Operating Segments (Tables)

12 Months Ended

Dec. 31, 2017

The following tables reflect certain financial data for each segment (in millions):



	Transportation		Facilities		Supply and Logistics		Intersegment Adjustment			Total
Year Ended December 31, 2017
Revenues:
External customers ⁽¹⁾	$	1,021	$	555	$	25,056	$	(409	)	$	26,223
Intersegment ⁽²⁾	697		618		9		409			1,733
Total revenues of reportable segments	$	1,718	$	1,173	$	25,065	$	—		$	27,956
Equity earnings in unconsolidated entities	$	290	$	—	$	—				$	290
Segment adjusted EBITDA	$	1,287	$	734	$	60				$	2,081
Capital expenditures ⁽³⁾	$	2,126	$	312	$	20				$	2,458
Maintenance capital	$	120	$	114	$	13				$	247

As of December 31, 2017
Total assets	$	12,661	$	7,313	$	5,377				$	25,351
Investments in unconsolidated entities	$	2,681	$	75	$	—				$	2,756



	Transportation		Facilities		Supply and Logistics		Intersegment Adjustment			Total
Year Ended December 31, 2016
Revenues:
External customers ⁽¹⁾	$	954	$	546	$	19,004	$	(322	)	$	20,182
Intersegment ⁽²⁾	630		561		14		322			1,527
Total revenues of reportable segments	$	1,584	$	1,107	$	19,018	$	—		$	21,709
Equity earnings in unconsolidated entities	$	195	$	—	$	—				$	195
Segment adjusted EBITDA	$	1,141	$	667	$	359				$	2,167
Capital expenditures ⁽³⁾	$	1,063	$	577	$	54				$	1,694
Maintenance capital	$	121	$	55	$	10				$	186

As of December 31, 2016
Total assets	$	10,917	$	7,556	$	5,737				$	24,210
Investments in unconsolidated entities	$	2,290	$	53	$	—				$	2,343



	Transportation		Facilities		Supply and Logistics		Intersegment Adjustment			Total
Year Ended December 31, 2015
Revenues:
External customers ⁽¹⁾	$	953	$	528	$	21,927	$	(256	)	$	23,152
Intersegment ⁽²⁾	641		522		18		256			1,437
Total revenues of reportable segments	$	1,594	$	1,050	$	21,945	$	—		$	24,589
Equity earnings in unconsolidated entities	$	183	$	—	$	—				$	183
Segment adjusted EBITDA	$	1,056	$	588	$	568				$	2,212
Capital expenditures ⁽³⁾	$	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

⁽¹⁾

Transportation revenues from external customers include inventory exchanges that are substantially similar to tariff-like arrangements with our customers. Under these arrangements, our Supply and Logistics segment has transacted the inventory exchange and serves as the shipper on our pipeline systems. See Note 2 for a discussion of our related accounting policy. We have included an estimate of the revenues from these inventory exchanges in our Transportation segment revenue presented above and adjusted those revenues out such that Total revenue from External customers reconciles to our Consolidated Statements of Operations. This presentation is consistent with the information provided to our CODM.


⁽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.


⁽³⁾	Expenditures for acquisition capital and expansion capital, including investments in unconsolidated entities.

Reconciliation of segment profit to net income attributable to PAA

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



	Year Ended December 31,
	2017			2016			2015
Segment adjusted EBITDA	$	2,081		$	2,167		$	2,212
Adjustments ⁽¹⁾:
Depreciation and amortization of unconsolidated entities ⁽²⁾	(45		)	(50		)	(45		)
Gains/(losses) from derivative activities net of inventory valuation adjustments ⁽³⁾	46			(404		)	(110		)
Long-term inventory costing adjustments ⁽⁴⁾	24			58			(99		)
Deficiencies under minimum volume commitments, net ⁽⁵⁾	(2		)	(46		)	—
Equity-indexed compensation expense ⁽⁶⁾	(23		)	(33		)	(27		)
Net gain/(loss) on foreign currency revaluation ⁽⁷⁾	26			(9		)	29
Line 901 incident ⁽⁸⁾	(32		)	—			(83		)
Significant acquisition-related expenses ⁽⁹⁾	(6		)	—			—
Depreciation and amortization	(626		)	(494		)	(432		)
Interest expense, net	(510		)	(467		)	(432		)
Other income/(expense), net	(31		)	33			(7		)
Income before tax	902			755			1,006
Income tax expense	(44		)	(25		)	(100		)
Net income	858			730			906
Net income attributable to noncontrolling interests	(2		)	(4		)	(3		)
Net income attributable to PAA	$	856		$	726		$	903


⁽¹⁾	Represents adjustments utilized by our CODM in the evaluation of segment results.


⁽²⁾	Includes our proportionate share of the depreciation and amortization and gains or losses on significant asset sales of equity method investments.

⁽³⁾

We use derivative instruments for risk management purposes and our related processes include specific identification of hedging instruments to an underlying hedged transaction. Although we identify an underlying transaction for each derivative instrument we enter into, there may not be an accounting hedge relationship between the instrument and the underlying transaction. In the course of evaluating our results, we identify the earnings that were recognized during the period related to derivative instruments for which the identified underlying transaction does not occur in the current period and exclude the related gains and losses in determining segment adjusted EBITDA. In addition, we exclude gains and losses on derivatives that are related to investing activities, such as the purchase of linefill. We also exclude the impact of corresponding inventory valuation adjustments, as applicable.

⁽⁴⁾

We carry crude oil and NGL inventory that is comprised of minimum working inventory requirements in third-party assets and other working inventory that is needed for our commercial operations. We consider this inventory necessary to conduct our operations and we intend to carry this inventory for the foreseeable future. Therefore, we classify this inventory as long-term on our balance sheet and do not hedge the inventory with derivative instruments (similar to linefill in our own assets). We exclude the impact of changes in the average cost of the long-term inventory (that result from fluctuations in market prices) and writedowns of such inventory that result from price declines from segment adjusted EBITDA.

⁽⁵⁾

We have certain agreements that require counterparties to deliver, transport or throughput a minimum volume over an agreed upon period. Substantially all of such agreements were entered into with counterparties to economically support the return on our capital expenditure necessary to construct the related asset. Some of these agreements include make-up rights if the minimum volume is not met. We record a receivable from the counterparty in the period that services are provided or when the transaction occurs, including amounts for deficiency obligations from counterparties associated with minimum volume commitments. If a counterparty has a make-up right associated with a deficiency, we defer the revenue attributable to the counterparty’s make-up right and subsequently recognize the revenue at the earlier of when the deficiency volume is delivered or shipped, when the make-up right expires or when it is determined that the counterparty’s ability to utilize the make-up right is remote. We include the impact of amounts billed to counterparties for their deficiency obligation, net of applicable amounts subsequently recognized into revenue, as a selected item impacting comparability. Our CODM views the inclusion of the contractually committed revenues associated with that period as meaningful to segment adjusted EBITDA as the related asset has been constructed, is standing ready to provide the committed service and the fixed operating costs are included in the current period results. Amounts for the year prior to 2016 were not significant to segment adjusted EBITDA ($13 million for the year ended December 31, 2015).


⁽⁶⁾	Includes equity-indexed compensation expense associated with awards that will or may be settled in units.


⁽⁷⁾	Includes gains and losses from the revaluation of foreign currency transactions and monetary assets and liabilities.


⁽⁸⁾	Includes costs recognized during the period related to the Line 901 incident that occurred in May 2015, net of amounts we believe are probable of recovery from insurance. See Note 17 for additional information regarding the Line 901 incident.

⁽⁹⁾

Includes acquisition-related expenses associated with the ACC Acquisition. See Note 6 for additional discussion. An adjustment for these non-recurring expenses is included in the calculation of segment adjusted EBITDA for the year ended December 31, 2017 as our CODM does not view such expenses as integral to understanding our core segment operating performance. Acquisition-related expenses for the 2016 and 2015 periods were not significant to segment adjusted EBITDA.

Revenues attributable to geographic areas

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⁾	2017		2016		2015
United States	$	21,443	$	15,599	$	18,701
Canada	4,780		4,583		4,451
	$	26,223	$	20,182	$	23,152


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

Long-lived assets attributable to geographic areas



	December 31,
Long-Lived Assets ⁽¹⁾	2017		2016
United States	$	17,167	$	16,041
Canada	4,179		3,895
	$	21,346	$	19,936


⁽¹⁾	Excludes long-term derivative assets and long-term deferred tax assets.