Kaneb Pipe Line Partners, L.P.  NYSE:  KPP

Kaneb Services, LLC  NYSE:  KSL

 

         

            Kaneb Pipe Line Partners, L.P. is engaged in the refined petroleum products and anhydrous ammonia pipeline business, transporting refined petroleum products as a common carrier in the Upper Midwest.  In addition, Kaneb’s Support Terminal Services operation (“ST Services”) is one of the largest independent petroleum products and specialty liquids terminaling companies in the United States.  Kaneb Services LLC is a publicly traded limited liability company which, through its wholly-owned subsidiary, Kaneb Pipe Line Company LLC, indirectly owns a general partner interest and 5.1 million limited partner units in Kaneb Pipe Line Partners.

 

Kaneb Pipeline Partners

 

            Kaneb Pipeline Partners’ business activities fall into three principal areas:  refined petroleum product pipelines and associated terminals, anhydrous ammonia pipelines, and terminaling of petroleum products and specialty liquids.

 

Pipeline Operations

 

            Kaneb Pipeline Partners’ pipeline business consist  primarily of the transportation of refined petroleum products as a common carrier in Kansas, Nebraska, Iowa, South Dakota, North Dakota, Colorado, Wyoming and Minnesota.    The products pipeline operations comprise three systems:

 

Ø      The East Pipeline system moves refined products from south to north, running from southern Kansas to Jamestown, North Dakota and extending west to North Platte, Nebraska and east into Iowa.   The pipeline transports refined petroleum products, including propane, received from refineries in southeast Kansas and other connecting pipelines to its terminals along the system, and to receiving pipeline connections in Kansas. The system consists of 2,090 miles of pipeline ranging in size from 6 inches to 16 inches; 17 terminals in Kansas, Nebraska, Iowa, South Dakota, North Dakota with total storage capacity of approximately 3.5 million barrels; and an additional 23 product tanks with total storage capacity of approximately 1,118,393 barrels at Kaneb’s tank farm installations at McPherson and El Dorado, Kansas. The system also has six origin pump stations in Kansas and 38 booster pump stations throughout the system.

 

Ø      The West Pipeline system includes approximately 550 miles of pipeline in Wyoming, Colorado and South Dakota, four truck-loading terminals and numerous pump stations situated along the system.  The system's four product terminals have a total storage capacity of over 1.7 million barrels. The West Pipeline system parallels the Partnership’s East Pipeline to the west, but serves Denver and other eastern Colorado markets and supplies jet fuel to Ellsworth Air Force Base at Rapid City, South Dakota, as compared to the East Pipeline's largely agricultural service area.

 

Ø      The North Pipeline system runs from west to east approximately 440 miles from its origin at the Tesoro Refining and Marketing Company's Mandan, North Dakota refinery to the Minneapolis, Minnesota area. It has four product terminals, one in North Dakota and three in Minnesota, with a total tankage capacity of 1.3 million barrels.

 

            Kaneb also owns three single-use pipelines, located near Umatilla, Oregon; Rawlins, Wyoming and Pasco, Washington, each of which supplies diesel fuel to a railroad fueling facility.  The Oregon and Washington lines are fully automated; however, the Wyoming line utilizes a coordinated startup procedure between the refinery and the railroad. For the year ended December 31, 2003, these three systems combined transported a total of 3.7 million barrels of diesel fuel, representing an aggregate of $1.5 million in revenues.

 

            The refined products pipelines as a whole transported 102,928 MBbls of product during 2003--53,205 MBbl of gasoline, 46,027 MBbl of diesel and fuel oil, and 3,651 MBbl of propane—and generated $98.3 million in revenues.  There are a total of 395 tanks at the refined product terminals along these systems, with a total storage capacity of 6.5 million barrels.

 

            Kaneb’s anhydrous Ammonia Pipeline was acquired in November 2002 from two Koch companies.  Anhydrous ammonia is primarily used as agricultural fertilizer through direct application.  It is also used as a component of various types of dry fertilizer as well as use as a cleaning agent in power plant scrubbers. The 2,000-mile pipeline originates in the Louisiana delta area and moves north into Missouri, where at Hermann, Missouri, one branch splits going east into Illinois and Indiana, and the other branch continues north into Iowa and then turning west into Nebraska.  The Partnership acquired a storage and loading terminal near Hermann, Missouri which was leased back to Koch Nitrogen.  The operations headquarters for the Ammonia Pipeline is located in Hermann, Missouri.  The Ammonia Pipeline is connected to twenty-two other third party owned terminals and also has several industrial facility delivery locations.  Product is primarily supplied to the pipeline from plants in Louisiana and foreign-source product delivered through the marine terminals. During 2003, the Ammonia Pipeline shipped 1,155,160 tons of ammonia, generating $21.3 million of revenue.

 

Liquids Terminaling Business

 

            Kaneb’s Support Terminal Services operation (“ST Services”) is one of the largest independent petroleum products and specialty liquids terminaling companies in the United States.  In 2003, this business accounted for approximately 41% of the partnership’s revenues.  As of December 31, 2003, ST operates 37 facilities in 20 states, with a total storage capacity of approximately 33.9 million barrels.  ST also owns and operates six terminals located in the United Kingdom which have a total capacity of approximately 5.5 million barrels.  In September 2002, ST acquired eight terminals in Australia and New Zealand with a total capacity of approximately 1.2 million barrels.

 

            The terminal facilities provide storage and handling services on a fee basis for petroleum products, specialty chemicals and other liquids. The six largest terminal facilities are located on the Island of St. Eustatius, Netherlands Antilles; in Point Tupper, Nova Scotia, Canada; in Piney Point, Maryland; in Linden, New Jersey (50% owned joint venture); in Crockett, California; and in Martinez, California. The ST terminal facilities worldwide contain a total of 1,502 tanks and a tankage capacity of 59.5 million barrels. Products stored include petroleum, ethanol, jet fuel, fertilizer, chemicals, petrochemicals, asphalt, and pulp liquor.

 

 

Kaneb Pipe Line Partners

Financial Information from 2003 10-K

(in thousands, except per unit amounts)

 

 

 

2003

2002

 

 

 

Market value*

$1,002,464

$671,360

Current assets

$109,019

$84,374

Net property, plant & equipment

$1,112,970

$1,092,192

Total assets

$  1,264,682

$1,215,410

Current liabilities

109,946

$96,185

Long-term debt

$ 617,696

$694,330

Partners’ capital

$492,571

$ 392,284

Revenues

$570,414

$386,630

Operating income

$128,501

$105,721

Net income

$82,357

$73,078

Net income/unit

$2.68

$2.96

Distribution / unit     

$3.30

$3.13

High unit price

$51.08

$44.00

Low unit price

$35.55

$30.99

 
*As of June 30, 2003 and June 28, 2002

 

 

 

Kaneb Services LLC

 

                    Kaneb Services LLC is a publicly traded limited liability company which, through its wholly-owned subsidiary, Kaneb Pipe Line Company LLC, indirectly owns a general partner interest and 5.1 million limited partner units in Kaneb Pipe Line Partners.  Through Martin Oil LLC, a wholly-owned subsidiary, Kaneb Services also provides wholesale motor fuel marketing services in the Great Lakes and Rocky Mountain regions and in California.  This operation and its predecessors have engaged for 40 years in the business of acquiring quantities of motor fuels and reselling them at wholesale in smaller lots at truck racks located in terminal storage facilities along pipelines primarily located throughout Colorado, Illinois, Indiana, Ohio, Wisconsin and Wyoming.  This business does not own any retail outlets, pipelines or terminals.  The product marketing segment earned revenues of $511.2 million in 2003.

 

Kaneb Services LLC

Financial Information from 2003 10-K

(in thousands, except per unit amounts)

 

 

 

2003

2002

 

 

 

Market value*

$318,094

$220,947

Current assets

$132,428

$109,833

Net property, plant & equipment

$1,113,020

$1,092,276

Total assets

1,291,567

$1,244,101

Current liabilities

$117,661

$105,560

Long-term debt

636,308

$718,162

Partners’ capital

$77,721

63,654

Revenues

$865,791

$669,828

Operating income

$128,504

$106,359

Net income

$33,083

$47,228

Net income/unit  (undiluted)

$2.86

$4.13

Distribution / unit     

$1.83

$1.65

High unit price

$32.31

$23.98

Low unit price

$18.35

$16.21

 
*As of June 30, 2003 and June 28, 2002

 

 

               For further information on Kaneb Pipe Line Partners, L.P. or Kaneb Services LLC, contact Kaneb’s Investor Relations department at 972-699-4041, fax: 972-644-3524, e-mail: [email protected]; or visit the Kaneb web site at http://www.kaneb.com/

 

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