Pacific Energy Partners, L.P.
NYSE : PPX

Pacific Energy Partners, L.P.

November 14, 2005 21:09 ET

Pacific Energy Partners, L.P. Reports Earnings for Third Quarter 2005

LONG BEACH, Calif.--(CCNMatthews - Nov 14, 2005) -

Pacific Energy Partners, L.P. (NYSE:PPX) ("Pacific Energy" or the "Partnership") announced that net income for the three months ended September 30, 2005 was $12.2 million, or $0.39 per limited partner unit, compared to net income of $9.9 million, or $0.33 per limited partner unit, for the period ended September 30, 2004. All per unit amounts in the text of this news release are reported on a diluted basis.

On October 21, 2005, Pacific Energy announced a cash distribution of $0.5125 per unit for the third quarter of 2005, or $2.05 per unit annualized. This is unchanged from the second quarter 2005 distribution level and is 5.1% higher than the third quarter 2004 distribution level. The distribution was paid on November 14, 2005, to holders of record as of October 31, 2005.

Distributable cash flow to the limited partners for the third quarter of 2005 was $16.5 million. On a diluted, weighted average basis, there were 30,762,000 limited partner units outstanding during the third quarter of 2005.

The improvement in results for the quarter ended September 30, 2005, reflects increased pipeline volumes in the Rocky Mountains, increased storage capacity and higher tank utilization for Pacific Terminals, and higher location differentials on the Rangeland pipeline system. These increases were partially offset by lower pipeline volumes on the West Coast and higher maintenance expenses.

"Our third quarter results continue to show the strength of diversity in our business. High utilization rates in the Pacific Terminals storage and distribution system, coupled with the pipeline volume growth that our Rocky Mountain business unit achieved, more than offset the effect of lower West Coast pipeline volumes in the third quarter," stated Irv Toole, President and CEO of Pacific Energy. "We are pleased to have completed on September 30, 2005, the acquisition of refined products storage and pipeline assets from Valero L.P. Integration is progressing well, and we look forward to further growth at Pacific Energy through internal expansion projects and acquisitions."

OPERATING RESULTS BY SEGMENT

WEST COAST BUSINESS UNIT

Operating income was $9.8 million for the three months ended September 30, 2005, compared to $11.4 million in the corresponding period in 2004.

West Coast pipeline volumes for the three months ended September 30, 2005 were approximately 25% lower than in the third quarter of 2004. During the 2005 quarter, volumes were impacted by Los Angeles area refinery maintenance, lower Outer Continental Shelf (OCS) production due to maintenance activities, natural production decline, and diversion of some volumes north to San Francisco. The decline in volumes was partially offset by increased tariffs.

Pacific Terminals' storage facilities had a higher rate of utilization during the quarter, as well as increased storage capacity. The resulting revenue increase was partially offset by increased expense associated with the unscheduled repair of two storage tanks.

Margins for Pacific Marketing and Transportation ("PMT") were greater in the third quarter of 2005 compared to the third quarter of 2004. In addition, on July 1, 2005, Pacific Energy purchased certain crude oil contracts which were integrated into PMT's business.

Pacific Energy continues to advance the Pier 400 deepwater import terminal project in the environmental permitting process, as well as in securing additional customer commitments. The Partnership expects to have the permits necessary to begin construction in the second half of 2006, with completion and start-up expected in the fourth quarter of 2007.

ROCKY MOUNTAIN BUSINESS UNIT

Operating income was $13.6 million for the three months ended September 30, 2005, compared to $7.5 million in the corresponding period in 2004. Increased market share for pipeline shipments of crude oil to Billings, Montana, and increased crude oil demand by Salt Lake City refiners helped drive higher pipeline volumes and revenues. On July 1, 2005 we increased certain tariffs on our U.S. Rocky Mountain pipelines, based on the FERC index adjustment, by 3.6%.

In Canada, higher revenues resulted from increased location differentials and higher volumes transported south to the U.S. The new receiving terminal and pump station in Edmonton, which will provide direct access to supplies of synthetic and other types of crude oil, is expected to begin operations in December 2005.

As previously announced on November 9, 2005, Pacific Energy determined there was an error in the procedures used to properly account for inventory and cost of goods sold for the Rangeland system since its acquisition in May 2004, which resulted in an understatement of net revenue and a corresponding understatement of the inventory balance.

The impact on net income and inventory balances of this understatement of net revenue was determined to be immaterial for each of the quarters impacted including the current quarter, and therefore a cumulative adjustment was made in the third quarter of 2005. This adjustment increased net income after tax in the third quarter of 2005 by $0.7 million, and did not affect cash flow from operating activities. In addition, Pacific Energy has now implemented the proper procedures to prevent this error in the future.

NINE MONTH RESULTS

For the nine months ended September 30, 2005, net income was $27.8 million, or $0.96 per limited partner unit, compared to $27.1 million, or $0.94 per limited partner unit, for the period ended September 30, 2004. Recurring net income for the nine months ended September 30, 2005 was $34.7 million, or $1.13 per limited partner unit, compared with $30.0 million, or $1.05 per limited partner unit, for the nine months ended September 30, 2004.

Recurring net income for the nine months ended September 30, 2005 excludes a $2.0 million expense for the insurance deductible associated with the remediation of the Pyramid Lake oil release on Line 63, a $3.1 million expense related to the accelerated vesting of restricted units under Pacific Energy's long-term incentive plan as a result of the change in control attributable to the purchase of the Pacific Energy's general partner by LB Pacific, LP, and a $1.8 million expense as a result of the general partner transaction (an item that was required to be recorded as a partnership expense with the general partner's payment of it recorded as a capital contribution). Recurring net income for the nine months ended September 30, 2004 excludes a $2.9 million write off of deferred financing costs.

Net income for the first nine months of 2005, excluding the unusual items, reflects the benefit of a full nine months of operations in 2005 for the Rangeland system, which was acquired in May 2004, higher pipeline volumes in the Rocky Mountains, and higher storage and terminaling revenues for Pacific Terminals. Partially offsetting these increases were lower gathering and blending margins from PMT compared to higher than average margins experienced in the same period of 2004, unscheduled repairs and maintenance associated with earth movement and stream erosion problems caused by the heavy rainfall in Southern California, and unscheduled repairs for two Pacific Terminals tanks.

In March 2005, Pacific Energy experienced an oil release on Line 63 in northern Los Angeles County, which was caused by a rain-induced landslide. In addition, record rainfall in Southern California caused stream erosion and earth movement, exposing the Partnership's pipelines in multiple locations. The total costs associated with the oil recovery and restoration effort at Pyramid Lake is now estimated at $19.5 million, of which Pacific Energy is paying $2.0 million for its insurance deductible. Additionally, the Partnership estimates that the cost of pipeline repairs and improvements associated with the Pyramid Lake landslide and the costs to address earth movement and stream erosion problems at other locations along Line 63 and Line 2000 will total approximately $6.3 million, a portion of which is capitalized. On August 1, 2005, we initiated a temporary surcharge of $0.10 per barrel on Line 63 long haul tariff rates to recover the repair costs and insurance deductible.

LOOKING FORWARD

For the full year ending December 31, 2005, Pacific Energy is increasing its guidance for recurring net income to $1.46 to $1.50 per unit. Included in the full year guidance is $3.6 million or $0.11 per unit, of unusual and unanticipated expense associated with the rain related pipeline repairs in Southern California. For the quarter ending December 31, 2005, Pacific Energy is forecasting net income of $0.33 to $0.37 per unit. This guidance includes the benefit of the acquisition of assets from Valero L.P.

As result of the Valero asset acquisition, approximately $3.3 million of additional depreciation and amortization expense is estimated for the fourth quarter of 2005. Pacific Energy is currently determining the final purchase price allocation for the assets, which impacts depreciation and amortization expense. Should this non-cash expense be different than what is currently estimated, it could have a material impact, either positive or negative, on the fourth quarter and full year 2005 earnings estimates, but such an impact would not affect distributable cash flow.

As previously announced, management intends to recommend a distribution increase of $0.03 per limited partner unit per quarter associated with the acquisition of assets from Valero L.P., and an additional $0.0125 per quarter increase associated with the start-up of the initiating synthetic crude oil facility in Edmonton, for a total increase of $0.0425 per unit per quarter. The resulting quarterly distribution would be $0.555 per unit, or $2.22 per unit annually, an 8.3% increase from the current distribution. These potential increases would be effective for the fourth quarter 2005, with payment occurring in February 2006.

For the full year, Pacific Energy is projecting total capital expenditures of $53 million, including $37 million for expansion projects, $11 million for transition capital projects, and $5 million for sustaining capital projects.

RECENT DEVELOPMENTS

On September 30, 2005, Pacific Energy completed the acquisition of certain terminal and pipeline assets from subsidiaries of Valero L.P. consisting of two California terminals handling refined products, refinery blend stocks, and crude oil, three East Coast refined and specialty products terminals, and a 550-mile refined products pipeline and four terminals in the U.S. Rocky Mountain region. The aggregate purchase price was $455 million, plus the assumption of certain environmental and operating liabilities and closing costs.

During September 2005, Pacific Energy completed several offerings to fund the acquisition of the assets from Valero L.P. In September 2005, the Partnership completed a public equity offering of 5,232,500 units, for total net proceeds of $163.4 million, inclusive of the general partner's contribution. In addition, on the 23rd of September, the Partnership completed the sale of $175 million of 6 1/4% senior unsecured notes due September 15, 2015. Lastly, on September 30, 2005, Pacific Energy completed the private placement of 4.3 million units to various institutional investors for total net proceeds of $131.8 million, including the general partner's contribution.

Pursuant to the terms of the partnership agreement, on August 12, 2005, 2,616,250 subordinated units owned by LB Pacific, LP converted on a one-for-one basis to common units. The conversion of the subordinated units will not affect future cash distributions.

Pacific Energy will host a conference call at 3:00 p.m. ET (noon PT) on Tuesday, November 15, 2005, to discuss the results of the third quarter of 2005. The dial in number for the live call is 800-446-2782 or 847-413-3235, and the passcode is 13252765.

The call will be available one hour after the end of the conference call and will be replayed for one week by dialing 888-843-8996 or 630-652-3044 and using 13252765 as the passcode.

The call will also be available both live and via replay on the Pacific Energy Partners, L.P. website at www.PacificEnergy.com.

About Pacific Energy:

Pacific Energy Partners, L.P. is a master limited partnership headquartered in Long Beach, California. Pacific Energy is engaged in the business of gathering, transporting, storing and distributing crude oil, refined products and other related products. The Partnership generates revenues by transporting such commodities on its pipelines, by leasing capacity in its storage facilities, and by providing other terminaling services. The Partnership also buys and sells crude oil, activities that are generally complementary to its crude pipeline operations. Pacific Energy conducts its business through two business units, the West Coast Business Unit, which includes activities in California, and the Philadelphia, PA area, and the Rocky Mountain Business Unit, which includes Alberta, Canada.

This news release may include "forward-looking" statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements other than statements of historical fact included or incorporated herein may constitute forward-looking statements. Although Pacific Energy believes that the forward-looking statements are reasonable, it can give no assurance that such expectations will prove to be correct. The forward-looking statements involve risks and uncertainties that may affect Pacific Energy's operations and financial performance. Among the factors that could cause results to differ materially are those risks discussed in Pacific Energy's filings with the Securities and Exchange Commission, including its Annual Report on Form 10-K for the year ended December 31, 2004.

The estimates associated with the oil release are based on facts known at the time of estimation and the Partnership's assessment of the ultimate outcome. Among the many uncertainties that impact the estimates are the necessary regulatory approvals for and potential modification of remediation plans, changes in costs associated with environmental remediation services and equipment and the possibility of third party legal claims giving rise to additional expenses. Therefore, no assurance can be made that costs incurred in excess of the estimated costs, if any, would not have a material adverse effect on the Partnership's financial condition, results of operations, or cash flows, although the Partnership believes it is likely that most, if not all, of any such excess cost, to the extent attributable to clean-up and third-party claims, would be recoverable through insurance. As new information becomes available in future periods, the Partnership may change its expense accrual and recovery estimates.

For additional information about Pacific Energy, please visit its website at www.PacificEnergy.com.



PACIFIC ENERGY PARTNERS, L.P.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(Amounts in thousands, except per unit amounts)


Three Months Ended Nine Months Ended
September 30, September 30,
----------------- -----------------
2005 2004 2005 2004
-------- -------- -------- --------
Operating revenues:
Pipeline transportation
revenue $27,283 $28,160 $83,067 $79,879
Storage and distribution
revenue 9,731 8,391 30,923 27,773
Pipeline buy/sell
transportation revenue 11,683 7,972 28,905 11,662
Crude oil sales, net of
purchases 5,823 3,568 13,647 14,436
-------- -------- -------- --------
Net revenues 54,520 48,091 156,542 133,750
-------- -------- -------- --------

Expenses:
Operating 25,019 22,788 72,065 62,572
Line 63 oil release costs -- -- 2,000 --
General and administrative 4,115 3,762 12,987 11,252
Accelerated long-term incentive
plan compensation expense -- -- 3,115 --
Transaction costs(1) -- -- 1,807 --
Depreciation and amortization 6,560 6,821 19,695 17,776
-------- -------- -------- --------
Total expenses 35,694 33,371 111,669 91,600
-------- -------- -------- --------

Share of net income of Frontier 516 406 1,363 1,190
-------- -------- -------- --------

Operating income 19,342 15,126 46,236 43,340

Net interest expense (6,237) (5,234) (17,679) (13,743)
Write-off of deferred financing
costs and interest rate swap
termination expense -- -- -- (2,901)
Other income 494 219 1,387 606
-------- -------- -------- --------

Income before foreign income tax
expense 13,599 10,111 29,944 27,302
-------- -------- -------- --------

Income tax expense:
Current (1,411) (118) (1,898) (150)
Deferred (22) (103) (239) (57)
-------- -------- -------- --------
(1,433) (221) (2,137) (207)
-------- -------- -------- --------

Net income $12,166 $9,890 $27,807 $27,095
======== ======== ======== ========

Net income (loss) for the general
partner interest(2) $243 $198 $(1,215) $542
======== ======== ======== ========
Net income for the limited partner
interests(2) $11,923 $9,692 $29,022 $26,553
======== ======== ======== ========

Weighted average units
outstanding:
Basic 30,761 29,574 30,051 28,008
Diluted 30,762 29,682 30,089 28,125

Basic net income per limited
partner unit $0.39 $0.33 $0.97 $0.95
======== ======== ======== ========
Diluted net income per limited
partner unit $0.39 $0.33 $0.96 $0.94
======== ======== ======== ========


(1) Pursuant to an Ancillary Agreement, our general partner reimbursed
us $1.8 million for costs incurred in connection with the sale of our
general partner. Generally accepted accounting principles require us
to record an expense with the reimbursement shown as a partner's
capital contribution.

(2) See "General Partner and Limited Partners Allocation of Net
Income" schedule included herein.


PACIFIC ENERGY PARTNERS, L.P.
(Unaudited)
(In thousands)

CONDENSED CONSOLIDATED BALANCE SHEETS


September December
30, 31,
2005 2004
----------- ---------
Assets
Current assets $186,845 $95,545
Property and equipment, net 1,029,619 718,624
Intangible assets 217,506 38,026
Investment in Frontier Pipeline Company 7,805 7,886
Other assets 15,540 9,824
----------- ---------
Total assets $1,457,315 $869,905
=========== =========
Liabilities and Partners' Capital
Current liabilities $156,208 $48,045
Long-term debt 539,789 357,163
Deferred income taxes 36,111 34,556
Other long term liabilities 18,456 7,675
Partners' capital 706,751 422,466
----------- ---------
Total liabilities and partners'
capital $1,457,315 $869,905
=========== =========

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS


Nine Months Ended
September 30,
-------------------
2005 2004
--------- ---------
Cash flows from operating activities:
Net income $27,807 $27,095
Depreciation, amortization, non-cash employee
compensation under long-term incentive plan,
deferred income taxes and Frontier(1)
adjustment 24,256 19,476
Non-cash write-off of deferred financing
costs -- 2,321
Net changes in operating assets and
liabilities 13,592 (6,672)
--------- ---------
Net cash provided by operating activities 65,655 42,220
Cash flows from investing activities:
Acquisitions (461,165) (139,000)
Net additions to property and equipment (27,265) (11,522)
Other -- (621)
--------- ---------
Net cash used in investing activities (488,430) (151,143)
Cash flows from financing activities:
Issuance of common units, net of fees and
offering expenses 289,122 125,881
Capital contribution from the general
partner 8,569 2,708
Net proceeds from senior notes offering 170,997 241,086
Repayment of term loan -- (225,000)
Proceeds from credit facilities 203,291 157,924
Repayment of credit facilities (195,661) (145,453)
Deferred financing costs (4,676) (1,388)
Distributions to partners (46,224) (41,800)
Issuance of common units pursuant to
exercise of unit option 707 --
Related parties (1,171) (206)
--------- ---------
Net cash provided by financing
activities 424,954 113,752
Effect of translation adjustment on cash 213 --
--------- ---------
Net increase in cash and cash equivalents 2,392 4,829
Cash and cash equivalents, beginning of period 23,383 9,699
--------- ---------
Cash and cash equivalents, end of period $25,755 $14,528
========= =========


(1) Net cash received from (to) Frontier was $1,317 and $(44) for the
nine months ended September 30, 2005 and 2004, respectively.


PACIFIC ENERGY PARTNERS, L.P.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
AND OPERATING HIGHLIGHTS BY SEGMENT

Three Months Ended September 30, 2005 and 2004
(Unaudited)
(In thousands)

Intersegment
Rocky and
West Coast Mountain Intrasegment
Operations Operations Eliminations(1) Total
---------- ---------- ------------- --------
Three Months Ended
September 30, 2005:
Segment revenue:
Pipeline
transportation
revenue $13,887 $14,887 $(1,491) $27,283
Storage and
distribution
revenue 9,731 -- 9,731
Pipeline buy/sell
transportation
revenue -- 11,683 11,683
Crude oil sales,
net of purchases 5,690 163 (30) 5,823
---------- ---------- --------
Net revenue 29,308 26,733 54,520
---------- ---------- --------
Segment expenses:
Operating
expenses 16,004 10,536 (1,521) 25,019
Depreciation and
amortization 3,491 3,069 6,560
---------- ---------- --------
Total expenses 19,495 13,605 31,579
---------- ---------- --------
Share of net income of
Frontier -- 516 516
---------- ---------- --------
Operating income(2) $9,813 $13,644 $23,457
========== ========== ========

Operating Data (barrels
per day, in thousands)
Line 2000 and Line 63
pipeline volume 104.4
Rangeland pipeline
system:
Sundre - North 19.3
Sundre - South 48.1
Western Corridor system
volume 26.8
Salt Lake City Core
system volume 125.6
Frontier pipeline volume 49.6

Three Months Ended
September 30, 2004:
Segment revenue:
Pipeline
transportation
revenue $16,985 $12,500 (1,325) $28,160
Storage and
distribution
revenue 8,544 -- (153) 8,391
Pipeline buy/sell
transportation
revenue -- 7,972 7,972
Crude oil sales,
net of purchases 3,568 -- 3,568
---------- ---------- --------
Net revenue 29,097 20,472 48,091
---------- ---------- --------
Segment expenses:
Operating
expenses 14,309 9,957 (1,478) 22,788
Depreciation and
amortization 3,433 3,388 6,821
---------- ---------- --------
Total expenses 17,742 13,345 29,609
---------- ---------- --------
Share of net income of
Frontier -- 406 406
---------- ---------- --------
Operating income(2) $11,355 $7,533 $18,888
========== ========== ========

Operating Data (barrels
per day, in thousands)
Line 2000 and Line 63
pipeline volume 139.7
Rangeland pipeline
system:
Sundre - North 21.8
Sundre - South 46.8
Western Corridor system
volume 23.1
Salt Lake City Core
system volume 122.6
Frontier pipeline volume 51.4


(1) Eliminations are required to account for revenue on services
provided by one subsidiary to another.

(2) General and administrative expense and certain other items are not
allocated to segments. See "Reconciliation of Operating Income by
Segment to Condensed Consolidated Statements of Income" included
herein.


PACIFIC ENERGY PARTNERS, L.P.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
AND OPERATING HIGHLIGHTS BY SEGMENT

Nine Months Ended September 30, 2005 and 2004
(Unaudited)
(In thousands)

Intersegment
Rocky and
West Coast Mountain Intrasegment
Operations Operations Eliminations(1) Total
---------- ---------- --------------- --------
Nine Months Ended
September 30, 2005:
Segment revenue:
Pipeline
transportation
revenue $46,525 $41,348 $(4,806) $83,067
Storage and
distribution
revenue 31,073 -- (150) 30,923
Pipeline
buy/sell
transportation
revenue -- 28,905 28,905
Crude oil
sales, net of
purchases 13,368 369 (90) 13,647
---------- ---------- --------
Net revenue 90,966 70,622 156,542
---------- ---------- --------
Segment expenses:
Operating
expenses 46,507 30,604 (5,046) 72,065
Line 63 oil
release costs(2) 2,000 -- 2,000
Depreciation
and
amortization 10,497 9,198 19,695
---------- ---------- --------
Total expenses 59,004 39,802 93,760
---------- ---------- --------
Share of net income
of Frontier -- 1,363 1,363
---------- ---------- --------
Operating income(3) $31,962 $32,183 $64,145
========== ========== ========

Operating Data (barrels
per day, in thousands)
Line 2000 and Line 63
pipeline volume 120.8
Rangeland pipeline
system:
Sundre - North 21.3
Sundre - South 45.3
Western Corridor system
volume 24.0
Salt Lake City Core
system volume 119.8
Frontier pipeline
volume 46.4

Nine Months Ended
September 30, 2004:
Segment revenue:
Pipeline
transportation
revenue $49,170 $34,847 $(4,138) $79,879
Storage and
distribution
revenue 28,126 -- (353) 27,773
Pipeline
buy/sell
transportation
revenue -- 11,662 11,662
Crude oil
sales, net of
purchases 14,436 -- 14,436
---------- ---------- --------
Net revenue 91,732 46,509 133,750
---------- ---------- --------
Segment expenses:
Operating
expenses 43,197 23,866 (4,491) 62,572
Depreciation
and
amortization 10,833 6,943 17,776
---------- ---------- --------
Total expenses 54,030 30,809 80,348
---------- ---------- --------
Share of net income
of Frontier -- 1,190 1,190
---------- ---------- --------
Operating income(3) $37,702 $16,890 $54,592
========== ========== ========

Operating Data (barrels
per day, in thousands)
Line 2000 and Line 63
pipeline volume 137.6
Rangeland pipeline
system:
Sundre - North 21.6
Sundre - South 47.6
Western Corridor system
volume 19.6
Salt Lake City Core
system volume 116.1
Frontier pipeline
volume 48.5


(1) Eliminations are required to account for revenue on services
provided by one subsidiary to another.

(2) On March 23, 2005, there was an oil release of approximately 3,400
barrels in northern Los Angeles County.

(3) General and administrative expense and certain other items are not
allocated to segments. See "Reconciliation of Operating Income by
Segment to Condensed Consolidated Statements of Income" included
herein.


PACIFIC ENERGY PARTNERS, L.P.

(Unaudited)
(In thousands)

RECONCILIATION OF OPERATING INCOME BY SEGMENT TO CONDENSED
CONSOLIDATED STATEMENTS OF INCOME

Three Months Ended Nine Months Ended
September 30, September 30,
----------------- -----------------
2005 2004 2005 2004
-------- -------- -------- --------
Operating income by segment:
West Coast $9,813 $11,355 $31,962 $37,702
Rocky Mountain 13,644 7,533 32,183 16,890
-------- -------- -------- --------
23,457 18,888 64,145 54,592
General expenses and other
income/(expense):(1)
General and administrative
expense (4,115) (3,762) (12,987) (11,252)
Accelerated long-term incentive
plan compensation expense(2) -- -- (3,115) --
Transaction costs(3) -- -- (1,807) --
Interest expense (6,237) (5,234) (17,679) (13,743)
Write-off of deferred financing
costs and interest rate swap
termination expense -- -- -- (2,901)
Other income 494 219 1,387 606
Income tax expense (1,433) (221) (2,137) (207)
-------- -------- -------- --------
Net income $12,166 $9,890 $27,807 $27,095
======== ======== ======== ========


GENERAL PARTNER AND LIMITED PARTNERS ALLOCATION OF NET INCOME

Three Months Nine Months
Ended September Ended September
30, 30,
---------------- -----------------
2005 2004 2005 2004
-------- ------- -------- --------

Net income $12,166 $9,890 $27,807 $27,095
-------- ------- -------- --------
Transaction costs reimbursed by
general partner:
Senior Notes consent solicitation
and other costs -- -- 893 --
Severance costs -- -- 914 --
-------- ------- -------- --------
Total transaction costs reimbursed
by general partner -- -- 1,807 --
-------- ------- -------- --------
Income before transaction costs
reimbursed by general partner 12,166 9,890 29,614 27,095
General partner's share of income 2% 2% 2% 2%
-------- ------- -------- --------
General partner allocated share of
net income before transaction
costs 243 198 592 542
Transaction costs reimbursed by
general partner(3) -- -- (1,807) --
-------- ------- -------- --------
Net income (loss) allocated to
general partner $243 $198 $(1,215) $542
======== ======= ======== ========

Income before transaction costs
reimbursed by general partner $12,166 $9,890 $29,614 $27,095
Limited partners' share of income 98% 98% 98% 98%
-------- ------- -------- --------
Limited partners' share of net
income $11,923 $9,692 $29,022 $26,553
======== ======= ======== ========

Net income (loss) allocated to
general partner $243 $198 $(1,215) $542
Net income allocated to limited
partners 11,923 9,692 29,022 26,553
-------- ------- -------- --------
Net income $12,166 $9,890 $27,807 $27,095
======== ======= ======== ========


(1) General and administrative expenses, accelerated long-term
incentive plan expense, transaction costs, interest expense, write-off
of deferred financing costs and interest rate swap termination
expense, other income and income tax expense are not allocated among
the West Coast and Rocky Mountain business units.

(2) On March 3, 2005, in connection with the change in control of the
Partnership's general partner, all restricted units outstanding under
the Long-Term Incentive Plan became immediately vested pursuant to the
terms of the grants. The Partnership recognized accelerated
compensation expense of $3.1 million relating to the vesting.

(3) Pursuant to an Ancillary Agreement, our general partner reimbursed
us $1.8 million for costs incurred in connection with the sale of our
general partner. Generally accepted accounting principles require us
to record an expense with the reimbursement shown as a partner's
capital contribution.


PACIFIC ENERGY PARTNERS, L.P.

RECONCILIATION OF NET INCOME TO RECURRING NET INCOME
(Unaudited)

(Amounts in thousands, except per unit amounts)

RECONCILIATION OF NET INCOME
TO RECURRING NET INCOME

Three Months Nine Months
Ended September Ended September
30, 30,
---------------- -----------------
2005 2004 2005 2004
-------- ------- -------- --------
Net income $12,166 $9,890 $27,807 $27,095
Add: Line 63 oil release costs(1) -- -- 2,000 --
Add: Accelerated long-term
incentive plan compensation
expense(2) -- -- 3,115 --
Add: Transaction costs(3) -- -- 1,807 --
Add: Write-off of deferred
financing costs and interest rate
swap termination expense(4) -- -- -- 2,901
-------- ------- -------- --------
Recurring net income $12,166 $9,890 $34,729 $29,996
======== ======= ======== ========
Recurring net income for the
general partner interest $243 $198 $695 $600
======== ======= ======== ========
Recurring net income for the
limited partner interest $11,923 $9,692 $34,034 $29,396
======== ======= ======== ========
Basic and diluted recurring net
income per limited partner unit $0.39 $0.33 $1.13 $1.05
======== ======= ======== ========


(1) On March 23, 2005, there was an oil release of approximately 3,400
barrels in northern Los Angeles County. Although this event involved
an outlay of cash, we believe these costs are unusual and are not
indicative of the Partnership's recurring earnings.

(2) On March 3, 2005, in connection with the change in control of the
Partnership's general partner, all restricted units outstanding under
the Long-Term Incentive Plan became immediately vested pursuant to the
terms of the grants. The Partnership recognized accelerated
compensation expense of $3.1 million relating to the vesting.

(3) Pursuant to an Ancillary Agreement, our general partner reimbursed
us $1.8 million for costs incurred in connection with the sale of our
general partner. Generally accepted accounting principles require us
to record an expense with the reimbursement shown as a partner's
capital contribution.

(4) In June 2004, in connection with the repayment of our term loan,
we had a $2.3 million non-cash write-down of deferred financing costs
and incurred a $0.6 million cash expense to terminate related interest
rate swaps.


PACIFIC ENERGY PARTNERS, L.P.

RECONCILIATION OF NET INCOME TO DISTRIBUTABLE CASH FLOW(1)
(Unaudited)

(In thousands)

----------------- -----------------
Three Months Nine Months
Ended Ended
September 30, September 30,
----------------- -----------------
2005 2004 2005 2004
-------- -------- -------- --------

Net income $12,166 $9,890 $27,807 $27,095
Depreciation and amortization 6,560 6,821 19,695 17,776
Amortization of debt issue costs
and accretion of discount on
long-term debt 487 430 1,424 1,100
Non-cash employee compensation
under long-term incentive plan -- (231) 1,429 1,120
Write-off of deferred financing
costs(2) -- -- -- 2,321
Transaction costs(3) -- -- 1,807 --
Deferred income tax expense
(benefit) 22 103 239 57
Sustaining capital expenditures (2,243) (729) (3,070) (1,454)
-------- -------- -------- --------
Distributable cash flow(4) 16,992 16,284 49,331 48,015
Less net (increase) decrease in
operating assets and liabilities 91 (3,597) 13,592 (6,672)
Less share of income of Frontier (516) (406) (1,363) (1,190)
Add net distributions from
Frontier (deduct contributions to
Frontier) 667 (712) 1,317 (44)
Less non cash employee
compensation under
long-term incentive plan added
(deducted) above -- 231 (1,429) (1,120)
Employee compensation under long-
term
incentive plan -- 426 2,886 1,777
Less transaction costs -- -- (1,807) --
Add other non-cash adjustments (40) -- 58 --
Add sustaining capital
expenditures 2,243 729 3,070 1,454
-------- -------- -------- --------
Net cash provided by operating
activities $19,437 $12,955 $65,655 $42,220
======== ======== ======== ========
General partner interest in
distributable cash flow $458 $425 $1,659 $1,460
Limited partner interest in
distributable cash flow 16,534 15,859 47,672 46,555
-------- -------- -------- --------
Total distributable cash flow $16,992 $16,284 $49,331 $48,015
======== ======== ======== ========


(1) Distributable Cash Flow provides additional information for
evaluating our ability to make the minimum quarterly distribution and
is presented solely as a supplemental measure. You should not
consider Distributable Cash Flow as an alternative to net income,
income before taxes, cash flow from operations, or any other measure
of liquidity or financial performance presented in accordance with
accounting principles generally accepted in the United States. Our
Distributable Cash Flow may not be comparable to similarly titled
measures of other entities. Additional information regarding
distributable cash flow is included in our annual report on Form
10-K for the year ended December 31, 2004.

(2) In June 2004, in connection with the repayment of our term loan,
we had a $2.3 million non-cash write-down of deferred financing cots
and incurred a $0.6 million cash expense to terminate related interest
rate swaps.

(3) Pursuant to an Ancillary Agreement, our general partner reimbursed
us $1.8 million for costs incurred in connection with the sale of our
general partner. Generally accepted accounting principles require us
to record an expense with the reimbursement shown as a partner's
capital contribution.

(4) For the nine months ended September 30, 2005, distributable cash
flow has been reduced by $2.0 of oil release costs and $1.9 million of
cash costs associated with the accelerated vesting of units. For nine
months ended September 30, 2004, distributable cash flow has been
reduced by $0.6 million cash expense to terminate interest rate swaps.



PACIFIC ENERGY PARTNERS, L.P.

NET INCOME GUIDANCE(1)
(Unaudited)

(In thousands)

RECONCILIATION OF NET INCOME GUIDANCE
TO RECURRING NET INCOME GUIDANCE

Year Ended
December 31,
2005
-----------------
Low High
-----------------
Net income guidance $41,300 $42,700
Add: Line 63 oil release costs(2) 2,000 2,000
Add: Accelerated long-term incentive plan
compensation expense(3) 3,115 3,115
Add: Transaction costs(4) 1,807 1,807
-----------------
Recurring net income guidance $48,222 $49,622
=================
Recurring net income for the general partner
interest $964 $992
=================
Recurring net income for the limited partner
interest $47,258 $48,630
=================
Basic and diluted recurring net income guidance per
limited partner unit $1.46 $1.50
=================


(1) The guidance for the twelve months ending December 31, 2005 is
based on assumptions and estimates that we believe are reasonable
given our assessment of historical trends, business cycles and other
information reasonably available. However, our assumptions and future
performance are both subject to a wide range of business risks and
uncertainties so no assurance can be provided that actual performance
will fall within the guidance ranges. Please see "Forward-Looking
Statements" above. These risks and uncertainties, as well as other
unforeseeable risks and uncertainties, could cause our actual results
to differ materially from those in the table. This financial guidance
is given as of the date hereof, based on information known to us as of
November 14, 2005. We undertake no obligation to publicly update or
revise any forward-looking statements.

(2) On March 23, 2005, there was an oil release of approximately 3,400
barrels in northern Los Angeles County. Although this expense involves
an outlay of cash, we believe these costs are unusual and are not
indicative of the Partnership's recurring earnings.

(3) On March 3, 2005, in connection with the change in control of the
Partnership's general partner, all restricted units outstanding under
the Long-Term Incentive Plan became immediately vested pursuant to the
terms of the grants. The Partnership recognized accelerated
compensation expense of $3.1 million relating to the vesting.

(4) Pursuant to an Ancillary Agreement, our general partner reimbursed
us $1.8 million for costs incurred in connection with the sale of our
general partner. Generally accepted accounting principles require us
to record an expense with the reimbursement shown as a partner's
capital contribution.



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