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Operating Segments
 12 Months Ended
Dec. 31, 2011
Operating Segments  
Operating Segments

Note 13—Operating Segments

 

We manage our operations through three operating segments: (i) Transportation, (ii) Facilities and (iii) Supply and Logistics. See “Revenue Recognition” within Note 2 for a summary of the types of products and services from which each segment derives its revenues.

 

Our Chief Operating Decision Maker (our Chief Executive Officer) evaluates segment performance based on a variety of measures including segment profit, segment volumes, segment profit per barrel and maintenance capital investment. We define segment profit as revenues and equity earnings in unconsolidated entities less (i) purchases and related costs, (ii) field operating costs and (iii) segment general and administrative (“G&A”) expenses. Each of the items above excludes depreciation and amortization.

 

As an MLP, we make quarterly distributions of our “available cash” (as defined in our partnership agreement) to our unitholders. We look at each period’s earnings before non-cash depreciation and amortization as an important measure of segment performance. The exclusion of depreciation and amortization expense could be viewed as limiting the usefulness of segment profit as a performance measure because it does not account in current periods for the implied reduction in value of our capital assets, such as crude oil pipelines and facilities, caused by age-related decline and wear and tear. We compensate for this limitation by recognizing that depreciation and amortization are largely offset by repair and maintenance investments, which acts to partially offset the aging and wear and tear in the value of our principal fixed assets. These maintenance investments are a component of field operating costs included in segment profit or in maintenance capital, depending on the nature of the cost. Maintenance capital, which is deducted in determining “available cash,” consists of capital expenditures for the replacement of partially or fully depreciated assets in order to maintain the service capability, level of production and/or functionality of our existing assets. Capital expenditures made to expand the existing earnings capacity of our assets are considered expansion capital expenditures, not maintenance capital. Repair and maintenance expenditures incurred in order to maintain the day to day operation of our existing assets are charged to expense as incurred. The following table reflects certain financial data for each segment for the periods indicated (in millions):

 

 

 

Transportation

 

Facilities

 

Supply & Logistics

 

Total

 

Twelve Months Ended December 31, 2011

 

 

 

 

 

 

 

 

 

Revenues:

 

 

 

 

 

 

 

 

 

External Customers

 

$

572

 

$

638

 

$

33,065

 

$

34,275

 

Intersegment (1)

 

593

 

158

 

3

 

754

 

Total revenues of reportable segments

 

$

1,165

 

$

796

 

$

33,068

 

$

35,029

 

Equity earnings in unconsolidated entities

 

$

13

 

$

—

 

$

—

 

$

13

 

Segment profit (2) (3) 

 

$

555

 

$

358

 

$

647

 

$

1,560

 

Capital expenditures (4)

 

$

600

 

$

1,317

 

$

18

 

$

1,935

 

Total assets

 

$

5,156

 

$

4,506

 

$

5,719

 

$

15,381

 

Maintenance capital

 

$

86

 

$

22

 

$

12

 

$

120

 

 

 

 

 

 

 

 

 

 

 

Twelve Months Ended December 31, 2010

 

 

 

 

 

 

 

 

 

Revenues:

 

 

 

 

 

 

 

 

 

External Customers

 

$

565

 

$

339

 

$

24,989

 

$

25,893

 

Intersegment (1)

 

480

 

151

 

1

 

632

 

Total revenues of reportable segments

 

$

1,045

 

$

490

 

$

24,990

 

$

26,525

 

Equity earnings in unconsolidated entities

 

$

3

 

$

—

 

$

—

 

$

3

 

Segment profit (2) (3)

 

$

516

 

$

270

 

$

240

 

$

1,026

 

Capital expenditures

 

$

329

 

$

270

 

$

163

 

$

762

 

Total assets

 

$

4,701

 

$

3,303

 

$

5,699

 

$

13,703

 

Maintenance capital

 

$

67

 

$

17

 

$

9

 

$

93

 

 

 

 

 

 

 

 

 

 

 

Twelve Months Ended December 31, 2009

 

 

 

 

 

 

 

 

 

Revenues:

 

 

 

 

 

 

 

 

 

External Customers

 

$

536

 

$

227

 

$

17,757

 

$

18,520

 

Intersegment (1)

 

425

 

135

 

2

 

562

 

Total revenues of reportable segments

 

$

961

 

$

362

 

$

17,759

 

$

19,082

 

Equity earnings in unconsolidated entities

 

$

7

 

$

8

 

$

—

 

$

15

 

Segment profit (2) (3)

 

$

477

 

$

208

 

$

345

 

$

1,030

 

Capital expenditures

 

$

183

 

$

564

 

$

10

 

$

757

 

Total assets

 

$

4,468

 

$

3,097

 

$

4,793

 

$

12,358

 

Maintenance capital

 

$

57

 

$

16

 

$

8

 

$

81

 

 

(1)                                 Segment revenues and purchases and related costs include intersegment amounts. Intersegment sales are conducted at posted tariff rates, rates similar to those charged to third parties or rates that we believe approximate market rates.

 

(2)                                 Supply and logistics segment profit includes interest expense (related to hedged inventory purchases) of $20 million, $17 million and $11 million for the years ended December 31, 2011, 2010 and 2009, respectively.

 

(3)                                 The following table reconciles segment profit to net income attributable to Plains (in millions):

 

 

 

Year Ended December 31,

 

 

 

2011

 

2010

 

2009

 

Segment profit

 

$

1,560

 

$

1,026

 

$

1,030

 

Depreciation and amortization

 

(249

)

(256

)

(236

)

Interest expense

 

(253

)

(248

)

(224

)

Other income/(expense), net

 

(19

)

(9

)

16

 

Income tax benefit/(expense)

 

(45

)

1

 

(6

)

Net income

 

994

 

514

 

580

 

Less: Net income attributable to noncontrolling interests

 

(28

)

(9

)

(1

)

Net income attributable to Plains

 

$

966

 

$

505

 

$

579

 

 

(4)                                 Facilities segment capital expenditures includes a cash deposit of $50 million (reflected within “Other current assets” on our Consolidated Balance Sheet) paid upon signing a definitive agreement related to the pending BP NGL acquisition, which is expected to close in the second quarter of 2012. Upon completion of this acquisition, we will allocate the assets to our segments, which may result in a different allocation than reflected above. See Note 3 for further discussion of the pending BP NGL acquisition.

 

Geographic Data

 

We have operations in the United States and Canada. Set forth below are revenues and long-lived assets attributable to these geographic areas (in millions):

 

 

 

For the Year Ended December 31,

 

Revenues (1)

 

2011

 

2010

 

2009

 

United States

 

$

28,181

 

$

21,471

 

$

15,439

 

Canada

 

6,094

 

4,422

 

3,081

 

 

 

$

34,275

 

$

25,893

 

$

18,520

 

 

(1)                                     Revenues are primarily attributed to each region based on where the services are provided or the product is shipped.

 

 

 

As of December 31,

 

Long-Lived Assets (1)

 

2011

 

2010

 

United States

 

$

9,127

 

$

7,502

 

Canada

 

1,883

 

1,800

 

 

 

$

11,010

 

$

9,302

 

 

(1)                                     Excludes long-term derivative assets.