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Operating Segments
 12 Months Ended
Dec. 31, 2015
Operating Segments  
Operating Segments

 

Note 18—Operating Segments

 

We manage our operations through three operating segments: Transportation, Facilities and Supply and Logistics.  See “Revenue Recognition” in 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 measures including segment profit and maintenance capital investment. We define segment profit 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. Each of the items above excludes depreciation and amortization. Maintenance capital consists of capital expenditures for the replacement of partially or fully depreciated assets in order to maintain the operating and/or earnings capacity of our existing assets.

 

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 act 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. Capital expenditures made to expand the existing operating and/or earnings capacity of our assets are classified as expansion capital. Capital expenditures for the replacement 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, which is deducted in determining “available cash”. 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 and Logistics

 

Total

 

Year Ended December 31, 2015

 

 

 

 

 

 

 

 

 

Revenues (1):

 

 

 

 

 

 

 

 

 

External customers

 

$
697 

 

$
528 

 

$
21,927 

 

$
23,152 

 

Intersegment (2)

 
897 

 
522 

 
18 

 
1,437 

 

 

 

 

 

 

 

 

 

 

 

Total revenues of reportable segments

 

$
1,594 

 

$
1,050 

 

$
21,945 

 

$
24,589 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity earnings in unconsolidated entities

 

$
183 

 

$

—

 

$

—

 

$
183 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Segment profit (3) (4) 

 

$
917 

 

$
579 

 

$
381 

 

$
1,877 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Capital expenditures (5)

 

$
1,278 

 

$
813 

 

$
184 

 

$
2,275 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Maintenance capital

 

$
144 

 

$
68 

 

$
8 

 

$
220 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of December 31, 2015

 

 

 

 

 

 

 

 

 

Total assets

 

$
10,345 

 

$
7,330 

 

$
4,613 

 

$
22,288 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investments in unconsolidated entities

 

$
1,998 

 

$
29 

 

$

—

 

$
2,027 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Transportation

 

Facilities

 

Supply and Logistics

 

Total

 

Year Ended December 31, 2014

 

 

 

 

 

 

 

 

 

Revenues (1):

 

 

 

 

 

 

 

 

 

External customers

 

$
774 

 

$
576 

 

$
42,114 

 

$
43,464 

 

Intersegment (2)

 
881 

 
551 

 
36 

 
1,468 

 

 

 

 

 

 

 

 

 

 

 

Total revenues of reportable segments

 

$
1,655 

 

$
1,127 

 

$
42,150 

 

$
44,932 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity earnings in unconsolidated entities

 

$
108 

 

$

—

 

$

—

 

$
108 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Segment profit (3) (4) 

 

$
925 

 

$
584 

 

$
782 

 

$
2,291 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Capital expenditures (5)

 

$
2,483 

 

$
582 

 

$
60 

 

$
3,125 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Maintenance capital

 

$
165 

 

$
52 

 

$
7 

 

$
224 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of December 31, 2014

 

 

 

 

 

 

 

 

 

Total assets

 

$
9,579 

 

$
6,843 

 

$
5,776 

 

$
22,198 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investments in unconsolidated entities

 

$
1,735 

 

$

—

 

$

—

 

$
1,735 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Transportation

 

Facilities

 

Supply and Logistics

 

Total

 

Year Ended December 31, 2013

 

 

 

 

 

 

 

 

 

Revenues:

 

 

 

 

 

 

 

 

 

External Customers

 

$
701 

 

$
856 

 

$
40,692 

 

$
42,249 

 

Intersegment (2)

 
797 

 
521 

 
4 

 
1,322 

 

 

 

 

 

 

 

 

 

 

 

Total revenues of reportable segments

 

$
1,498 

 

$
1,377 

 

$
40,696 

 

$
43,571 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity earnings in unconsolidated entities

 

$
64 

 

$

—

 

$

—

 

$
64 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Segment profit (3) (4)

 

$
729 

 

$
616 

 

$
822 

 

$
2,167 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Capital expenditures (5)

 

$
1,046 

 

$
549 

 

$
46 

 

$
1,641 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Maintenance capital

 

$
123 

 

$
38 

 

$
15 

 

$
176 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of December 31, 2013

 

 

 

 

 

 

 

 

 

Total assets

 

$
7,181 

 

$
6,555 

 

$
6,584 

 

$
20,320 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investments in unconsolidated entities

 

$
485 

 

$

—

 

$

—

 

$
485 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1)

Effective January 1, 2014, our natural gas sales and costs, primarily attributable to the activities performed by our natural gas storage commercial optimization group, are reported in the Supply and Logistics segment. Such items were previously reported in the Facilities segment.

 

(2)

Segment revenues include intersegment amounts that are eliminated in Purchases and related costs and Field operating costs in our Consolidated Statements of Operations. Intersegment sales are conducted at posted tariff rates, rates similar to those charged to third parties or rates that we believe approximate market at the time the agreement is executed or renegotiated.

 

(3)

Supply and Logistics segment profit includes interest expense (related to hedged inventory purchases) of $6 million, $12 million and $30 million for the years ended December 31, 2015, 2014 and 2013, respectively.

 

(4)

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

 

 

 

Year Ended December 31,

 

 

 

2015

 

2014

 

2013

 

Segment profit

 

$
1,877

 

$
2,291

 

$
2,167

 

Depreciation and amortization

 
(432

)
(384

)
(365

)

Interest expense, net

 
(432

)
(348

)
(313

)

Other income/(expense), net

 
(7

)
(2

)
1

 

 

 

 

 

 

 

 

 

Income before tax

 
1,006

 
1,557

 
1,490

 

Income tax expense

 
(100

)
(171

)
(99

)

 

 

 

 

 

 

 

 

Net income

 
906

 
1,386

 
1,391

 

Net income attributable to noncontrolling interests

 
(3

)
(2

)
(30

)

 

 

 

 

 

 

 

 

Net income attributable to PAA

 

$
903

 

$
1,384

 

$
1,361

 

 

 

 

 

 

 

 

 

 

 

 

 

(5)

Expenditures for acquisition capital and expansion capital, including investments in unconsolidated entities.

 

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):

 

 

 

Year Ended December 31,

 

Revenues (1)

 

2015

 

2014

 

2013

 

United States

 

$
18,701 

 

$
34,860 

 

$
32,924 

 

Canada

 
4,451 

 
8,604 

 
9,325 

 

 

 

 

 

 

 

 

 

 

 

$
23,152 

 

$
43,464 

 

$
42,249 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1)

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

 

 

 

December 31,

 

Long-Lived Assets (1)

 

2015

 

2014

 

United States

 

$
15,942 

 

$
14,342 

 

Canada

 
3,368 

 
3,650 

 

 

 

 

 

 

 

 

 

$
19,310 

 

$
17,992 

 

 

 

 

 

 

 

 

 

 

(1)

Excludes long-term derivative assets.