Note 3—Acquisitions and Dispositions

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.

2012 Acquisitions

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 (including mileage supporting the NGL facilities assets); approximately 13 million barrels of net usable NGL storage capacity; seven fractionation plants with annualized NGL fractionation volumes of over 100,000 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. 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 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	$	241		N/A
Property and equipment	1,081			5 - 70
Linefill	85			N/A
Long-term inventory	165			N/A
Intangible assets (contract)	130			13
Goodwill	236			N/A
Deferred tax liability	(236		)	N/A
Environmental liability	(14		)	N/A
Other long-term liabilities	(5		)	N/A
Total	$	1,683

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.

Intangible assets above consist of a contract with a 13 year life. Amortization of this contract under the declining balance method was approximately $41 million during the year ended December 31, 2012 and the future amortization is estimated as follows:

2013	$	30
2014	$	10
2015	$	8
2016	$	7
2017	$	6

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 year ended December 31, 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 Consolidated Statement of Operations.

USD Rail Terminal Acquisition

On December 12, 2012, we completed a transaction with U.S. Development Group (referred to herein as the “USD Rail Terminal Acquisition”) for an aggregate consideration of approximately $503 million, paid in cash. Through the USD Rail Terminal Acquisition, we acquired four operating crude oil rail terminals and one terminal under development. The assets acquired include three crude oil rail loading terminals located in the Eagle Ford, Bakken and Niobrara producing regions with an aggregate daily loading capacity of approximately 75,000 barrels per day, a rail unloading terminal at St. James, Louisiana with capacity of approximately 140,000 barrels per day and a project to construct a crude oil unloading terminal near Bakersfield, California. The preliminary determination of the fair value of the assets and liabilities acquired is approximately $1 million of working capital, $76 million of property and equipment and $426 million of goodwill. The determination of the fair value of the assets and liabilities acquired is preliminary pending completion of internal valuation procedures. The goodwill arising from the USD Rail Terminal Acquisition represents anticipated opportunities to generate future cash flows from the rail facilities by utilizing them to reduce capacity constraints in certain geographic market areas.

Other 2012 Acquisitions

During the year ended December 31, 2012, we completed several additional acquisitions for an aggregate consideration of approximately $150 million. The assets acquired primarily included crude oil and condensate gathering pipelines, a truck unloading terminal and 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.

Pro Forma Results

Disclosure of the revenues and earnings from the BP NGL Acquisition, USD Rail Terminal Acquisition and our other 2012 acquisitions in our results for the year ended December 31, 2012 is not practicable as they are not being operated as standalone subsidiaries. Selected unaudited pro forma results of operations for the years ended December 31, 2012 and 2011, assuming our 2012 acquisitions had occurred on January 1, 2011, are presented below (in millions, except per unit amounts):

	Year Ended December 31,
	2012		2011
Total revenues	$	38,729	$	37,493
Net income attributable to Plains	$	1,149	$	1,153
Limited partner interest in net income attributable to Plains	$	846	$	928
Net income per limited partner unit:
Basic	$	2.57	$	3.01
Diluted	$	2.55	$	2.99

2011 Acquisitions

Southern Pines Acquisition

On February 9, 2011, PNG acquired 100% of the equity interests in SG Resources from SGR Holdings, L.L.C. (the “Southern Pines Acquisition”) for an aggregate purchase price of approximately $765 million in cash (approximately $750 million, net of cash and other working capital acquired). The purchase price included the release of restricted cash of approximately $20 million held in escrow prior to the closing of the acquisition. The primary asset of SG Resources is the Southern Pines Energy Center (“Southern Pines”), a FERC-regulated, salt-cavern natural gas storage facility located in Greene County, Mississippi. In connection with this acquisition, PNG obtained financing through a private placement of PNG common units to third-party purchasers and to us. See Note 10 for further discussion.

The fair value of assets acquired and liabilities assumed was as follows (in millions):

			Average
			Depreciable
Description	Amount		Life (in years)
Inventory	$	14	N/A
Property and equipment	340		5 - 70
Base gas	3		N/A
Other working capital (including approximately $13 million of cash acquired)	15		N/A
Intangible assets	92		2 - 10
Goodwill	301		N/A
Total	$	765

The allocation of fair value to intangible assets above is comprised of a tax abatement valued at approximately $15 million and contracts valued at approximately $77 million, which have lives ranging from 2 to 10 years. Amortization of customer contracts under the declining balance method of amortization was approximately $14 million and $13 million for the years ended December 31, 2012 and 2011, respectively, and is estimated to be approximately $13 million, $11 million and $8 million for the years ending December 31, 2013, 2014 and 2015, respectively. Goodwill or indefinite lived intangible assets will not be subject to depreciation or amortization, but will be subject to periodic impairment testing and, if necessary, will be written down to fair value should circumstances warrant.

Several factors contributed to a purchase price in excess of the fair value of the net tangible and intangible assets acquired. Such factors included the strategic location of the Southern Pines facility, the limited alternative locations and the extended lead times required to develop and construct such facility, along with its operational flexibility, organic expansion capabilities and synergies anticipated to be obtained from combining Southern Pines with our existing asset base. This acquisition is reflected in our Facilities segment.

Also in connection with the Southern Pines Acquisition, PNG became the owner, with the ability to remarket in the future, and ultimate obligor of the $100,000,000 Mississippi Business Finance Corporation Gulf Opportunity Zone Industrial Development Revenue Bonds (SG Resources Mississippi, LLC Project), Series 2009 and the $100,000,000 Mississippi Business Finance Corporation Gulf Opportunity Zone Industrial Development Revenue Bonds (SG Resources Mississippi, LLC Project), Series 2010 (collectively, the “GO Bonds”). These GO Bonds were originally issued to fund the expansion of the Southern Pines facility. PNG remarketed the GO Bonds in August 2011.

In May 2011, PNG entered into an agreement with the former owners of SG Resources with respect to certain outstanding issues and purchase price adjustments as well as the distribution of the remaining 5% of the purchase price that was escrowed at closing (totaling $37 million). Pursuant to this agreement, PNG received approximately $10 million and the balance was remitted to the former owners. Funds received by PNG have been and will continue to be used to fund anticipated facility development and other related costs identified subsequent to closing. Approximately $3 million of capital expenditures were incurred related to matters covered by the agreement through December 31, 2012. Remaining amounts, included as a component of accounts payable and accrued liabilities as of December 31, 2012, will be utilized to offset applicable cavern development expenditures as incurred. Any remaining amounts upon completion of applicable cavern development procedures will reduce goodwill. Additionally, as part of this agreement, the parties executed releases of any existing and future claims, subject to customary carve-outs.

Other 2011 Acquisitions

Western Acquisition. On December 29, 2011, we completed two transactions with Western Refining for a combined consideration of approximately $220 million in cash. Through the first transaction, we acquired crude oil, refined products and NGL storage and the associated manifold and pumping equipment located at Western’s Yorktown, Virginia refinery site, which we will operate as a terminal, as well as certain intangible assets. The second transaction included an 82-mile, 16-inch segment of pipeline that originates in Chaves County, New Mexico and connects into our Basin Pipeline system at Jal, New Mexico. The transaction includes associated tankage, piping and other related assets at the Lynch and Jal Stations.

Gardendale Gathering System Acquisition. On November 29, 2011, we completed the acquisition of 100% of the member interests in Velocity from Velocity Midstream Partners, LLC for an aggregate consideration of approximately $349 million in cash. The assets acquired included approximately 120 miles of crude oil and condensate gathering and transportation pipelines (the “Gardendale Gathering System”) in the Eagle Ford Shale. We recognized goodwill of approximately $155 million associated with this acquisition, which was primarily related to the potential incremental income from anticipated growth projects.

Additional2011 Acquisitions. During 2011, we completed six additional acquisitions for an aggregate consideration of approximately $20 million. These acquisitions included propane storage and terminal facilities included in our Facilities segment, a trucking business included in our Transportation segment as well as the right to ship on third-party pipelines, the revenues of which are included in our Supply and Logistics segment.

The determination of fair value of assets acquired and liabilities assumed for all other acquisitions completed during 2011, including the Western and Gardendale Gathering System acquisitions, is as follows (in millions):

Description	Amount
Inventory	$	2
Linefill	2
Property and equipment	280
Other working capital, net of cash acquired	(6		)
Intangible assets	142
Environmental liability	(9		)
Goodwill	178
Total	$	589

2010 Acquisitions

Nexen Acquisition. On December 30, 2010, we acquired from Nexen Holdings U.S.A. Inc. entities that hold crude oil gathering and transportation assets that primarily service Bakken area producers. The aggregate consideration of approximately $229 million was paid in cash and included approximately $170 million for the business and physical assets and approximately $59 million for approximately 460,000 barrels of inventory and other working capital adjustments. The assets are primarily located in Northwestern North Dakota and Northeastern Montana and include (i) a lease gathering business, (ii) the Robinson Lake pipeline, a FERC-regulated 20-mile, 8-inch pipeline, (iii) eight truck terminals and (iv) various other contractual rights. These assets are included in our Transportation and Supply and Logistics segments. We recognized goodwill of approximately $83 million associated with this acquisition.

Other 2010 Acquisitions. During 2010, we completed five additional acquisitions for aggregate consideration of approximately $178 million. These acquisitions included (i) a 34% interest in White Cliffs that is reflected in our Transportation segment, (ii) an additional 11% interest in Capline pipeline that is reflected in our Transportation segment and (iii) various other assets reflected in both our Transportation and Facilities segments. We did not recognize any goodwill for these acquisitions.

Dispositions

During 2012, 2011 and 2010, we sold various property and equipment for proceeds totaling approximately $22 million, $12 million and $3 million, respectively. A gain of approximately $6 million, a loss of approximately $6 million and a gain of less than $1 million were recognized in 2012, 2011 and 2010, respectively, related to these sales.