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Acquisitions
 6 Months Ended
Jun. 30, 2012
Acquisitions  
Acquisitions

Note 4—Acquisitions

 

The following acquisitions were accounted for using the acquisition method of accounting and the determination of the fair value of the assets and liabilities acquired has been estimated in accordance with the applicable accounting guidance.

 

BP NGL Acquisition

 

On April 1, 2012, we acquired all of the outstanding shares of BP Canada Energy Company (“BPCEC”), a wholly owned subsidiary of BP Corporation North America Inc. (“BP North America”) from Amoco Canada International Holdings B.V. (the “Seller”).  Total consideration for this acquisition (referred to herein as the “BP NGL Acquisition”), which was based on an October 1, 2011 effective date, was approximately $1.68 billion in cash, including $17 million of imputed interest, subject to working capital and other adjustments.

 

Upon completion of this acquisition, we became the indirect owner of all of BP North America’s Canadian-based NGL business and certain of BP North America’s NGL assets located in the upper-Midwest United States (collectively the “BP NGL Assets”). The BP NGL Assets acquired include varying ownership interests and contractual rights relating to approximately 2,600 miles of NGL pipelines; approximately 20 million barrels of NGL storage capacity; seven fractionation plants with an aggregate net capacity of approximately 232,000 barrels per day; four straddle plants and two field gas processing plants with an aggregate net capacity of approximately six Bcf per day; and long-term and seasonal NGL inventories of approximately 8 million barrels upon closing. Certain of these pipelines and storage assets are currently inactive. The acquired business also includes various third-party supply contracts at other field gas processing plants and a supply contract relating to a third-party owned straddle plant with throughput capacity of 2.5 Bcf per day, shipping arrangements on third-party NGL pipelines and long-term leases on 720 rail cars used to move product among various locations. We have also entered into an Integrated Supply and Trading Agreement, pursuant to which an affiliate of BP North America will, for a period of two years following the closing of the acquisition, continue to provide sourcing services for gas supply to feed certain of the straddle plants acquired as a result of the acquisition.

 

The preliminary determination of the fair value of the assets and liabilities acquired is as follows (in millions):

 

 

 

 

 

Average

 

 

 

 

 

Depreciable

 

Description

 

Amount

 

Life (in years)

 

Working capital

 

$

253

 

N/A

 

Property and equipment

 

1,067

 

5 - 70

 

Linefill

 

84

 

N/A

 

Long-term inventory

 

166

 

N/A

 

Intangible assets (contract)

 

132

 

14

 

Goodwill

 

244

 

N/A

 

Deferred tax liability

 

(244

)

N/A

 

Environmental liability

 

(14

)

N/A

 

Other long-term liabilities

 

(5

)

N/A

 

Total

 

$

1,683

 

 

 

 

The determination of the fair value of the assets and liabilities acquired is preliminary pending completion of internal valuation procedures and resolution of working capital and other adjustments. We expect to finalize our fair value determination during 2012. The purchase price was equal to the fair value of the net tangible and intangible assets acquired, excluding the resulting deferred tax liability and goodwill. The deferred tax liability is determined by the difference between the fair value of the acquired assets and liabilities and the tax basis for those assets and liabilities. The resulting liability gives rise to an equal and offsetting goodwill balance for this transaction.

 

The preliminary determination of fair value to intangible assets above is comprised of a contract with a 14 year life.  Amortization of the contract under the declining balance method of amortization for the five full or partial calendar years following the acquisition date is estimated as follows:

 

2012 (1)

 

$

39

 

2013

 

$

30

 

2014

 

$

10

 

2015

 

$

8

 

2016

 

$

7

 

2017

 

$

6

 

 

(1)            Estimated amortization is for the period of April 1, 2012 through December 31, 2012.

 

The following table reflects the preliminary determination of total assets and total net assets by segment as a result of the BP NGL Acquisition (in millions):

 

 

 

Total

 

Total

 

 

 

Assets

 

Net Assets

 

Transportation

 

$

558

 

$

398

 

Facilities

 

1,067

 

787

 

Supply and Logistics

 

845

 

498

 

Total

 

$

2,470

 

$

1,683

 

 

The BP NGL Acquisition was pre-funded through various means, including the issuance of common units and senior notes in March 2012 for net proceeds of approximately $1.69 billion. During the six months ended June 30, 2012, we incurred approximately $13 million of acquisition-related costs associated with the BP NGL Acquisition. Such costs are reflected as a component of general and administrative expenses in our condensed consolidated statement of operations.

 

Pro Forma Results

 

Disclosure of the revenues and earnings from the BP NGL Acquisition in our results for the three and six months ended June 30, 2012 is not practicable as it is not being operated as a standalone subsidiary. Selected unaudited pro forma results of operations for the three and six months ended June 30, 2012 and 2011, assuming the BP NGL Acquisition had occurred on January 1, 2011, are presented below (in millions, except per unit amounts):

 

 

 

Three Months Ended

 

Six Months Ended

 

 

 

June 30,

 

June 30,

 

 

 

2012

 

2011

 

2012

 

2011

 

Total revenues

 

$

9,786

 

$

9,937

 

$

19,828

 

$

18,541

 

Net income attributable to Plains

 

$

378

 

$

239

 

$

600

 

$

498

 

Limited partner interest in net income attributable to Plains

 

$

303

 

$

186

 

$

460

 

$

394

 

Net income per limited partner unit:

 

 

 

 

 

 

 

 

 

Basic

 

$

1.86

 

$

1.20

 

$

2.83

 

$

2.60

 

Diluted

 

$

1.85

 

$

1.20

 

$

2.81

 

$

2.58

 

 

Other Acquisitions

 

During the six months ended June 30, 2012, we completed three additional acquisitions for an aggregate consideration of approximately $22 million. The assets acquired primarily included trailers that are utilized in our transportation segment and terminal facilities included in our facilities segment. We recognized goodwill of approximately $10 million related to these acquisitions.