ordinary course of business uses, such as the payment of amounts related to the purchase of crude oil, NGL and other products, other expenses and interest payments on outstanding debt, (ii) investment and maintenance capital activities, (iii) acquisitions of assets or businesses, (iv) repayment of principal on our long-term debt and (v) distributions to our unitholders and noncontrolling interests.
Our primary cash requirements include, but are not limited to, (i) ordinary course of business uses, such as the payment of amounts related to the purchase of crude oil, NGL and other products, payment of other expenses and interest payments on outstanding debt, (ii) investment and maintenance capital activities, (iii) acquisitions of assets or businesses, (iv) repayment of principal on our long-term debt and (v) distributions to our unitholders and noncontrolling interests.
In addition, we may use cash for repurchases of common equity. We generally expect to fund our short-term cash requirements through cash flow generated from operating activities and/or borrowings under our commercial paper program or credit facilities.
In addition, we may use cash for repurchases of common equity. We generally expect to fund our short-term cash requirements through cash flow generated from operating activities and/or borrowings under our credit facilities or commercial paper program.
With respect to a potential divestiture or acquisition, we may conduct an auction process or participate in an auction process conducted by a third party or we may negotiate a transaction with one or a limited number of potential buyers (in the case of a divestiture) or sellers (in the case of an acquisition).
With respect to a potential acquisition or divestiture, we may conduct an auction process or participate in an auction process conducted by a third party or we may negotiate a transaction with one or a limited number of potential sellers (in the case of an acquisition) or buyers (in the case of a divestiture).
These non-GAAP measures may exclude, for example, (i) charges for obligations that are expected to be settled with the issuance of equity instruments, (ii) gains and losses on derivative instruments that are related to underlying activities in another period (or the reversal of such adjustments from a prior period), gains and losses on derivatives that are either related to investing activities (such as the purchase of linefill) or purchases of long-term inventory, and inventory valuation adjustments, as applicable, (iii) long-term inventory costing adjustments, (iv) items that are not indicative of our core operating results and/or (v) other items that we believe should be excluded in understanding our core operating performance.
These non-GAAP financial performance measures may exclude, for example, (i) charges for obligations that are expected to be settled with the issuance of equity instruments, (ii) gains and losses on derivative instruments that are related to underlying activities in another period (or the reversal of such adjustments from a prior period), gains and losses on derivatives that are either related to investing activities (such as the purchase of linefill) or purchases of long-term inventory, and inventory valuation adjustments, as applicable, (iii) long-term inventory costing adjustments, (iv) items that are not indicative of our core operating results and/or (v) other items that we believe should be excluded in understanding our core operating performance.
We define Segment Adjusted EBITDA as revenues and equity earnings in unconsolidated entities less (a) purchases and related costs, (b) field operating costs and (c) segment general and administrative expenses, plus (d) our proportionate share of the depreciation and amortization expense (including write-downs related to cancelled projects and impairments) of unconsolidated entities, further adjusted (e) for certain selected items including (i) gains and losses on derivative instruments that are related to underlying activities in another period (or the reversal of such adjustments from a prior period), gains and losses on derivatives that are either related to investing activities (such as the purchase of linefill) or purchases of long-term inventory, and inventory valuation adjustments, as applicable, (ii) long-term inventory costing adjustments, (iii) charges for obligations that are expected to be settled with the issuance of equity instruments, (iv) amounts related to deficiencies associated with minimum volume commitments, net of applicable amounts subsequently recognized into revenue and (v) other items that our CODM believes are integral to understanding our core segment operating performance and (f) to exclude the portion of all preceding items that is attributable to noncontrolling interests (“Adjusted EBITDA attributable to noncontrolling interests”).
We define Segment Adjusted EBITDA as revenues and equity earnings in unconsolidated entities less (a) purchases and related costs, (b) field operating costs and (c) segment general and administrative expenses, plus (d) our proportionate share of the depreciation and amortization expense (including write-downs related to cancelled projects and impairments) of unconsolidated entities, further adjusted (e) for certain selected items including (i) gains and losses on derivative instruments that are related to underlying activities in another period (or the reversal of such adjustments from a prior period), gains and losses on derivatives that are either related to investing activities (such as the purchase of linefill) or purchases of long-term inventory, and inventory valuation adjustments, as applicable, (ii) long-term inventory costing adjustments, (iii) charges for obligations that are expected to be settled with the issuance of equity instruments, (iv) amounts related to deficiencies associated with minimum volume commitments, net of the applicable amounts subsequently recognized into revenue and (v) other items that our CODM believes are integral to understanding our core segment operating performance and (f) to exclude the portion of all preceding items that is attributable to noncontrolling interests (“Segment amounts attributable to noncontrolling interests”).
Adjusted EBITDA, Adjusted EBITDA attributable to PAA and Implied DCF are reconciled to Net Income/(Loss), and Free Cash Flow and Free Cash Flow after Distributions are reconciled to Net Cash Provided by Operating Activities, the most directly comparable measures as reported in accordance with GAAP, and should be viewed in addition to, and not in lieu of, our Consolidated Financial Statements and accompanying notes.
Adjusted EBITDA, Adjusted EBITDA attributable to PAA and Implied DCF are reconciled to Net Income, and Adjusted Free Cash Flow and Adjusted Free Cash Flow after Distributions are reconciled to Net Cash Provided by Operating Activities, the most directly comparable measures as reported in accordance with GAAP, and should be viewed in addition to, and not in lieu of, our Consolidated Financial Statements and accompanying notes.
Free Cash Flow is defined as Net cash provided by operating activities, less Net cash provided by/(used in) investing activities, which primarily includes acquisition, investment and maintenance capital expenditures, investments in unconsolidated entities and the impact from the purchase and sale of linefill, net of proceeds from the sales of assets and further impacted by distributions to, contributions from and proceeds from the sale of noncontrolling interests.
Adjusted Free Cash Flow is defined as Net cash provided by operating activities, less Net cash provided by/(used in) investing activities, which primarily includes acquisition, investment and maintenance capital expenditures, investments in unconsolidated entities and the impact from the purchase and sale of linefill, net of proceeds from the sales of assets and further impacted by distributions to and contributions from noncontrolling interests.
Additionally, we estimate the upcoming liquidation timing of the inventory. Changes in assumptions made as to the timing of a sale can materially impact net realizable value. During the years ended December 31, 2022 and 2021, we did not record any charges related to the valuation adjustment of our inventory.
Additionally, we estimate the upcoming liquidation timing of the inventory. Changes in assumptions made as to the timing of a sale can materially impact net realizable value. During the years ended December 31, 2023, 2022 and 2021, we did not record any charges related to the valuation adjustment of our inventory.
Crude Oil Segment Our Crude Oil segment operations generally consist of gathering and transporting crude oil using pipelines, gathering systems, trucks and at times on barges or railcars, in addition to providing terminalling, storage and other facilities-related services utilizing our integrated assets across the United States and Canada.
Crude Oil Segment Our Crude Oil segment operations generally consist of gathering and transporting crude oil using pipelines, gathering systems, trucks and at times on barges or railcars, in addition to providing terminalling, storage and other related services utilizing our integrated assets across the United States and Canada.
Liquidity Measures Management uses the non-GAAP financial measures Free Cash Flow and Free Cash Flow after Distributions to assess the amount of cash that is available for distributions, debt repayments, common equity repurchases and other general partnership purposes.
Liquidity Measures Management uses the non-GAAP financial measures Adjusted Free Cash Flow and Adjusted Free Cash Flow after Distributions to assess the amount of cash that is available for distributions, debt repayments, common equity repurchases and other general partnership purposes.
We have estimated that the aggregate total costs we have incurred or will incur with respect to the Line 901 incident will be approximately $740 million, which includes actual and projected emergency response and clean-up costs, natural resource damage assessments, fines and penalties payable pursuant to the Consent Decree, certain third-party claims settlements, and estimated costs associated with our remaining Line 901 lawsuits and claims, as well as estimates for certain legal fees and statutory interest where applicable.
We have estimated that the aggregate total costs we have incurred or will incur with respect to the Line 901 incident will be approximately $750 million, which includes actual and projected emergency response and clean-up costs, natural resource damage assessments, fines and penalties payable pursuant to the Consent Decree, certain third-party claims settlements, and estimated costs associated with our remaining Line 901 lawsuits and claims, as well as estimates for certain legal fees and statutory interest where applicable.
We have filed with the SEC a universal shelf registration statement that, subject to effectiveness at the time of use, allows us to issue up to a specified amount of debt or equity securities (“Traditional Shelf”), under which we had approximately $1.1 billion of unsold securities available at December 31, 2022.
We have filed with the SEC a universal shelf registration statement that, subject to effectiveness at the time of use, allows us to issue up to a specified amount of debt or equity securities (“Traditional Shelf”), under which we had approximately $1.1 billion of unsold securities available at December 31, 2023.
Our estimates for contingent liability accruals are increased or decreased as additional information is obtained or resolution is achieved. A hypothetical variance of 5% in our aggregate estimate for the accruals and contingent liabilities discussed above would have an impact on earnings of up to approximately $16 million.
Our estimates for contingent liability accruals are increased or decreased as additional information is obtained or resolution is achieved. A hypothetical variance of 5% in our aggregate estimate for the accruals and contingent liabilities discussed above would have an impact on earnings of up to approximately $14 million.
(8) Maintenance capital expenditures are defined as capital expenditures for the replacement and/or refurbishment of partially or fully depreciated assets in order to maintain the operating and/or earnings capacity of our existing assets. (9) Investment capital expenditures attributable to noncontrolling interests that reduce Implied DCF available to PAA common unitholders.
(9) Maintenance capital expenditures are defined as capital expenditures for the replacement and/or refurbishment of partially or fully depreciated assets in order to maintain the operating and/or earnings capacity of our existing assets. (10) Investment capital expenditures attributable to noncontrolling interests that reduce Implied DCF available to PAA common unitholders.
(10) Comprised of cash distributions received from unconsolidated entities less equity earnings in unconsolidated entities (adjusted for our proportionate share of depreciation and amortization, including write-downs related to cancelled projects, and selected items impacting comparability of unconsolidated entities). (11) Cash distributions paid during the period presented.
(11) Comprised of cash distributions received from unconsolidated entities less equity earnings in unconsolidated entities (adjusted for our proportionate share of depreciation and amortization, including write-downs related to cancelled projects, and selected items impacting comparability of unconsolidated entities). (12) Cash distributions paid during the period presented.
Purchase Obligations In the ordinary course of doing business, we purchase crude oil and NGL from third parties under contracts, the majority of which range in term from thirty-day evergreen to five years, with a limited number of contracts with remaining terms extending up to 12 years.
Purchase Obligations In the ordinary course of doing business, we purchase crude oil and NGL from third parties under contracts, the majority of which range in term from thirty-day evergreen to five years, with a limited number of contracts with remaining terms extending up to 11 years.
(12) Excess DCF is retained to establish reserves for debt repayment, future distributions, common equity repurchases, capital expenditures and other partnership purposes. Analysis of Operating Segments We manage our operations through two operating segments: Crude Oil and NGL.
(13) Excess DCF is retained to establish reserves for debt repayment, future distributions, common equity repurchases, capital expenditures and other partnership purposes. Analysis of Operating Segments We manage our operations through two operating segments: Crude Oil and NGL.
“Management’s Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations” included in our Annual Report on Form 10-K for the year ended December 31, 2021 filed with the SEC on March 1, 2022.
“Management’s Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations” included in our Annual Report on Form 10-K for the year ended December 31, 2022 filed with the SEC on March 1, 2023.
Therefore, our cash flow from operating activities may be impacted by the margin deposit requirements related to our derivative activities. See Note 13 to our Consolidated Financial Statements for a discussion regarding our derivatives and risk management activities.
Therefore, our cash flow from operating activities may be impacted by the margin deposit requirements related to our derivative activities. See Note 12 to our Consolidated Financial Statements for a discussion regarding our derivatives and risk management activities.
See Note 6 and Note 10 to our Consolidated Financial Statements for additional information on our property and equipment, intangible assets and depreciation and amortization expense. See Note 2 to our Consolidated Financial Statements for additional information on our asset retirement obligations. Impairment Assessments of Property and Equipment, Investments in Unconsolidated Entities and Intangible Assets.
See Note 6 and Note 9 to our Consolidated Financial Statements for additional information on our property and equipment, intangible assets and depreciation and amortization expense. See Note 2 to our Consolidated Financial Statements for additional information on our asset retirement obligations. Impairment Assessments of Property and Equipment, Investments in Unconsolidated Entities and Intangible Assets.
As long as we are in compliance with the provisions in our credit agreements, our ability to make distributions of available cash is not restricted. We were in compliance with the covenants contained in our credit agreements and indentures as of December 31, 2022.
As long as we are in compliance with the provisions in our credit agreements, our ability to make distributions of available cash is not restricted. We were in compliance with the covenants contained in our credit agreements and indentures as of December 31, 2023.
(3) Represents adjustments included in the performance measure utilized by our CODM in the evaluation of segment results. See Note 20 to our Consolidated Financial Statements for additional discussion of such adjustments.
(3) Represents adjustments included in the performance measure utilized by our CODM in the evaluation of segment results. See Note 19 to our Consolidated Financial Statements for additional discussion of such adjustments.
(3) Represents adjustments included in the performance measure utilized by our CODM in the evaluation of segment results. See Note 20 to our Consolidated Financial Statements for additional discussion of such adjustments.
(3) Represents adjustments included in the performance measure utilized by our CODM in the evaluation of segment results. See Note 19 to our Consolidated Financial Statements for additional discussion of such adjustments.
The chart below depicts the relationship between global supply of crude oil and other petroleum liquids and demand since the beginning of 2018 and the U.S. Energy Information Administration’s (“EIA”) Short-Term Energy Outlook as of January 2023: World Liquid Fuels Production and Consumption Balance (1) (in millions of barrels per day) (1) Barrels produced and consumed per quarter.
The chart below depicts the relationship between global supply of crude oil and other petroleum liquids and demand since the beginning of 2019 and the U.S. Energy Information Administration’s (“EIA”) Short-Term Energy Outlook as of January 2024: World Liquid Fuels Production and Consumption Balance (1) (in millions of barrels per day) (1) Barrels produced and consumed per quarter.
During 2022, we repaid the following senior unsecured notes in full (in millions): Year Description Repayment Date 2022 $750 million 3.65% Senior Notes due June 2022 March 2022 (1) (1) We repaid these senior notes with cash on hand and borrowings under our commercial paper program. On January 31, 2023, we redeemed our 2.85%, $400 million senior notes.
During 2023 and 2022, we repaid the following senior unsecured notes in full (in millions): Year Description Repayment Date 2023 $700 million 3.85% Senior Notes due October 2023 October 2023 (1) 2023 $400 million 2.85% Senior Notes due January 2023 January 2023 (1) 2022 $750 million 3.65% Senior Notes due June 2022 March 2022 (1) (1) We repaid these senior notes with cash on hand and borrowings under our commercial paper program.
See Note 11 to our Consolidated Financial Statements for additional information regarding our debt and related activities during the periods presented.
See Note 10 to our Consolidated Financial Statements for additional information regarding our debt and related activities during the periods presented.
As of December 31, 2022, we have recognized a long-term receivable of approximately $225 million for the portion of the release costs that we believe is probable of recovery from insurance, net of deductibles and amounts already collected. In the fourth quarter of 2022, insurers responsible for the majority of our remaining insurance coverage formally communicated a denial of coverage.
As of December 31, 2023, we have recognized a long-term receivable of approximately $225 million for the portion of the release costs that we believe is probable of recovery from insurance, net of deductibles and amounts already collected. Insurers responsible for the majority of our remaining insurance coverage have formally communicated a denial of coverage.
(5) Includes volumes (attributable to our interest) from assets owned by unconsolidated entities. 76 Table of Contents Index to Financial Statements (6) Average monthly capacity in millions of barrels per day calculated as total volumes for the year divided by the number of months in the year.
(5) Includes volumes (attributable to our interest) from assets owned by unconsolidated entities. 78 Table of Contents Index to Financial Statement s (6) Average monthly capacity in millions of barrels per day calculated as total volumes for the year divided by the number of months in the year.
Gains/(Losses) on Investments in Unconsolidated Entities, Net During the fourth quarter of 2022, we recognized (i) a gain of $370 million associated with the remeasurement of our previously held 65% interest in Cactus II to fair value in connection with our acquisition of an additional 5% interest in Cactus II in November 2022 and (ii) a loss of $25 million associated with the difference between the fair value and historical book value of assets contributed by the Permian JV in exchange for an additional interest in OMOG.
During the fourth quarter of 2022, we recognized (i) a gain of $370 million associated with the remeasurement of our previously held 65% interest in Cactus II to fair value in connection with our acquisition of an additional 5% interest in Cactus II in November 2022 and (ii) a loss of $25 million associated with the difference between the fair value and historical book value of assets contributed by the Permian JV in exchange for an additional interest in OMOG.
See Note 20 to our Consolidated Financial Statements for a reconciliation of Segment Adjusted EBITDA to Net income/(loss) attributable to PAA. 74 Table of Contents Index to Financial Statements In connection with our merchant activities, our Crude Oil and NGL segments may enter into intersegment transactions for the purchase or sale of products, along with services such as the transportation, terminalling or storage of products.
See Note 19 to our Consolidated Financial Statements for a reconciliation of Segment Adjusted EBITDA to Net income attributable to PAA. 76 Table of Contents Index to Financial Statement s In connection with our merchant activities, our Crude Oil and NGL segments may enter into intersegment transactions for the purchase or sale of products, along with services such as the transportation, terminalling or storage of products.
In addition, when we evaluate property and equipment and other long-lived assets for recoverability, it may also be necessary to review related depreciation estimates and methods. Investments in unconsolidated entities accounted for under the equity method of accounting are assessed for impairment when events or circumstances suggest that a decline in value may be other than temporary.
In addition, when we evaluate property and equipment and other long-lived assets for recoverability, it may also be necessary to review related depreciation estimates and methods. 90 Table of Contents Index to Financial Statement s Investments in unconsolidated entities accounted for under the equity method of accounting are assessed for impairment when events or circumstances suggest that a decline in value may be other than temporary.
Gains/(Losses) on Asset Sales and Asset Impairments, Net The net losses on asset sales and asset impairments for 2022 primarily included (i) a $330 million non-cash impairment charge recognized in the fourth quarter of 2022 related to certain crude oil assets in California and (ii) gains recognized from the sale of land and related assets in Long Beach, California, as well as Line 901 and the Sisquoc to Pentland portion of Line 903, a portion of which relates to the transfer of an asset retirement obligation to the purchaser.
The net loss on asset sales and asset impairments for 2022 was primarily comprised of (i) a $330 million non-cash impairment charge recognized in the fourth quarter of 2022 related to certain crude oil assets in California, partially offset by (ii) gains recognized from the sale of land and related assets in Long Beach, California, as well as Line 901 and the Sisquoc to Pentland portion of Line 903, a portion of which relates to the transfer of an asset retirement obligation to the purchaser.
Net cash provided by operating activities for the years ended December 31, 2022 and 2021 was approximately $2.4 billion and $2.0 billion, respectively, and primarily resulted from earnings from our operations.
Net cash provided by operating activities for the years ended December 31, 2023 and 2022 was approximately $2.7 billion and $2.4 billion, respectively, and primarily resulted from earnings from our operations.
(7) Of this amount, approximately 1,073 and 1,038 thousand barrels per day were purchased in the Permian Basin for the years ended December 31, 2022 and 2021, respectively.
(7) Of this amount, approximately 1,147 and 1,073 thousand barrels per day were purchased in the Permian Basin for the years ended December 31, 2023 and 2022, respectively.
Our discussion and analysis includes the following: • Executive Summary • Results of Operations • Liquidity and Capital Resources • Critical Accounting Policies and Estimates • Recent Accounting Pronouncements 66 Table of Contents Index to Financial Statements A comparative discussion of our 2021 to 2020 operating results and performance measures can be found in Item 7.
Our discussion and analysis includes the following: • Executive Summary • Results of Operations • Liquidity and Capital Resources • Critical Accounting Policies and Estimates • Recent Accounting Pronouncements 68 Table of Contents Index to Financial Statement s A comparative discussion of our 2022 to 2021 operating results and performance measures can be found in Item 7.
The actual physical volume purchased and actual settlement prices will vary from the assumptions used in the table. Uncertainties involved in these estimates include levels of production at the wellhead, weather conditions, changes in market prices and other conditions beyond our control. Letters of Credit.
The actual physical volume purchased and actual settlement prices will vary from the assumptions used in the table. Uncertainties involved in these estimates include levels of production at the wellhead, weather conditions, changes in market prices and other conditions beyond our control. 87 Table of Contents Index to Financial Statement s Letters of Credit.
Other Income/(Expense), Net The following table summarizes the components impacting Other income/(expense), net (in millions): Year Ended December 31, 2022 2021 Gain/(loss) on mark-to-market adjustment of Preferred Distribution Rate Reset Option embedded derivative (1) $ (189) $ 14 Net gain/(loss) on foreign currency revaluation (2) (36) 3 Other 6 2 $ (219) $ 19 (1) See Note 13 to our Consolidated Financial Statements for additional information.
Other Income/(Expense), Net The following table summarizes the components impacting Other income/(expense), net (in millions): Year Ended December 31, 2023 2022 Gain/(loss) on mark-to-market adjustment of Preferred Distribution Rate Reset Option embedded derivative (1) $ 58 $ (189) Net gain/(loss) on foreign currency revaluation (2) 15 (36) Other 29 6 $ 102 $ (219) (1) See Note 12 to our Consolidated Financial Statements for additional information.
The following table summarizes our investment, maintenance and acquisition capital expenditures (in millions): Year Ended December 31, 2022 2021 Investment capital (1) (2) (3) $ 334 $ 237 Maintenance capital (1) (3) 211 168 Acquisition capital (2) (4) 284 32 $ 829 $ 437 82 Table of Contents Index to Financial Statements (1) Capital expenditures made to expand the existing operating and/or earnings capacity of our assets are classified as “Investment capital.” Capital expenditures for the replacement and/or refurbishment of partially or fully depreciated assets in order to maintain the operating and/or earnings capacity of our existing assets are classified as “Maintenance capital.” (2) Contributions to unconsolidated entities, accounted for under the equity method of accounting, that are related to investment capital projects by such entities are recognized in “Investment capital.” Acquisitions of initial investments or additional interests in unconsolidated entities are included in “Acquisition capital.” (3) Investment capital and Maintenance capital, net to our interest, was approximately $265 million and $202 million, respectively, for 2022.
The following table summarizes our investment, maintenance and acquisition capital expenditures (in millions): Year Ended December 31, 2023 2022 Investment capital (1) (2) (3) $ 399 $ 334 Maintenance capital (1) (3) 231 211 Acquisition capital (2) (4) 431 284 $ 1,061 $ 829 (1) Capital expenditures made to expand the existing operating and/or earnings capacity of our assets are classified as “Investment capital.” Capital expenditures for the replacement and/or refurbishment of partially or fully depreciated assets in order to maintain the operating and/or earnings capacity of our existing assets are classified as “Maintenance capital.” (2) Contributions to unconsolidated entities, accounted for under the equity method of accounting, that are related to investment capital projects by such entities are recognized in “Investment capital.” Acquisitions of initial investments or additional interests in unconsolidated entities are included in “Acquisition capital.” (3) Investment capital and maintenance capital, net to our 65% interest in the Permian JV, was approximately $310 million and $214 million, respectively, for 2023, and approximately $265 million and $202 million, respectively, for 2022.
See Note 7 to our Consolidated Financial Statements for additional information.
See Note 7 to our Consolidated Financial Statements for additional information regarding this transaction.
The following table summarizes our investment in capital projects (in millions): Year Ended December 31, Projects 2022 2021 Complementary Permian Basin Projects (1) $ 191 $ 73 Permian Basin Takeaway Pipeline Projects (2) 33 75 Selected Facilities/Downstream Projects (3) 28 41 Other Projects 82 48 Total $ 334 $ 237 (1) Includes projects associated with assets included in the Permian JV.
The following table summarizes our investment in capital projects (in millions): Year Ended December 31, Projects 2023 2022 Complementary Permian Basin Projects (1) $ 266 $ 191 Permian Basin Takeaway Pipeline Projects (2) 34 33 Selected Facilities/Downstream Projects (3) 71 28 Other Projects 28 82 Total $ 399 $ 334 (1) Includes projects associated with assets included in the Permian JV.
(2) Represents pipeline projects with takeaway capacity out of the Permian Basin, including investments for our proportionate share of the projects of Wink to Webster Pipeline and Cactus II Pipeline. (3) Includes projects at our St. James, Cushing and Fort Saskatchewan terminals. Projected 2023 Capital Expenditures.
(2) Represents pipeline projects with takeaway capacity out of the Permian Basin, including investments for our proportionate share of the projects of Wink to Webster Pipeline and Cactus II Pipeline. (3) Includes projects at our St. James and Fort Saskatchewan terminals. 84 Table of Contents Index to Financial Statement s Projected 2024 Capital Expenditures.
As of December 31, 2022, although we had a working capital deficit of $536 million, we had approximately $3.0 billion of liquidity available to meet our ongoing operating, investing and financing needs, subject to continued covenant compliance, as noted below (in millions): As of December 31, 2022 Availability under senior unsecured revolving credit facility (1) (2) $ 1,317 Availability under senior secured hedged inventory facility (1) (2) 1,281 Amounts outstanding under commercial paper program — Subtotal 2,598 Cash and cash equivalents (3) 378 Total $ 2,976 (1) Represents availability prior to giving effect to borrowings outstanding under our commercial paper program, which reduce available capacity under the facilities.
As of December 31, 2023, although we had a working capital deficit of $90 million, we had over $2.6 billion of liquidity available to meet our ongoing operating, investing and financing needs, subject to continued covenant compliance, as noted below (in millions): As of December 31, 2023 Availability under senior unsecured revolving credit facility (1) (2) $ 1,350 Availability under senior secured hedged inventory facility (1) (2) 1,279 Amounts outstanding under commercial paper program (433) Subtotal 2,196 Cash and cash equivalents (3) 444 Total $ 2,640 (1) Represents availability prior to giving effect to borrowings outstanding under our commercial paper program, which reduce available capacity under the facilities.
Determining the fair value of assets and liabilities acquired, as well as intangible assets that relate to such items as customer relationships, acreage dedications and other contracts, involves professional judgment and is ultimately based on acquisition models and management’s assessment of the value of the assets acquired and, to the extent available, third-party assessments. 87 Table of Contents Index to Financial Statements In November 2022, we and Enbridge Inc.
Determining the fair value of assets and liabilities acquired, as well as intangible assets that relate to such items as customer relationships, acreage dedications and other contracts, involves professional judgment and is ultimately based on acquisition models and management’s assessment of the value of the assets acquired and, to the extent available, third-party assessments.
Although the resolution of the uncertainties involved in these estimates has not historically had a material impact on our results of operations or financial condition, we cannot provide assurance that actual amounts will not vary significantly from estimated amounts. See Item 7A.
Less than 1% of total annual revenues are based on estimates derived from internal valuation models. Although the resolution of the uncertainties involved in these estimates has not historically had a material impact on our results of operations or financial condition, we cannot provide assurance that actual amounts will not vary significantly from estimated amounts. See Item 7A.
We repurchased common units under the Program during the years ended December 31, 2022 and 2021 for a total purchase price of $74 million and $178 million, respectively, including commissions and fees. The remaining available capacity under the Program as of December 31, 2022 was $198 million.
There were no repurchases under the Program during the year ended December 31, 2023. We repurchased common units under the Program during the year ended December 31, 2022 for a total purchase price of $74 million, including commissions and fees. The remaining available capacity under the Program as of December 31, 2023 was $198 million.
(6) Reflects amounts attributable to noncontrolling interests in the Permian JV, Cactus II and Red River. (7) Excludes certain non-cash items impacting interest expense such as amortization of debt issuance costs and terminated interest rate swaps.
(6) Reflects amounts attributable to noncontrolling interests in the Permian JV, Cactus II and Red River. (7) See the table above for a reconciliation from Net Income to Adjusted EBITDA. (8) Excludes certain non-cash items impacting interest expense such as amortization of debt issuance costs and terminated interest rate swaps.
Total investment capital for the year ending December 31, 2023 is currently projected to be approximately $420 million ($325 million net to our interest). Approximately half of our projected investment capital expenditures are expected to be invested in the Permian JV assets. Additionally, maintenance capital for 2023 is currently projected to be $205 million ($195 million net to our interest).
Total investment capital for the year ending December 31, 2024 is currently projected to be approximately $465 million ($375 million net to our interest). Approximately half of our projected investment capital expenditures are expected to be invested in the Permian JV assets.
These areas are key components of our results of operations and are based on complex rules which require us to make judgments and estimates. Therefore, we consider these to be our critical accounting policies and estimates, which are discussed below. For further information on all of our significant accounting policies, see Note 2 to our Consolidated Financial Statements.
These areas are key components of our results of operations and are based on complex rules which require us to make judgments and estimates. Therefore, we consider these to be our critical accounting policies and estimates, which are discussed below.
These include our $1.35 billion senior unsecured revolving credit facility maturing in 2027, $1.35 billion senior secured hedged inventory facility maturing in 2025 and $2.7 billion unsecured commercial paper program that is backstopped by our revolving credit facility and our hedged inventory facility.
These include our $1.35 billion senior unsecured revolving credit facility maturing in 2028 (excluding a commitment of $64 million, which matures in 2027), $1.35 billion senior secured hedged inventory facility maturing in 2026 and $2.7 billion unsecured commercial paper program that is backstopped by our revolving credit facility and our hedged inventory facility.
The following is a more detailed discussion of the significant factors impacting Segment Adjusted EBITDA for the year ended December 31, 2022 compared to the year ended December 31, 2021. • Permian JV.
The following is a more detailed discussion of the significant factors impacting Segment Adjusted EBITDA for the year ended December 31, 2023 compared to the year ended December 31, 2022. Net Revenues and Equity Earnings.
We recognized net income attributable to PAA of $1.037 billion for the year ended December 31, 2022 compared to net income attributable to PAA of $593 million for the year ended December 31, 2021.
Overview of Operating Results We recognized net income attributable to PAA of $1.230 billion for the year ended December 31, 2023 compared to net income attributable to PAA of $1.037 billion for the year ended December 31, 2022.
In addition, we generally expect to fund our long-term needs, such as those resulting from investment capital activities or acquisitions and refinancing our long-term debt, through a variety of sources (either separately or in combination), which may include the sources mentioned above as funding for short-term needs and/or the issuance of additional equity or debt securities and the sale of assets.
In addition, we generally expect to fund our long-term needs, such as those resulting from investment capital activities, acquisitions or refinancing our long-term debt, through a variety of sources, which may include any or a combination of the sources listed above.
The following table sets forth the reconciliation of the non-GAAP financial liquidity measures Free Cash Flow and Free Cash Flow after Distributions from Net Cash Provided by Operating Activities (in millions): Year Ended December 31, 2022 2021 Net cash provided by operating activities $ 2,408 $ 1,996 Adjustments to reconcile net cash provided by operating activities to free cash flow: Net cash provided by/(used in) investing activities (526) 386 Cash contributions from noncontrolling interests 26 1 Cash distributions paid to noncontrolling interests (1) (298) (14) Free Cash Flow $ 1,610 $ 2,369 Cash distributions (2) (782) (715) Free Cash Flow after Distributions $ 828 $ 1,654 (1) Cash distributions paid during the period presented. 81 Table of Contents Index to Financial Statements (2) Cash distributions paid to our preferred and common unitholders during the period presented.
Adjusted Free Cash Flow is further reduced by cash distributions paid to our preferred and common unitholders to arrive at Adjusted Free Cash Flow after Distributions. 82 Table of Contents Index to Financial Statement s The following table sets forth the reconciliation of the non-GAAP financial liquidity measures Adjusted Free Cash Flow and Adjusted Free Cash Flow after Distributions from Net Cash Provided by Operating Activities (in millions): Year Ended December 31, 2023 2022 Net cash provided by operating activities $ 2,727 $ 2,408 Adjustments to reconcile net cash provided by operating activities to adjusted free cash flow: Net cash used in investing activities (702) (526) Cash contributions from noncontrolling interests 106 26 Cash distributions paid to noncontrolling interests (1) (333) (298) Adjusted Free Cash Flow $ 1,798 $ 1,610 Cash distributions (2) (989) (782) Adjusted Free Cash Flow after Distributions $ 809 $ 828 (1) Cash distributions paid during the period presented.
We expect to fund our 2023 investment and maintenance capital expenditures primarily with retained cash flow. Divestitures Proceeds from the sale of assets have generally been used to fund our investment capital projects and reduce debt levels.
Additionally, maintenance capital for 2024 is currently projected to be approximately $250 million ($230 million net to our interest). We expect to fund our 2024 investment and maintenance capital expenditures primarily with retained cash flow. Divestitures Proceeds from the sale of assets have generally been used to fund our investment capital projects and reduce debt levels.
If the initial accounting for the business combination is incomplete when the combination occurs, an estimate will be recorded. We also expense the transaction costs as incurred in connection with each acquisition, except for acquisitions of equity method investments. In addition, we are required to recognize intangible assets separately from goodwill.
We also expense the transaction costs as incurred in connection with each acquisition, except for acquisitions of equity method investments. In addition, we are required to recognize intangible assets separately from goodwill.
The following table includes our best estimate and the timing of these payments as of December 31, 2022 (in millions): 2023 2024 2025 2026 2027 2028 and Thereafter Total Crude oil, NGL and other purchases (1) $ 22,660 $ 19,940 $ 18,528 $ 17,568 $ 15,582 $ 41,216 $ 135,494 (1) Amounts are primarily based on estimated volumes and market prices based on average activity during December 2022.
The following table includes our best estimate and the timing of these payments as of December 31, 2023 (in millions): 2024 2025 2026 2027 2028 2029 and Thereafter Total Crude oil, NGL and other purchases (1) $ 22,938 $ 19,743 $ 17,910 $ 15,817 $ 12,795 $ 30,341 $ 119,544 (1) Amounts are primarily based on estimated volumes and market prices based on average activity during December 2023.
Segment General and Administrative Expenses. See the “—Consolidated Results” section above for a discussion of general and administrative expenses. Maintenance Capital. Maintenance capital consists of capital expenditures for the replacement and/or refurbishment of partially or fully depreciated assets in order to maintain the operating and/or earnings capacity of our existing assets.
Maintenance Capital Maintenance capital consists of capital expenditures for the replacement and/or refurbishment of partially or fully depreciated assets in order to maintain the operating and/or earnings capacity of our existing assets.
A hypothetical variance of 5% in our aggregate estimate for the retirement obligations discussed above would have an impact on earnings of up to approximately $6 million.
Uncertainties that impact these estimates include the costs associated with these activities and the timing of incurring such costs. A hypothetical variance of 5% in our aggregate estimate for the retirement obligations discussed above would have an impact on earnings of up to approximately $6 million.
(2) Available capacity under our senior unsecured revolving credit facility and senior secured hedged inventory facility was reduced by outstanding letters of credit of $33 million and $69 million, respectively. 80 Table of Contents Index to Financial Statements (3) Excludes restricted cash of $23 million.
(2) Available capacity under our senior unsecured revolving credit facility and senior secured hedged inventory facility was reduced by outstanding letters of credit issued under these facilities of less than $1 million and $71 million, respectively. 81 Table of Contents Index to Financial Statement s (3) Excludes restricted cash of $6 million.
The segment results also include the direct fixed and variable field costs of operating the crude oil assets, as well as an allocation of indirect operating costs. 75 Table of Contents Index to Financial Statements The following tables set forth our operating results from our Crude Oil segment: Operating Results (1) (in millions) Year Ended December 31, Variance 2022 2021 $ % Revenues $ 55,080 $ 40,470 $ 14,610 36 % Purchases and related costs (52,088) (37,540) (14,548) (39) % Field operating costs (1,003) (824) (179) (22) % Segment general and administrative expenses (2) (250) (221) (29) (13) % Equity earnings in unconsolidated entities 403 274 129 47 % Adjustments (3) : Depreciation and amortization of unconsolidated entities 85 123 (38) (31) % Derivative activities and inventory valuation adjustments (11) (252) 241 ** Long-term inventory costing adjustments (3) (67) 64 ** Deficiencies under minimum volume commitments, net 7 (7) 14 ** Equity-indexed compensation expense 32 19 13 ** Foreign currency revaluation 3 (3) 6 ** Line 901 incident 95 15 80 ** Significant transaction-related expenses — 16 (16) ** Adjusted EBITDA attributable to noncontrolling interests (364) (94) (270) ** Segment Adjusted EBITDA $ 1,986 $ 1,909 $ 77 4 % Maintenance capital $ 112 $ 100 $ 12 12 % Average Volumes Year Ended December 31, Variance 2022 2021 Volumes % Crude oil pipeline tariff (by region) (4) Permian Basin (5) 5,638 4,412 1,226 28 % Other (5) 1,927 1,793 134 7 % Total crude oil pipeline tariff 7,565 6,205 1,360 22 % Commercial crude oil storage capacity (5) (6) 72 73 (1) (1) % Crude oil lease gathering purchases (4) (7) 1,382 1,330 52 4 % ** Indicates that variance as a percentage is not meaningful.
The segment results also include the direct fixed and variable field costs of operating the crude oil assets, as well as an allocation of indirect operating costs. 77 Table of Contents Index to Financial Statement s The following tables set forth our operating results from our Crude Oil segment: Operating Results (1) (in millions) Year Ended December 31, Variance 2023 2022 $ % Revenues $ 47,174 $ 55,080 $ (7,906) (14) % Purchases and related costs (43,805) (52,088) 8,283 16 % Field operating costs (1,053) (1,003) (50) (5) % Segment general and administrative expenses (2) (271) (250) (21) (8) % Equity earnings in unconsolidated entities 369 403 (34) (8) % Adjustments (3) : Depreciation and amortization of unconsolidated entities 87 85 2 2 % Derivative activities and inventory valuation adjustments 17 (11) 28 ** Long-term inventory costing adjustments 22 (3) 25 ** Deficiencies under minimum volume commitments, net 12 7 5 ** Equity-indexed compensation expense 35 32 3 ** Foreign currency revaluation 19 3 16 ** Line 901 incident 10 95 (85) ** Transaction-related expenses 1 — 1 ** Segment amounts attributable to noncontrolling interests (454) (364) (90) ** Segment Adjusted EBITDA $ 2,163 $ 1,986 $ 177 9 % Maintenance capital expenditures $ 145 $ 112 $ 33 29 % Average Volumes Year Ended December 31, Variance 2023 2022 Volumes % Crude oil pipeline tariff (by region) (4) Permian Basin (5) 6,356 5,638 718 13 % Other (5) 2,104 1,927 177 9 % Total crude oil pipeline tariff 8,460 7,565 895 12 % Commercial crude oil storage capacity (5) (6) 72 72 — — % Crude oil lease gathering purchases (4) (7) 1,452 1,382 70 5 % ** Indicates that variance as a percentage is not meaningful.
General and Administrative Expenses The increase in general and administrative expenses for the year ended December 31, 2022 compared to the year ended December 31, 2021 was primarily due to (i) employee-related costs, including an increase in equity-indexed compensation expense due to changes in plan assumptions and a higher common unit price (a portion of which is excluded in the calculation of Adjusted EBITDA and Segment Adjusted EBITDA), (ii) higher information systems costs due to ongoing systems integration work and (iii) higher office rent due to an operating cost abatement in the prior year, partially offset by (iv) costs associated with the formation of the Permian JV in the prior year.
General and Administrative Expenses The increase in general and administrative expenses for the year ended December 31, 2023 compared to the year ended December 31, 2022 was primarily due to (i) higher employee-related costs, including an increase in equity-indexed compensation expense (a portion of which is excluded in the calculation of Adjusted EBITDA and Segment Adjusted EBITDA) due to a higher common unit price and higher number of outstanding units assumed probable of vesting and (ii) higher information systems costs due to ongoing systems integration work, partially offset by (iii) decreases across several categories.
Fair Value of Assets and Liabilities Acquired and Identification of Associated Goodwill and Intangible Assets. In accordance with Financial Accounting Standards Board (“FASB”) guidance regarding business combinations, with each acquisition, we allocate the cost of the acquired entity to the assets acquired and liabilities assumed based on their estimated fair values at the date of acquisition.
In accordance with Financial Accounting Standards Board (“FASB”) guidance regarding business combinations, with each acquisition, we allocate the cost of the acquired entity to the assets acquired and liabilities assumed based on their estimated fair values at the date of acquisition. If the initial accounting for the business combination is incomplete when the combination occurs, an estimate will be recorded.
Off-Balance Sheet Arrangements We have no off-balance sheet arrangements as defined by Item 303 of Regulation S-K. 86 Table of Contents Index to Financial Statements Investments in Unconsolidated Entities We have invested in entities that are not consolidated in our financial statements. None of these entities had debt outstanding as of December 31, 2022.
At December 31, 2023 and 2022, we had outstanding letters of credit of approximately $205 million and $102 million, respectively. Off-Balance Sheet Arrangements We have no off-balance sheet arrangements as defined by Item 303 of Regulation S-K. Investments in Unconsolidated Entities We have invested in entities that are not consolidated in our financial statements.
We may elect at any time to make additional capital contributions to any of these entities.
None of these entities had debt outstanding as of December 31, 2023. We may elect at any time to make additional capital contributions to any of these entities.
(4) Average daily volumes calculated as the total volumes (attributable to our interest for assets owned through undivided joint interests) for the year divided by the number of days in the year. (5) During the fourth quarter of 2022, we modified our sales volumes reported to include only propane and butane sales.
(4) Average daily volumes are calculated as total volumes (attributable to our interest for assets owned through undivided joint interests) for the year divided by the number of days in the year.
We are, however, subject to business and operational risks that could adversely affect our cash flow, including extended disruptions in the financial markets and/or energy price volatility resulting from current macroeconomic and geopolitical conditions associated with the COVID-19 pandemic and/or actions by OPEC.
We are, however, subject to business and operational risks that could adversely affect our cash flow, including extended disruptions in the financial markets and/or energy price volatility resulting from current macroeconomic and geopolitical conditions, including actions by OPEC. A prolonged material decrease in our cash flows would likely produce an adverse effect on our borrowing capacity and cost of borrowing.
The following table sets forth selected information regarding these entities as of December 31, 2022 (unaudited, dollars in millions): Entity Type of Operation Our Ownership Interest Total Entity Assets Total Cash and Restricted Cash BridgeTex Pipeline Company, LLC Crude Oil Pipeline 20% $ 792 $ 26 Capline Pipeline Company LLC Crude Oil Pipeline 54% $ 1,268 $ 33 Diamond Pipeline LLC Crude Oil Pipeline (1) 50% $ 896 $ 1 Eagle Ford Pipeline LLC Crude Oil Pipeline (1) 50% $ 779 $ 25 Eagle Ford Terminals Corpus Christi LLC Crude Oil Terminal and Dock (1) 50% $ 214 $ 5 OMOG JV LLC Crude Oil Pipeline (1) 57% $ 434 $ 13 Saddlehorn Pipeline Company, LLC Crude Oil Pipeline 30% $ 612 $ 19 White Cliffs Pipeline, LLC Crude Oil Pipeline 36% $ 407 $ 7 Wink to Webster Pipeline LLC Crude Oil Pipeline 16% $ 2,129 $ 83 Other investments $ 519 $ 24 (1) We serve as operator of the asset.
The following table sets forth selected information regarding these entities as of December 31, 2023 (unaudited, dollars in millions): Entity Type of Operation Our Ownership Interest Total Entity Assets Total Cash and Restricted Cash BridgeTex Pipeline Company, LLC Crude Oil Pipeline 20% $ 786 $ 11 Capline Pipeline Company LLC Crude Oil Pipeline 54% $ 1,249 $ 46 Diamond Pipeline LLC Crude Oil Pipeline (1) 50% $ 876 $ 1 Eagle Ford Pipeline LLC Crude Oil Pipeline (1) 50% $ 780 $ 34 Eagle Ford Terminals Corpus Christi LLC Crude Oil Terminal and Dock (1) 50% $ 210 $ 5 Saddlehorn Pipeline Company, LLC Crude Oil Pipeline 30% $ 600 $ 21 White Cliffs Pipeline, LLC Crude Oil Pipeline 36% $ 377 $ 6 Wink to Webster Pipeline LLC Crude Oil Pipeline 16% $ 2,324 $ 73 Other investments $ 520 $ 30 (1) We serve as operator of the asset.
Holders of our Series B preferred units are entitled to receive, when, as and if declared by our general partner out of legally available funds for such purpose, cumulative cash distributions, as applicable.
Holders of our Series B preferred units are entitled to receive, when, as and if declared by our general partner out of legally available funds for such purpose, cumulative cash distributions, as applicable. Distributions on the Series B preferred units accumulate based on the applicable three-month SOFR, plus a credit spread adjustment of 0.26121%, plus 4.11% per annum.
In May 2015, we experienced a crude oil release from our Las Flores to Gaviota Pipeline (Line 901) in Santa Barbara County, California.
See Note 5 to our Consolidated Financial Statements for further discussion regarding inventory. Line 901 Incident Insurance Receivable. In May 2015, we experienced a crude oil release from our Las Flores to Gaviota Pipeline (Line 901) in Santa Barbara County, California.
See the “—Results of Operations” section below for further discussion. 68 Table of Contents Index to Financial Statements Results of Operations Consolidated Results The following table sets forth an overview of our consolidated financial results calculated in accordance with GAAP (in millions, except per unit data): Year Ended December 31, Variance 2022 2021 $ % Product sales revenues $ 55,948 $ 40,883 $ 15,065 37 % Services revenues 1,394 1,195 199 17 % Purchases and related costs (53,176) (38,504) (14,672) (38) % Field operating costs (1,315) (1,065) (250) (23) % General and administrative expenses (325) (292) (33) (11) % Depreciation and amortization (965) (774) (191) (25) % Gains/(losses) on asset sales and asset impairments, net (269) (592) 323 55 % Equity earnings in unconsolidated entities 403 274 129 47 % Gains/(losses) on investments in unconsolidated entities, net 346 2 344 ** Interest expense, net (405) (425) 20 5 % Other income/(expense), net (219) 19 (238) ** Income tax expense (189) (73) (116) (159) % Net income 1,228 648 580 90 % Net income attributable to noncontrolling interests (191) (55) (136) (247) % Net income attributable to PAA $ 1,037 $ 593 $ 444 75 % Basic and diluted net income per common unit $ 1.19 $ 0.55 $ 0.64 ** Basic and diluted weighted average common units outstanding 701 716 (15) ** ** Indicates that variance as a percentage is not meaningful.
See the “—Results of Operations” section below for further discussion. 70 Table of Contents Index to Financial Statement s Results of Operations Consolidated Results The following table sets forth an overview of our consolidated financial results calculated in accordance with GAAP (in millions, except per unit data): Year Ended December 31, Variance 2023 2022 $ % Product sales revenues $ 46,974 $ 55,948 $ (8,974) (16) % Services revenues 1,738 1,394 344 25 % Purchases and related costs (44,531) (53,176) 8,645 16 % Field operating costs (1,425) (1,315) (110) (8) % General and administrative expenses (350) (325) (25) (8) % Depreciation and amortization (1,048) (965) (83) (9) % Gains/(losses) on asset sales and asset impairments, net 152 (269) 421 157 % Equity earnings in unconsolidated entities 369 403 (34) (8) % Gains/(losses) on investments in unconsolidated entities, net 28 346 (318) (92) % Interest expense, net (386) (405) 19 5 % Other income/(expense), net 102 (219) 321 147 % Income tax expense (121) (189) 68 36 % Net income 1,502 1,228 274 22 % Net income attributable to noncontrolling interests (272) (191) (81) (42) % Net income attributable to PAA $ 1,230 $ 1,037 $ 193 19 % Basic and diluted net income per common unit $ 1.40 $ 1.19 $ 0.21 ** Basic and diluted weighted average common units outstanding 699 701 (2) ** ** Indicates that variance as a percentage is not meaningful.
Inventory, including long-term inventory, primarily consists of crude oil and NGL and is valued at the lower of cost or net realizable value, with cost determined using an average cost method within specific inventory pools.
See “—Executive Summary— Market Overview and Outlook” and Note 6, Note 8 and Note 9 to our Consolidated Financial Statements for additional information. Inventory Valuations. Inventory, including long-term inventory, primarily consists of crude oil and NGL and is valued at the lower of cost or net realizable value, with cost determined using an average cost method within specific inventory pools.
Adjusted EBITDA is defined as earnings before interest, taxes, depreciation and amortization (including our proportionate share of depreciation and amortization, including write-downs related to cancelled projects and impairments, of unconsolidated entities), gains and losses on asset sales and asset impairments, goodwill impairment losses and gains or losses on and impairments of investments in unconsolidated entities, adjusted for certain selected items impacting comparability.
See “—Liquidity and Capital Resources—Liquidity Measures” for additional information regarding Adjusted Free Cash Flow and Adjusted Free Cash Flow after Distributions. 73 Table of Contents Index to Financial Statement s Performance Measures Adjusted EBITDA is defined as earnings before interest expense, income taxes, depreciation and amortization (including our proportionate share of depreciation and amortization, including write-downs related to cancelled projects and impairments, of unconsolidated entities), gains and losses on asset sales and asset impairments and gains or losses on investments in unconsolidated entities, adjusted for certain selected items impacting comparability.
Borrowings and Repayments Under Credit Arrangements We had no net borrowings or repayments under our credit facilities or commercial paper program during the year ended December 31, 2022. During the year ended December 31, 2021, we had net repayments under our credit facilities and commercial paper program of $712 million.
We had no net borrowings or repayments under our credit facilities or commercial paper program during the year ended December 31, 2022. 85 Table of Contents Index to Financial Statement s Senior Notes Repayments of Senior Notes.
(4) Acquisition capital for 2022 includes (i) an additional ownership interest in certain straddle plants included in our NGL segment, (ii) the purchase of an additional 5% interest in Cactus II and (iii) the remaining 50% interest in Advantage Pipeline Holdings LLC. Acquisition capital for 2021 represents the cash consideration paid as part of the Asset Exchange transaction.
Acquisition capital for 2022 includes (i) an additional ownership interest in certain straddle plants included in our NGL segment, (ii) the purchase of an additional 5% interest in Cactus II and (iii) the remaining 50% interest in Advantage Pipeline Holdings LLC by the Permian JV. See Note 7 to our Consolidated Financial Statements for additional information.
(3) The Preferred Distribution Rate Reset Option of our Series A preferred units is accounted for as an embedded derivative and recorded at fair value in our Consolidated Financial Statements. The associated gains and losses are not integral to our results and were thus classified as a selected item impacting comparability.
The associated gains and losses are not integral to our results and were thus classified as a selected item impacting comparability. See Note 12 to our Consolidated Financial Statements for additional information regarding the Preferred Distribution Rate Reset Option.
The primary additional measures used by management are Adjusted EBITDA, Adjusted EBITDA attributable to PAA, Implied distributable cash flow (“DCF”), Free Cash Flow and Free Cash Flow after Distributions.
The primary additional measures used by management are Adjusted EBITDA, Adjusted EBITDA attributable to PAA, Implied distributable cash flow (“DCF”), Adjusted Free Cash Flow and Adjusted Free Cash Flow after Distributions. Our definition and calculation of certain non-GAAP financial measures may not be comparable to similarly-titled measures of other companies.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

9 edited+3 added−5 removed7 unchanged
Biggest changeIn January 2023, we received notice that the Series A preferred unitholders elected the Preferred Distribution Rate Reset Option, which will be effective for the distribution paid in May 2023. See Note 12 to our Consolidated Financial Statements for additional information. Item 8. Financial Statements and Supplementary Data See “Index to the Consolidated Financial Statements” on page F-1. Item 9.
Biggest changeSee Note 11 to our Consolidated Financial Statements for additional information on the Series B preferred units. Item 8. Financial Statements and Supplementary Data See “Index to the Consolidated Financial Statements” on page F-1. Item 9. Changes In and Disagreements With Accountants on Accounting and Financial Disclosure None.
Interest Rate Risk Our use of variable rate debt and any forecasted issuances of fixed rate debt expose us to interest rate risk. Therefore, from time to time, we use interest rate derivatives to hedge interest rate risk associated with anticipated interest payments and, in certain cases, outstanding debt instruments.
Our use of variable rate debt and any forecasted issuances of fixed rate debt expose us to interest rate risk. Therefore, from time to time, we use interest rate derivatives to hedge interest rate risk associated with anticipated interest payments and, in certain cases, outstanding debt instruments.
Our objectives for these derivatives include hedging anticipated purchases and sales and stored inventory. We manage these exposures with various instruments including futures, forwards, swaps and options. See Note 13 to our Consolidated Financial Statements for further discussion regarding our hedging strategies and objectives.
Our objectives for these derivatives include hedging anticipated purchases and sales and stored inventory. We manage these exposures with various instruments including futures, forwards, swaps and options. See Note 12 to our Consolidated Financial Statements for further discussion regarding our hedging strategies and objectives.
In the event of an actual 10% change in near-term commodity prices, the fair value of our derivative portfolio would typically change less than that shown in the table as changes in near-term prices are not typically mirrored in delivery months further out.
In the event of an actual 10% change in near-term commodity prices, the fair value of our derivative portfolio would typically change less than that shown in the table as changes in near-term prices are not typically mirrored in delivery months further out. Interest Rate Risk Debt .
We manage these exposures with various instruments including futures, forwards, swaps and options. 90 Table of Contents Index to Financial Statements • Natural gas We utilize natural gas derivatives to hedge commodity price risk inherent in our natural gas processing assets (natural gas purchase component of the frac spread).
We manage these exposures with various instruments including futures, forwards, swaps and options. • Natural gas We utilize natural gas derivatives to hedge commodity price risk inherent in our natural gas processing assets (natural gas purchase component of the frac spread).
The fair value of our interest rate derivatives was an asset of $120 million as of December 31, 2022. A 10% increase in the forward LIBOR curve as of December 31, 2022 would have resulted in an increase of $18 million to the fair value of our interest rate derivatives.
A 10% increase in the forward SOFR curve as of December 31, 2023 would have resulted in an increase of $18 million to the fair value of our interest rate derivatives.
The fair value of our commodity derivatives and the change in fair value as of December 31, 2022 that would be expected from a 10% price increase or decrease is shown in the table below (in millions): Fair Value Effect of 10% Price Increase Effect of 10% Price Decrease Crude oil $ (2) $ (54) $ 55 Natural gas (1) $ 13 $ (13) NGL and other 225 $ (47) $ 47 Total fair value $ 222 The fair values presented in the table above reflect the sensitivity of the derivative instruments only and do not include the effect of the underlying hedged commodity.
The fair value of our commodity derivatives and the change in fair value as of December 31, 2023 that would be expected from a 10% price increase or decrease is shown in the table below (in millions): Fair Value Effect of 10% Price Increase Effect of 10% Price Decrease Crude oil $ (2) $ (49) $ 49 Natural gas (66) $ 12 $ (12) NGL and other 68 $ (51) $ 51 Total fair value $ — 92 Table of Contents Index to Financial Statement s The fair values presented in the table above reflect the sensitivity of the derivative instruments only and do not include the effect of the underlying hedged commodity.
A 10% decrease in the forward LIBOR curve as of December 31, 2022 would have resulted in a decrease of $18 million to the fair value of our interest rate derivatives.
A 10% decrease in the forward SOFR curve as of December 31, 2023 would have resulted in a decrease of $18 million to the fair value of our interest rate derivatives. See Note 12 to our Consolidated Financial Statements for a discussion of our interest rate risk hedging activities. Series B Preferred Units .
All of our senior notes are fixed rate notes and thus are not subject to interest rate risk. We did not have any variable rate debt outstanding at December 31, 2022. The average interest rate on variable rate debt that was outstanding during the year ended December 31, 2022 was 1.9%, based upon rates in effect during the year.
All of our senior notes are fixed rate notes and thus are not subject to interest rate risk. Our variable rate debt outstanding at December 31, 2023, approximately $433 million, was subject to interest rate resets that generally range from less than one week to approximately one month.
Removed
See Note 13 to our Consolidated Financial Statements for a discussion of our interest rate risk hedging activities. 91 Table of Contents Index to Financial Statements Preferred Distribution Rate Reset Option The Preferred Distribution Rate Reset Option of our Series A preferred units is an embedded derivative that must be bifurcated from the related host contract, our partnership agreement, and recorded at fair value in our Consolidated Balance Sheets.
Added
The average interest rate on variable rate debt that was outstanding during the year ended December 31, 2023 was 5.8%, based upon rates in effect during the year. The fair value of our interest rate derivatives was an asset of $55 million as of December 31, 2023.
Removed
The valuation model utilized for this embedded derivative contains multiple inputs, including our common unit price, ten-year United States treasury rates, default probabilities and timing estimates to ultimately calculate the fair value of our Series A preferred units with and without the Preferred Distribution Rate Reset Option.
Added
Distributions on the Series B preferred units accumulate and are payable quarterly in arrears on the 15th day of February, May, August and November. Beginning August 15, 2023, distributions on the Series B preferred units accumulate based on the applicable three-month SOFR, plus certain adjustments.
Removed
The fair value of this embedded derivative was a liability of $189 million as of December 31, 2022. The ten-year U.S. Treasury rate as of December 31, 2022 was 3.88%. An increase in the ten-year U.S. Treasury rate curve of 10%, holding other inputs constant, would result in an increase in both expense and our liability of $33 million.
Added
Based upon the Series B preferred units outstanding at December 31, 2023 and the liquidation preference of $1,000 per unit, a change of 100 basis points in interest rates would increase or decrease the annual distributions on the Series B preferred units by approximately $8 million.
Removed
A decrease in the ten-year U.S. Treasury rate curve of 10%, holding other inputs constant, would result in a decrease in both expense and our liability of $39 million. See Note 13 to our Consolidated Financial Statements for a discussion of embedded derivatives.
Removed
Changes In and Disagreements With Accountants on Accounting and Financial Disclosure None.

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