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Pacific Energy Partners, L.P. (NYSE:PPX) (�Pacific Energy� or the �Partnership�) announced that net income for the three months ended September 30, 2006, was $19.2 million, or $0.48 per limited partner unit, compared to net income of $12.2 million, or $0.39 per limited partner unit, for the three months ended September 30, 2005. Recurring net income for the three months ended September 30, 2006 was $20.3 million, or $0.51 per limited partner unit, compared to recurring net income of $12.2 million, or $0.39 per limited partner unit, for the corresponding period in 2005. All per unit amounts in the text of this news release are reported on a diluted basis. The increase in recurring net income for the quarter ended September 30, 2006, reflects the benefit of the September 30, 2005, acquisition of refined products terminals and a refined products pipeline from Valero L.P., increased income from our California pipelines, increased margins from crude oil marketing activities and higher revenue from our Southern California terminals. Partially offsetting these increases was a decline in transportation revenue from the Partnership�s Canadian pipeline operations. In addition, the Partnership incurred higher interest expense attributable to the financing of the refined products asset acquisition and increased general and administrative costs. There were approximately 28% more units outstanding in the third quarter of 2006 compared to the corresponding quarter in 2005. Recurring net income for the third quarter of 2006 excludes $1.1 million of transaction costs related to the planned merger with Plains All American Pipeline, L.P. (�Plains�). �We are very pleased with our third quarter results. Recurring net income was up 31 percent on a per unit basis versus the prior year quarter and also exceeded the guidance given in last quarter�s earnings press release. Our core transportation and storage business performed well, and favorable market conditions allowed us to generate better than expected crude oil marketing income,� stated Irv Toole, President and CEO of Pacific Energy. �Organic pipeline and terminal growth projects in both of our business units continue to progress and are a primary focus of the Partnership.� On October 20, 2006, Pacific Energy announced a cash distribution of $0.5675 per unit for the third quarter of 2006, or $2.27 per unit annualized. This is unchanged from the second quarter 2006 distribution level but is 10.7% higher than the third quarter 2005 distribution level. The distribution will be paid on November 13, 2006, to holders of record as of October 31, 2006. Distributable cash flow available to the limited partners� interest for the third quarter of 2006 was $26.9 million after deducting $1.1 million in merger costs. On a diluted, weighted average, basis there were 39,321,000 limited partner units outstanding during the third quarter of 2006. Earnings before interest, tax, depreciation and amortization expenses (�EBITDA�) were $40.7 million in the third quarter of 2006. OPERATING RESULTS BY SEGMENT WEST COAST BUSINESS UNIT Operating income was $24.2 million for the three months ended September 30, 2006, compared to $9.8 million in the corresponding period in 2005. This increase was primarily due to the addition of the Northern California and East Coast terminals on September 30, 2005, improved operating income from California pipeline operations, higher tank revenue from Los Angeles area terminal operations, and increased margins from crude oil marketing activities. The Northern California terminals are operating at capacity. Construction of 450,000 barrels of additional storage capacity at Martinez was completed in late September 2006, with lease revenue beginning October 1. As previously announced, due to strong customer demand, Pacific Energy increased its capital budget to provide for the construction of an additional 850,000 barrels of storage capacity at Martinez, which is under contract. It is projected that $1.1 million of capital will be expended in 2006 for these tanks, with an additional $27.1 million to be expended in 2007. Completion of 250,000 barrels is expected in the third quarter of 2007 and the remaining 600,000 barrels is expected to be completed in the fourth quarter of 2007. The East Coast terminals are also operating near capacity. East Coast terminal income includes the benefit of expanded ethanol facilities, which began operations in the second quarter of 2006 and are now fully operational, and the start-up of ultra low sulfur diesel and jet fuel handling facilities. Volumes transported to Los Angeles on the Partnership�s crude oil pipelines for the three months ended September 30, 2006 were approximately 6% higher than in the third quarter of 2005, due to refinery maintenance and higher Outer Continental Shelf production volumes which were lower in 2005 due to maintenance downtime. In addition to the long-haul volume improvement, revenue increased as a result of a $0.10 per barrel tariff increase effective May 1, 2006 on Line 2000. In addition, deliveries to Bakersfield refineries more than tripled from the prior year quarter as a result of pipeline modifications in the San Joaquin Valley that were completed on October 1, 2005, that increased delivery capacity to those refineries. Operating income for Los Angeles Basin terminals was higher compared to the corresponding quarter in 2005 due to increased tank utilization, higher rates on tank leases and lower operating expenses. The reactivation of 300,000 barrels of storage at the Alamitos terminal was completed in July 2006, and reactivation of a second 300,000 barrel tank is scheduled to be completed in the first quarter of 2007. Total capacity available to be leased after these reactivations will be 7.4 million barrels, with an additional 0.8 million barrels idle but available for reactivation in the future. The Partnership�s crude oil marketing income in the third quarter of 2006 was significantly higher than in the prior year quarter due to favorable margins and increased crude oil volumes. The Partnership continues to advance the development of the Pier 400 deepwater import terminal in the Port of Los Angeles, with the draft environmental impact report expected to be released by the Port in the fourth quarter of 2006. This past quarter, efforts continued to be focused on finalizing environmental mitigation factors with the Port of Los Angeles and the Partnership�s customers. The Partnership expects to receive the permits necessary to begin construction by mid-year 2007, with start-up of operations expected in the first quarter of 2009. The project, which will require a total estimated investment of $315 million, is currently anticipated to include 4,000,000 barrels of storage capacity that will be constructed in two phases. Long term volume commitment agreements have been signed with subsidiaries of Valero Energy Corporation and ConocoPhillips, and it is anticipated that, with additional customer commitments currently being finalized, the estimated 250,000 barrels per day of offloading capacity will be fully subscribed. ROCKY MOUNTAIN BUSINESS UNIT Operating income was $12.2 million for the three months ended September 30, 2006, compared to $13.6 million in the corresponding period in 2005. The $1.4 million decrease was primarily due to lower operating income for the Rangeland pipeline system in Alberta, partially offset by higher volumes on the Western Corridor system and the income contribution from the Rocky Mountain Products Pipeline that was part of the Valero L.P. acquisition. The decrease in Rangeland�s third quarter 2006 income was due in part to the absence of an unusual item that benefited the 2005 quarter: the correction of an error in the procedures used to properly account for inventory and cost of goods sold that resulted in an increase in Rangeland�s pre-tax income in the third quarter 2005 of $1.2 million ($0.7 million after tax). Two major profit generating capital projects, the Salt Lake City pipeline expansion project and the Cheyenne pipeline project are proceeding on schedule and on budget. Construction of the first phase of the Salt Lake City pipeline expansion began in October 2006 and is scheduled to be completed around the end of this year. The second phase is expected to be completed in the fourth quarter of 2007. Total cost of this 93-mile,16-inch pipeline, with a capacity of 95,000 barrels per day, is approximately $77 million and is supported by firm, ten-year transportation agreements with four Salt Lake City refiners. The Cheyenne Pipeline consists of a 24-inch crude oil pipeline, approximately 10 miles in length, from Guernsey, Wyoming, to Pacific Energy�s Fort Laramie, Wyoming tank farm and a 16-inch crude oil pipeline, approximately 85 miles in length, from Fort Laramie to the Frontier Oil and Refining Company Cheyenne refinery. The project is on schedule to be completed in the second quarter of 2007 at a cost of approximately $59 million and is supported by a firm ten-year commitment by Frontier Oil to ship 35,000 barrels per day on the pipeline, and lease approximately 300,000 barrels of storage capacity at Fort Laramie. The new pipeline system�s initial capacity will be 55,000 barrels per day, expandable to a capacity of 90,000 barrels per day. CORPORATE ITEMS General and administrative expenses were $5.6 million in the third quarter of 2006, approximately $1.5 million higher than in the third quarter of 2005. This increase was associated with support of newly acquired assets, the Partnership�s long term incentive plan, and an expense for the LB Pacific, LP (�LB Pacific�) option plan introduced in the first quarter of 2006, the cost of which is required by generally accepted accounting principles to be recorded as a Pacific Energy expense even though the plan is funded by LB Pacific not the Partnership. Interest expense was $10.9 million for the third quarter of 2006, $4.6 million greater than in the comparable period in 2005, due to the increase in debt for the Valero L.P. asset acquisition. Income tax expense was $1.2 million lower compared to the third quarter of 2005, as a result of reduced Rangeland earnings. NINE MONTH RESULTS For the nine months ended September 30, 2006, net income was $52.3 million, or $1.31 per limited partner unit, compared to $27.8 million, or $0.96 per limited partner unit, for the nine months ended September 30, 2005. Recurring net income for the nine months ended September 30, 2006, was $52.3 million, or $1.31 per limited partner unit, compared with $34.7 million, or $1.13 per limited partner unit, for the nine months ended September 30, 2005. Recurring net income for the first nine months of 2006 reflects the benefit of nine months of operations in 2006 from the assets acquired from Valero L.P., increased margins from crude oil marketing activities, higher revenue and lower pipeline repair expenses for the California pipeline operations, increased pipeline revenue in the U.S. Rocky Mountain region, and higher Los Angeles area storage revenue. Partially offsetting these increases were increased interest and general and administrative expenses. In addition, there were approximately 31% more units outstanding in the nine months ended September 30, 2006 versus the comparable period of 2005. Recurring net income for the nine months ended September 30, 2006 excludes $4.5 million of costs associated with the pending Plains merger transaction, and a $4.6 million deferred tax benefit. Due to legislation enacted in the second quarter of 2006, both federal and Alberta corporate tax rates in Canada are being reduced, and Pacific Energy�s deferred tax liability balance was required by accounting rules to be adjusted to reflect the new rates. Recurring net income for the nine months ended September 30, 2005 excludes a $2.0 million expense for the insurance deductible associated with remediation of the March 2005 Line 63 oil release, a $3.1 million expense related to 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 Pacific Energy�s general partner by LB Pacific, and $1.8 million of expense from this general partner transaction required to be recorded as a partnership expense even though it was paid by the general partner, not the Partnership. For the nine months ended September 30, 2006, total capital spending was $67.5 million: $57.5 million of expansion capital, $4.1 million of sustaining capital (including $1.5 million in the third quarter), and $5.9 million of transition capital. LOOKING FORWARD For the quarter ending December 31, 2006, Pacific Energy is forecasting recurring net income of $0.34 to $0.40 per unit and EBITDA of $34 million to $38 million. Major maintenance expenses budgeted for 2006 but not yet incurred will increase costs in the fourth quarter of 2006 and are reflected in the guidance for the quarter and full year. Sustaining capital expenditures for the fourth quarter of 2006 are expected to be $2 million to $3 million. For full year 2006, Pacific Energy is forecasting recurring net income of $1.65 to $1.71 per unit and EBITDA of $144 million to $148 million. Capital expenditures for the full year are projected to be $119 million, including $105 million for expansion projects, $7 million for transition capital projects and $7 million for sustaining capital projects. The reduction in expansion capital spending over prior guidance reflects a change in timing of certain project expenditures from 2006 to 2007. The guidance for recurring net income for the fourth quarter and full year 2006 does not include expenses related to the Plains merger transaction or the deferred tax benefit resulting from the change in Canadian tax rates. The guidance for EBITDA reflects $1.3 million and $5.8 million, for the fourth quarter and full year, respectively, for estimated merger expenses to be incurred prior to closing. For more information about non-GAAP (�generally accepted accounting principles�) measures, see the schedules accompanying this press release. MERGER WITH PLAINS ALL AMERICAN PIPELINE, L.P. On June�12, 2006, Pacific Energy announced that it had entered into an Agreement and Plan of Merger with Plains, pursuant to which the Partnership will be merged with and into Plains. A special meeting of unitholders of the Partnership to consider approval of the merger is scheduled to occur on November 9, 2006. The parties expect to complete the merger on November 15, 2006 assuming the proposals are approved by the unitholders and all other conditions to closing are satisfied. OTHER MATTERS Pacific Energy will host a conference call at 2:00 p.m. EDT (11:00 a.m. PDT) on Thursday, November 2, 2006, to discuss the results of the third quarter of 2006. Please join us at www.PacificEnergy.com for the live broadcast or dial in at 800-446-1671 or 847-413-3362 passcode 16033900. The call, with questions and answers, will continue to be available on Pacific Energy�s web site following the call. About Pacific Energy: Pacific Energy is a master limited partnership headquartered in Long Beach, California, engaged principally 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. Pacific Energy also buys and sells crude oil, activities that are generally complementary to its crude oil 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 activities in five Rocky Mountain states and Alberta, Canada. For additional information about the Partnership, please visit www.PacificEnergy.com. Investor Notice: Pacific Energy and Plains All American Pipeline, L.P. have filed a joint proxy statement/prospectus and other documents with the Securities and Exchange Commission (�SEC�) with respect to the proposed merger of Pacific Energy with and into Plains, which joint proxy statement/prospectus has been declared effective by the SEC. The definitive joint proxy statement/prospectus has been sent to security holders of Pacific Energy and Plains seeking their approval of the merger and related transactions. Investors and security holders are urged to carefully read the joint proxy statement/prospectus because it contains important information, including detailed risk factors, regarding Pacific Energy, Plains and the merger. Investors and security holders may obtain a free copy of the definitive joint proxy statement/prospectus and other documents containing information about Pacific Energy and Plains, without charge, at the SEC's web site at www.sec.gov. Copies of the definitive joint proxy statement/prospectus and the SEC filings that are incorporated by reference in the joint proxy statement/prospectus may also be obtained free of charge by directing a request to Pacific Energy or Plains. Pacific Energy or Plains and the officers and directors of the respective general partners of Pacific Energy or Plains may be deemed to be participants in the solicitation of proxies from their security holders in connection with the proposed transaction. Information about these persons can be found in Pacific Energy�s or Plains' respective Annual Reports on Form 10-K filed with the SEC, and additional information about such persons may be obtained from the joint proxy statement/prospectus. Cautionary Statement Regarding Forward-Looking Statements: 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 our Annual Report on Form 10-K for the year ended December 31, 2005, and including the definitive joint proxy statement/prospectus referred to in this press release. PACIFIC ENERGY PARTNERS, L.P. CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited) (Amounts in thousands, except per unit amounts) � � Three Months Ended September 30, Nine Months Ended September 30, 2006� 2005� 2006� 2005� Operating revenues: Pipeline transportation revenue $ 36,995� $ 27,283� $ 105,652� $ 83,067� Storage and terminaling revenue 23,467� 9,731� 65,420� 30,923� Pipeline buy/sell transportation revenue 10,010� 11,683� 31,136� 28,905� Crude oil sales, net of purchases 9,924� 5,823� 27,453� 13,647� Net revenues 80,396� 54,520� 229,661� 156,542� � Expenses: Operating 34,046� 25,019� 99,120� 72,065� General and administrative 5,649� 4,115� 18,236� 12,987� Depreciation and amortization 10,398� 6,560� 30,692� 19,695� Merger costs1 1,112� �� 4,529� �� Accelerated long-term incentive plan compensation expense2 �� �� �� 3,115� Line 63 oil release costs3 �� �� �� 2,000� Reimbursed general partner transaction costs4 �� �� �� 1,807� Total expenses 51,205� 35,694� 152,577� 111,669� � Share of net income of Frontier 373� 516� 1,246� 1,363� � Operating income 29,564� 19,342� 78,330� 46,236� � Net interest expense (10,853) (6,237) (30,029) (17,679) Other income 720� 494� 1,455� 1,387� � Income before income tax expense 19,431� 13,599� 49,756� 29,944� � Income tax benefit (expense): Current (485) (1,411) (2,288) (1,898) Deferred5 289� (22) 4,824� (239) (196) (1,433) 2,536� (2,137) � Net income $ 19,235� $ 12,166� $ 52,292� $ 27,807� Net income (loss) for the general partner interest6 $ 347� $ 243� $ 720� $ (1,215) Net income for the limited partner interests6 $ 18,888� $ 11,923� $ 51,572� $ 29,022� � Basic net income per limited partner unit $ 0.48� $ 0.39� $ 1.31� $ 0.97� Diluted net income per limited partner unit $ 0.48� $ 0.39� $ 1.31� $ 0.96� � Weighted average units outstanding: Basic 39,307� 30,761� 39,305� 30,051� Diluted 39,321� 30,762� 39,332� 30,089� PACIFIC ENERGY PARTNERS, L.P. (Unaudited) (Amounts in thousands) CONDENSED CONSOLIDATED BALANCE SHEETS � � September 30, December 31, 2006� 2005� Assets Current assets $ 265,226� $ 192,115� Property and equipment, net 1,252,750� 1,185,534� Intangible assets 67,639� 69,180� Investment in Frontier Pipeline Company 8,651� 8,156� Other assets 17,957� 21,467� Total assets $ 1,612,223� $ 1,476,452� Liabilities and Partners� Capital Current liabilities $ 204,160� $ 156,187� Long-term debt 669,163� 565,632� Deferred income taxes 32,560� 35,771� Environmental and other long-term liabilities 17,416� 20,623� Partners� capital 688,924� 698,239� Total liabilities and partners� capital $ 1,612,223� $ 1,476,452� CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS � Nine Months Ended September 30, 2006� 2005� Cash flows from operating activities: Net income $ 52,292� $ 27,807� Depreciation, amortization, non-cash employee compensation under long-term incentive plan, deferred income taxes and Frontier adjustment 27,458� 24,256� Working capital adjustments (30,259) 13,592� Net cash provided by operating activities 49,491� 65,655� Cash flows from investing activities: Acquisition (2,365) (461,165) Net additions to property and equipment (67,522) (27,265) Additions to pipeline linefill and minimum tank inventory (16,106) �� Other 181� �� Net cash used in investing activities (85,812) (488,430) Cash flows from financing activities: Issuance of common units, net of fees and offering expenses �� 289,122� Capital contribution from the general partner �� 8,569� Net proceeds from senior notes offering �� 170,997� Proceeds from bank credit facilities 182,094� 203,291� Repayment of bank credit facilities (81,463) (195,661) Deferred financing costs �� (4,676) Distributions to partners (68,714) (46,224) Issuance of common units pursuant to exercise of unit option �� 707� Related parties (28) (1,171) Net cash provided by financing activities 31,889� 424,954� Effect of exchange rate changes on cash 83� 213� Net increase in cash and cash equivalents (4,349) 2,392� Cash and cash equivalents, beginning of period 18,064� 23,383� Cash and cash equivalents, end of period $ 13,715� $ 25,755� PACIFIC ENERGY PARTNERS, L.P. CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND OPERATING HIGHLIGHTS BY SEGMENT Three Months Ended September 30, 2006 and 2005 (Unaudited) (Amounts in thousands) West Coast Business Unit Rocky Mountain Business Unit Intersegment and Intrasegment Eliminations Total Three Months Ended September 30, 2006: Revenues: Pipeline transportation revenue $ 18,224� $ 21,500� $ (2,729) $ 36,995� Storage and terminaling revenue 23,467� �� 23,467� Pipeline buy/sell transportation revenue �� 10,010� 10,010� Crude oil sales, net of purchases 9,494� 572� (142) 9,924� Net revenue 51,185� 32,082� 80,396� Expenses: Operating expenses 21,505� 15,412� (2,871) 34,046� Depreciation and amortization 5,528� 4,870� 10,398� Total expenses 27,033� 20,282� 44,444� Share of net income of Frontier �� 373� 373� Operating income7 $ 24,152� $ 12,173� $ 36,325� � Operating Data (barrels per day, in thousands) Line 2000 and Line 63 pipeline systems 111.0� Rangeland pipeline system: Sundre � North 19.7� Sundre � South 48.5� Western Corridor system 26.6� Salt Lake City Core system 126.7� Frontier Pipeline 46.2� Rocky Mountain Products Pipeline8 59.2� � Three Months Ended September 30, 2005: Revenues: Pipeline transportation revenue $ 13,887� $ 14,887� $ (1,491) $ 27,283� Storage and terminaling 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� 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 income7 $ 9,813� $ 13,644� $ 23,457� � Operating Data (barrels per day, in thousands) Line 2000 and Line 63 pipeline systems 104.4� Rangeland pipeline system: Sundre � North 19.3� Sundre � South 48.1� Western Corridor system 26.8� Salt Lake City Core system 125.6� Frontier Pipeline 49.6� Rocky Mountain Products Pipeline8 �� PACIFIC ENERGY PARTNERS, L.P. CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND OPERATING HIGHLIGHTS BY SEGMENT Nine Months Ended September 30, 2006 and 2005 (Unaudited) (Amounts in thousands) West Coast Business Unit Rocky Mountain Business Unit Intersegment and Intrasegment Eliminations Total Nine Months Ended September 30, 2006: Revenues: Pipeline transportation revenue $ 52,083� $ 60,790� $ (7,221) $ 105,652� Storage and terminaling revenue 65,420� �� 65,420� Pipeline buy/sell transportation revenue �� 31,136� 31,136� Crude oil sales, net of purchases 26,000� 1,860� (407) 27,453� Net revenue 143,503� 93,786� 229,661� Expenses: Operating expenses 63,200� 43,548� (7,628) 99,120� Depreciation and amortization 16,534� 14,158� 30,692� Total expenses 79,734� 57,706� 129,812� Share of net income of Frontier �� 1,246� 1,246� Operating income7 $ 63,769� $ 37,326� $ 101,095� � Operating Data (barrels per day, in thousands) Line 2000 and Line 63 pipeline systems 112.6� Rangeland pipeline system: Sundre � North 21.9� Sundre � South 44.5� Western Corridor system 26.3� Salt Lake City Core system 125.3� Frontier Pipeline 46.6� Rocky Mountain Products Pipeline8 60.3� � Nine Months Ended September 30, 2005: Revenues: Pipeline transportation revenue $ 46,525� $ 41,348� $ (4,806) $ 83,067� Storage and terminaling 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� Expenses: Operating expenses 46,507� 30,604� (5,046) 72,065� Line 63 oil release costs3 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 income7 $ 31,962� $ 32,183� $ 64,145� � Operating Data (barrels per day, in thousands) Line 2000 and Line 63 pipeline systems 120.8� Rangeland pipeline system: Sundre � North 21.3� Sundre � South 45.3� Western Corridor system 24.0� Salt Lake City Core system 119.8� Frontier Pipeline 46.4� Rocky Mountain Products Pipeline8 �� PACIFIC ENERGY PARTNERS, L.P. (Unaudited) (Amounts in thousands) RECONCILIATION OF OPERATING INCOME BY SEGMENT TO CONDENSED CONSOLIDATED STATEMENTS OF INCOME � Three Months Ended September 30, Nine Months Ended September 30, 2006� 2005� 2006� 2005� Operating income by Business Unit: West Coast Business Unit $ 24,152� $ 9,813� $ 63,769� $ 31,962� Rocky Mountain Business Unit 12,173� 13,644� 37,326� 32,183� 36,325� 23,457� 101,095� 64,145� General expenses and other income (expense):7 General and administrative expense (5,649) (4,115) (18,236) (12,987) Merger costs1 (1,112) �� (4,529) �� Accelerated long-term incentive plan compensation expense2 �� �� �� (3,115) Reimbursed general partner transaction costs4 �� �� �� (1,807) Interest expense (10,853) (6,237) (30,029) (17,679) Other income 720� 494� 1,455� 1,387� Income tax benefit (expense)5 (196) (1,433) 2,536� (2,137) Net income $ 19,235� $ 12,166� $ 52,292� $ 27,807� LIMITED PARTNERS AND GENERAL PARTNER ALLOCATION OF NET INCOME � Three Months Ended September 30, Nine Months Ended September 30, 2006� 2005� 2006� 2005� � Net income for the limited partner interests: Net income $ 19,235� $ 12,166� $ 52,292� $ 27,807� Costs allocated to general partner: LBP Option Plan costs9 370� �� 1,250� �� Senior Notes consent solicitation and other costs �� �� �� 893� Severance costs �� �� �� 914� Total costs allocated to general partner 370� �� 1,250� 1,807� Income before costs allocated to general partner 19,605� 12,166� 53,542� 29,614� Less: General partner incentive distribution rights paid (331) �� (917) �� Subtotal 19,274� 12,166� 52,625� 29,614� Less: General partner 2% ownership (386) (243) (1,053) (592) Net income allocated to limited partners $ 18,888� $ 11,923� $ 51,572� $ 29,022� � Net income for the general partner interest: General partner 2% ownership $ 386� $ 243� $ 1,053� $ 592� Incentive distribution payments to general partner 331� �� 917� �� Costs allocated to general partner (370) �� (1,250) (1,807) Net income (loss) allocated to general partner $ 347� $ 243� $ 720� $ (1,215) PACIFIC ENERGY PARTNERS, L.P. (Unaudited) (Amounts in thousands, except per unit amounts) RECONCILIATION OF NET INCOME TO RECURRING NET INCOME10 � Three Months Ended September 30, Nine Months Ended September 30, 2006� 2005� 2006� 2005� Net income $ 19,235� $ 12,166� $ 52,292� $ 27,807� Add: Merger costs1 1,112� �� 4,529� �� Add: Accelerated long-term incentive plan compensation expense2 �� �� �� 3,115� Add: Line 63 oil release costs3 �� �� �� 2,000� Add: Reimbursed general partner transaction costs4 �� �� �� 1,807� Less: Deferred tax rate adjustment5 �� �� (4,560) �� Recurring net income $ 20,347� $ 12,166� $ 52,261� $ 34,729� Recurring net income for the general partner interest $ 369� $ 243� $ 719� $ 695� Recurring net income for the limited partner interest $ 19,978� $ 11,923� $ 51,542� $ 34,034� Basic and diluted recurring net income per limited partner unit $ 0.51� $ 0.39� $ 1.31� $ 1.13� RECONCILIATION OF NET INCOME TO EBITDA11 � Three Months Ended September 30, Nine Months Ended September 30, 2006� 2005� 2006� 2005� Net income $ 19,235� $ 12,166� $ 52,292� $ 27,807� Interest expense 10,853� 6,237� 30,029� 17,679� Depreciation and amortization 10,398� 6,560� 30,692� 19,695� Income tax (benefit) expense 196� 1,433� (2,536) 2,137� EBITDA $ 40,682� $ 26,396� $ 110,477� $ 67,318� PACIFIC ENERGY PARTNERS, L.P. RECONCILIATION OF NET INCOME TO DISTRIBUTABLE CASH FLOW12 (Unaudited) (Amounts in thousands) � Three Months Ended September 30, Nine Months Ended September 30, 2006� 2005� 2006� 2005� � Net income $ 19,235� $ 12,166� $ 52,292� $ 27,807� Depreciation and amortization 10,398� 6,560� 30,692� 19,695� Amortization of debt issue costs and accretion of discount on long-term debt 625� 487� 1,847� 1,424� Non-cash employee compensation under long-term incentive plan 236� �� 732� 1,429� Costs allocated to general partner6 370� �� 1,250� 1,807� Deferred income tax expense (benefit)5 (289) 22� (4,824) 239� Sustaining capital expenditures (1,502) (2,243) (4,148) (3,070) Distributable cash flow 29,073� 16,992� 77,841� 49,331� Less: net (increase) decrease in operating assets and Liabilities (22,783) 165� (30,259) 13,592� Less: share of income of Frontier (373) (516) (1,246) (1,363) Add: distributions from Frontier �� 667� 622� 1,317� Less: non-cash employee compensation under long-term incentive plan added (deducted) above (236) �� (732) (1,429) Add: employee compensation under long-term incentive plan 236� �� 782� 2,886� Less: costs reimbursed by general partner �� �� �� (1,807) Add: other non-cash adjustments (16) (40) (1,665) 58� Add: sustaining capital expenditures 1,502� 2,243� 4,148� 3,070� Net cash provided by operating activities $ 7,403� $ 19,511� $ 49,491� $ 65,655� Total distributable cash flow $ 29,073� $ 16,992� $ 77,841� $ 49,331� General partner interest in distributable cash flow (2,192) (458) (4,423) (1,659) Limited partner interest in distributable cash flow $ 26,881� $ 16,534� $ 73,418� $ 47,672� PACIFIC ENERGY PARTNERS, L.P. RECONCILIATION OF RECURRING NET INCOME GUIDANCE TO NET INCOME GUIDANCE AND EBITDA GUIDANCE13 (Unaudited) (Amounts in millions) � Three Months Ending December 31, 2006 Year Ending December 31, 2006 Low High Low High Recurring net income guidance14 $ 13.7� $ 16.0� $ 65.9� $ 68.2� Less: Merger costs (1.4) (1.2) (5.9) (5.7) Add: Deferred tax rate adjustment �� �� 4.6� 4.6� Net income guidance15 $ 12.3� $ 14.8� $ 64.6� $ 67.1� Add: Depreciation and amortization 10.6� 11.0� 41.3� 41.7� Add: Interest expense 10.8� 11.5� 40.8� 41.5� Add: Income tax expense (benefit)16 �� 0.2� (2.5) (2.3) � � � � Earnings before interest, tax, depreciation and amortization (EBITDA) $ 33.7� $ 37.5� $ 144.2� $ 148.0� PACIFIC ENERGY PARTNERS, L.P. NOTES TO FINANCIAL SCHEDULES (Unaudited) (Amounts in millions, except volume data) 1 On June 12, 2006, we announced that we had entered into a merger agreement with Plains All American Pipeline, L.P. (�PAA�), pursuant to which we will be merged into PAA. PAA will acquire common units (except for common units purchased from LB Pacific, LP) of Pacific Energy through a tax-free unit-for-unit merger in which each unitholder of Pacific Energy will receive 0.77 newly issued PAA common units for each Pacific Energy common unit. Under the terms of a separate agreement, PAA will acquire from LB Pacific, LP and its affiliates (�LB Pacific�) the general partner interest and incentive distribution rights of the Partnership as well as 5.2 million common units and 5.2 million subordinated units for a total of $700 million in cash. For the three and nine months ended September 30, 2006, we incurred $1.1 million and $4.5 million, respectively, in professional fees and other costs directly related to the merger. 2 On March 3, 2005, in connection with a change in control of the Partnership�s general partner, all restricted units outstanding under the Long-Term Incentive Plan immediately vested pursuant to the terms of the grants. The Partnership recognized compensation expense of $3.1 million relating to the accelerated vesting. Of this compensation expense, $0.6 million was considered operating expense and $2.5 million was general and administrative expense. 3 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. 4 In 2005, our general partner reimbursed us $1.8 million for transaction costs incurred in connection with the change in control of our general partner. Generally accepted accounting principles require us to record an expense with the reimbursement shown as a partner�s capital contribution. 5 During the nine months ended September 30, 2006, we recognized into earnings a $4.6 million deferred tax benefit to adjust our deferred tax liability for recently enacted reductions in the Canadian provincial and federal income tax rates. 6 See �Limited Partners and General Partner Allocation of Net Income� schedule included herein. 7 General and administrative expenses, merger costs, accelerated long-term incentive plan expense, reimbursed general partner transaction costs, net interest expense, other income and income tax expense are not allocated among the West Coast and Rocky Mountain business units. 8 The Rocky Mountain Products Pipeline was purchased on September 30, 2005. 9 In January 2006, LB Pacific, LP (�LBP�), the owner of our General Partner, granted options under its LBP Option Plan (the �Plan�) to certain of our officers and key employees. Under the Plan, participants are granted options to acquire partnership interests in LBP. We are not obligated to pay any amounts to LBP for the benefits granted or paid to our officers and key employees under the Plan, although generally accepted accounting principles require that we record an expense in the Partnership�s financial statements with a corresponding increase in the general partner�s capital account. For the three and nine months ended September 30, 2006, we recorded compensation expense of $0.4 million and $1.3 million, respectively, relating to the LBP Option Plan. 10 Recurring net income is a non-GAAP financial measure. This measure is used to more precisely compare year over year net income by eliminating one-time, non-recurring charges. You should not consider recurring net income as an alternative to net income, income before taxes, cash flow from operations, or any other measure of financial performance presented in accordance with accounting principles generally accepted in the United States. Our recurring net income may not be comparable to similarly titled measures of other entities. 11 EBITDA (earnings before interest, taxes, depreciation and amortization expense) is used as a supplemental performance measure by management to assess (i) the financial performance of our assets without regard to financing methods, capital structures or historical cost basis, (ii) the ability of our assets to generate cash sufficient to pay interest cost and support our indebtedness, (iii) our operating performance and return on capital as compared to those of other companies in the midstream energy sector, without regard to financing and capital structure, and (iv) the viability of projects and the overall rates of return on alternative investment opportunities. You should not consider EBITDA as an alternative to net income, income before taxes, cash flow from operations, or any other measure of financial performance presented in accordance with accounting principles generally accepted in the United States. Our EBITDA may not be comparable to similarly titled measures of other entities. Additional information regarding EBITDA is included in our annual report on Form 10-K for the year ended December 31, 2005. For the three and nine months ended September 30, 2006, EBITDA has been reduced by $1.1 million and $4.5 million, respectively, for costs directly related to the proposed merger with Plains All American Pipeline, L.P. For the nine months ended September 30, 2005, EBITDA was reduced by $3.1 million of compensation expense relating to the accelerated vesting of our long term incentive compensation plan, $2.0 million of oil release costs and $1.8 million of general partner costs that was required by GAAP to be recorded in our income statement. There was no unusual impact on EBITDA for the three months ended September 30, 2005. 12 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 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, 2005. 13 The guidance for the three months ending December 31, 2006 and for the twelve months ending December�31, 2006 are 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 1, 2006. We undertake no obligation to publicly update or revise any forward-looking statements. 14 Recurring net income guidance for the twelve months ending December 31, 2006 excludes $4.5 million of merger costs and a $4.6 million deferred tax benefit to adjust our deferred tax liability for reductions in the Canadian provincial and federal income tax rates that were enacted into law in the second quarter of 2006. 15 Included in the net income guidance for the year ending December 31, 2006 is forecast general and administrative expense of $23 million to $24 million. 16 Included for the year ending December 31, 2006 is forecast cash tax expense of $2.7 million and forecast deferred tax benefit of $5.1 million. Pacific Energy Partners, L.P. (NYSE:PPX) ("Pacific Energy" or the "Partnership") announced that net income for the three months ended September 30, 2006, was $19.2 million, or $0.48 per limited partner unit, compared to net income of $12.2 million, or $0.39 per limited partner unit, for the three months ended September 30, 2005. Recurring net income for the three months ended September 30, 2006 was $20.3 million, or $0.51 per limited partner unit, compared to recurring net income of $12.2 million, or $0.39 per limited partner unit, for the corresponding period in 2005. All per unit amounts in the text of this news release are reported on a diluted basis. The increase in recurring net income for the quarter ended September 30, 2006, reflects the benefit of the September 30, 2005, acquisition of refined products terminals and a refined products pipeline from Valero L.P., increased income from our California pipelines, increased margins from crude oil marketing activities and higher revenue from our Southern California terminals. Partially offsetting these increases was a decline in transportation revenue from the Partnership's Canadian pipeline operations. In addition, the Partnership incurred higher interest expense attributable to the financing of the refined products asset acquisition and increased general and administrative costs. There were approximately 28% more units outstanding in the third quarter of 2006 compared to the corresponding quarter in 2005. Recurring net income for the third quarter of 2006 excludes $1.1 million of transaction costs related to the planned merger with Plains All American Pipeline, L.P. ("Plains"). "We are very pleased with our third quarter results. Recurring net income was up 31 percent on a per unit basis versus the prior year quarter and also exceeded the guidance given in last quarter's earnings press release. Our core transportation and storage business performed well, and favorable market conditions allowed us to generate better than expected crude oil marketing income," stated Irv Toole, President and CEO of Pacific Energy. "Organic pipeline and terminal growth projects in both of our business units continue to progress and are a primary focus of the Partnership." On October 20, 2006, Pacific Energy announced a cash distribution of $0.5675 per unit for the third quarter of 2006, or $2.27 per unit annualized. This is unchanged from the second quarter 2006 distribution level but is 10.7% higher than the third quarter 2005 distribution level. The distribution will be paid on November 13, 2006, to holders of record as of October 31, 2006. Distributable cash flow available to the limited partners' interest for the third quarter of 2006 was $26.9 million after deducting $1.1 million in merger costs. On a diluted, weighted average, basis there were 39,321,000 limited partner units outstanding during the third quarter of 2006. Earnings before interest, tax, depreciation and amortization expenses ("EBITDA") were $40.7 million in the third quarter of 2006. OPERATING RESULTS BY SEGMENT WEST COAST BUSINESS UNIT Operating income was $24.2 million for the three months ended September 30, 2006, compared to $9.8 million in the corresponding period in 2005. This increase was primarily due to the addition of the Northern California and East Coast terminals on September 30, 2005, improved operating income from California pipeline operations, higher tank revenue from Los Angeles area terminal operations, and increased margins from crude oil marketing activities. The Northern California terminals are operating at capacity. Construction of 450,000 barrels of additional storage capacity at Martinez was completed in late September 2006, with lease revenue beginning October 1. As previously announced, due to strong customer demand, Pacific Energy increased its capital budget to provide for the construction of an additional 850,000 barrels of storage capacity at Martinez, which is under contract. It is projected that $1.1 million of capital will be expended in 2006 for these tanks, with an additional $27.1 million to be expended in 2007. Completion of 250,000 barrels is expected in the third quarter of 2007 and the remaining 600,000 barrels is expected to be completed in the fourth quarter of 2007. The East Coast terminals are also operating near capacity. East Coast terminal income includes the benefit of expanded ethanol facilities, which began operations in the second quarter of 2006 and are now fully operational, and the start-up of ultra low sulfur diesel and jet fuel handling facilities. Volumes transported to Los Angeles on the Partnership's crude oil pipelines for the three months ended September 30, 2006 were approximately 6% higher than in the third quarter of 2005, due to refinery maintenance and higher Outer Continental Shelf production volumes which were lower in 2005 due to maintenance downtime. In addition to the long-haul volume improvement, revenue increased as a result of a $0.10 per barrel tariff increase effective May 1, 2006 on Line 2000. In addition, deliveries to Bakersfield refineries more than tripled from the prior year quarter as a result of pipeline modifications in the San Joaquin Valley that were completed on October 1, 2005, that increased delivery capacity to those refineries. Operating income for Los Angeles Basin terminals was higher compared to the corresponding quarter in 2005 due to increased tank utilization, higher rates on tank leases and lower operating expenses. The reactivation of 300,000 barrels of storage at the Alamitos terminal was completed in July 2006, and reactivation of a second 300,000 barrel tank is scheduled to be completed in the first quarter of 2007. Total capacity available to be leased after these reactivations will be 7.4 million barrels, with an additional 0.8 million barrels idle but available for reactivation in the future. The Partnership's crude oil marketing income in the third quarter of 2006 was significantly higher than in the prior year quarter due to favorable margins and increased crude oil volumes. The Partnership continues to advance the development of the Pier 400 deepwater import terminal in the Port of Los Angeles, with the draft environmental impact report expected to be released by the Port in the fourth quarter of 2006. This past quarter, efforts continued to be focused on finalizing environmental mitigation factors with the Port of Los Angeles and the Partnership's customers. The Partnership expects to receive the permits necessary to begin construction by mid-year 2007, with start-up of operations expected in the first quarter of 2009. The project, which will require a total estimated investment of $315 million, is currently anticipated to include 4,000,000 barrels of storage capacity that will be constructed in two phases. Long term volume commitment agreements have been signed with subsidiaries of Valero Energy Corporation and ConocoPhillips, and it is anticipated that, with additional customer commitments currently being finalized, the estimated 250,000 barrels per day of offloading capacity will be fully subscribed. ROCKY MOUNTAIN BUSINESS UNIT Operating income was $12.2 million for the three months ended September 30, 2006, compared to $13.6 million in the corresponding period in 2005. The $1.4 million decrease was primarily due to lower operating income for the Rangeland pipeline system in Alberta, partially offset by higher volumes on the Western Corridor system and the income contribution from the Rocky Mountain Products Pipeline that was part of the Valero L.P. acquisition. The decrease in Rangeland's third quarter 2006 income was due in part to the absence of an unusual item that benefited the 2005 quarter: the correction of an error in the procedures used to properly account for inventory and cost of goods sold that resulted in an increase in Rangeland's pre-tax income in the third quarter 2005 of $1.2 million ($0.7 million after tax). Two major profit generating capital projects, the Salt Lake City pipeline expansion project and the Cheyenne pipeline project are proceeding on schedule and on budget. Construction of the first phase of the Salt Lake City pipeline expansion began in October 2006 and is scheduled to be completed around the end of this year. The second phase is expected to be completed in the fourth quarter of 2007. Total cost of this 93-mile,16-inch pipeline, with a capacity of 95,000 barrels per day, is approximately $77 million and is supported by firm, ten-year transportation agreements with four Salt Lake City refiners. The Cheyenne Pipeline consists of a 24-inch crude oil pipeline, approximately 10 miles in length, from Guernsey, Wyoming, to Pacific Energy's Fort Laramie, Wyoming tank farm and a 16-inch crude oil pipeline, approximately 85 miles in length, from Fort Laramie to the Frontier Oil and Refining Company Cheyenne refinery. The project is on schedule to be completed in the second quarter of 2007 at a cost of approximately $59 million and is supported by a firm ten-year commitment by Frontier Oil to ship 35,000 barrels per day on the pipeline, and lease approximately 300,000 barrels of storage capacity at Fort Laramie. The new pipeline system's initial capacity will be 55,000 barrels per day, expandable to a capacity of 90,000 barrels per day. CORPORATE ITEMS General and administrative expenses were $5.6 million in the third quarter of 2006, approximately $1.5 million higher than in the third quarter of 2005. This increase was associated with support of newly acquired assets, the Partnership's long term incentive plan, and an expense for the LB Pacific, LP ("LB Pacific") option plan introduced in the first quarter of 2006, the cost of which is required by generally accepted accounting principles to be recorded as a Pacific Energy expense even though the plan is funded by LB Pacific not the Partnership. Interest expense was $10.9 million for the third quarter of 2006, $4.6 million greater than in the comparable period in 2005, due to the increase in debt for the Valero L.P. asset acquisition. Income tax expense was $1.2 million lower compared to the third quarter of 2005, as a result of reduced Rangeland earnings. NINE MONTH RESULTS For the nine months ended September 30, 2006, net income was $52.3 million, or $1.31 per limited partner unit, compared to $27.8 million, or $0.96 per limited partner unit, for the nine months ended September 30, 2005. Recurring net income for the nine months ended September 30, 2006, was $52.3 million, or $1.31 per limited partner unit, compared with $34.7 million, or $1.13 per limited partner unit, for the nine months ended September 30, 2005. Recurring net income for the first nine months of 2006 reflects the benefit of nine months of operations in 2006 from the assets acquired from Valero L.P., increased margins from crude oil marketing activities, higher revenue and lower pipeline repair expenses for the California pipeline operations, increased pipeline revenue in the U.S. Rocky Mountain region, and higher Los Angeles area storage revenue. Partially offsetting these increases were increased interest and general and administrative expenses. In addition, there were approximately 31% more units outstanding in the nine months ended September 30, 2006 versus the comparable period of 2005. Recurring net income for the nine months ended September 30, 2006 excludes $4.5 million of costs associated with the pending Plains merger transaction, and a $4.6 million deferred tax benefit. Due to legislation enacted in the second quarter of 2006, both federal and Alberta corporate tax rates in Canada are being reduced, and Pacific Energy's deferred tax liability balance was required by accounting rules to be adjusted to reflect the new rates. Recurring net income for the nine months ended September 30, 2005 excludes a $2.0 million expense for the insurance deductible associated with remediation of the March 2005 Line 63 oil release, a $3.1 million expense related to 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 Pacific Energy's general partner by LB Pacific, and $1.8 million of expense from this general partner transaction required to be recorded as a partnership expense even though it was paid by the general partner, not the Partnership. For the nine months ended September 30, 2006, total capital spending was $67.5 million: $57.5 million of expansion capital, $4.1 million of sustaining capital (including $1.5 million in the third quarter), and $5.9 million of transition capital. LOOKING FORWARD For the quarter ending December 31, 2006, Pacific Energy is forecasting recurring net income of $0.34 to $0.40 per unit and EBITDA of $34 million to $38 million. Major maintenance expenses budgeted for 2006 but not yet incurred will increase costs in the fourth quarter of 2006 and are reflected in the guidance for the quarter and full year. Sustaining capital expenditures for the fourth quarter of 2006 are expected to be $2 million to $3 million. For full year 2006, Pacific Energy is forecasting recurring net income of $1.65 to $1.71 per unit and EBITDA of $144 million to $148 million. Capital expenditures for the full year are projected to be $119 million, including $105 million for expansion projects, $7 million for transition capital projects and $7 million for sustaining capital projects. The reduction in expansion capital spending over prior guidance reflects a change in timing of certain project expenditures from 2006 to 2007. The guidance for recurring net income for the fourth quarter and full year 2006 does not include expenses related to the Plains merger transaction or the deferred tax benefit resulting from the change in Canadian tax rates. The guidance for EBITDA reflects $1.3 million and $5.8 million, for the fourth quarter and full year, respectively, for estimated merger expenses to be incurred prior to closing. For more information about non-GAAP ("generally accepted accounting principles") measures, see the schedules accompanying this press release. MERGER WITH PLAINS ALL AMERICAN PIPELINE, L.P. On June 12, 2006, Pacific Energy announced that it had entered into an Agreement and Plan of Merger with Plains, pursuant to which the Partnership will be merged with and into Plains. A special meeting of unitholders of the Partnership to consider approval of the merger is scheduled to occur on November 9, 2006. The parties expect to complete the merger on November 15, 2006 assuming the proposals are approved by the unitholders and all other conditions to closing are satisfied. OTHER MATTERS Pacific Energy will host a conference call at 2:00 p.m. EDT (11:00 a.m. PDT) on Thursday, November 2, 2006, to discuss the results of the third quarter of 2006. Please join us at www.PacificEnergy.com for the live broadcast or dial in at 800-446-1671 or 847-413-3362 passcode 16033900. The call, with questions and answers, will continue to be available on Pacific Energy's web site following the call. About Pacific Energy: Pacific Energy is a master limited partnership headquartered in Long Beach, California, engaged principally 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. Pacific Energy also buys and sells crude oil, activities that are generally complementary to its crude oil 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 activities in five Rocky Mountain states and Alberta, Canada. For additional information about the Partnership, please visit www.PacificEnergy.com. Investor Notice: Pacific Energy and Plains All American Pipeline, L.P. have filed a joint proxy statement/prospectus and other documents with the Securities and Exchange Commission ("SEC") with respect to the proposed merger of Pacific Energy with and into Plains, which joint proxy statement/prospectus has been declared effective by the SEC. The definitive joint proxy statement/prospectus has been sent to security holders of Pacific Energy and Plains seeking their approval of the merger and related transactions. Investors and security holders are urged to carefully read the joint proxy statement/prospectus because it contains important information, including detailed risk factors, regarding Pacific Energy, Plains and the merger. Investors and security holders may obtain a free copy of the definitive joint proxy statement/prospectus and other documents containing information about Pacific Energy and Plains, without charge, at the SEC's web site at www.sec.gov. Copies of the definitive joint proxy statement/prospectus and the SEC filings that are incorporated by reference in the joint proxy statement/prospectus may also be obtained free of charge by directing a request to Pacific Energy or Plains. Pacific Energy or Plains and the officers and directors of the respective general partners of Pacific Energy or Plains may be deemed to be participants in the solicitation of proxies from their security holders in connection with the proposed transaction. Information about these persons can be found in Pacific Energy's or Plains' respective Annual Reports on Form 10-K filed with the SEC, and additional information about such persons may be obtained from the joint proxy statement/prospectus. Cautionary Statement Regarding Forward-Looking Statements: 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 our Annual Report on Form 10-K for the year ended December 31, 2005, and including the definitive joint proxy statement/prospectus referred to in this press release. -0- *T 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, ------------------- ------------------ 2006 2005 2006 2005 ---------- -------- --------- -------- Operating revenues: Pipeline transportation revenue $36,995 $27,283 $105,652 $83,067 Storage and terminaling revenue 23,467 9,731 65,420 30,923 Pipeline buy/sell transportation revenue 10,010 11,683 31,136 28,905 Crude oil sales, net of purchases 9,924 5,823 27,453 13,647 ---------- -------- --------- -------- Net revenues 80,396 54,520 229,661 156,542 ---------- -------- --------- -------- Expenses: Operating 34,046 25,019 99,120 72,065 General and administrative 5,649 4,115 18,236 12,987 Depreciation and amortization 10,398 6,560 30,692 19,695 Merger costs(1) 1,112 -- 4,529 -- Accelerated long-term incentive plan compensation expense(2) -- -- -- 3,115 Line 63 oil release costs(3) -- -- -- 2,000 Reimbursed general partner transaction costs(4) -- -- -- 1,807 ---------- -------- --------- -------- Total expenses 51,205 35,694 152,577 111,669 ---------- -------- --------- -------- Share of net income of Frontier 373 516 1,246 1,363 ---------- -------- --------- -------- Operating income 29,564 19,342 78,330 46,236 Net interest expense (10,853) (6,237) (30,029) (17,679) Other income 720 494 1,455 1,387 ---------- -------- --------- -------- Income before income tax expense 19,431 13,599 49,756 29,944 ---------- -------- --------- -------- Income tax benefit (expense): Current (485) (1,411) (2,288) (1,898) Deferred(5) 289 (22) 4,824 (239) ---------- -------- --------- -------- (196) (1,433) 2,536 (2,137) ---------- -------- --------- -------- Net income $19,235 $12,166 $52,292 $27,807 ========== ======== ========= ======== Net income (loss) for the general partner interest(6) $347 $243 $720 $(1,215) ========== ======== ========= ======== Net income for the limited partner interests(6) $18,888 $11,923 $51,572 $29,022 ========== ======== ========= ======== Basic net income per limited partner unit $0.48 $0.39 $1.31 $0.97 ========== ======== ========= ======== Diluted net income per limited partner unit $0.48 $0.39 $1.31 $0.96 ========== ======== ========= ======== Weighted average units outstanding: Basic 39,307 30,761 39,305 30,051 Diluted 39,321 30,762 39,332 30,089 *T -0- *T PACIFIC ENERGY PARTNERS, L.P. (Unaudited) (Amounts in thousands) CONDENSED CONSOLIDATED BALANCE SHEETS September 30, December 31, 2006 2005 ------------- -------------- Assets Current assets $265,226 $192,115 Property and equipment, net 1,252,750 1,185,534 Intangible assets 67,639 69,180 Investment in Frontier Pipeline Company 8,651 8,156 Other assets 17,957 21,467 ------------- -------------- Total assets $1,612,223 $1,476,452 ============= ============== Liabilities and Partners' Capital Current liabilities $204,160 $156,187 Long-term debt 669,163 565,632 Deferred income taxes 32,560 35,771 Environmental and other long-term liabilities 17,416 20,623 Partners' capital 688,924 698,239 ------------- -------------- Total liabilities and partners' capital $1,612,223 $1,476,452 ============= ============== *T -0- *T CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS Nine Months Ended September 30, ------------------ 2006 2005 -------- --------- Cash flows from operating activities: Net income $52,292 $27,807 Depreciation, amortization, non-cash employee compensation under long-term incentive plan, deferred income taxes and Frontier adjustment 27,458 24,256 Working capital adjustments (30,259) 13,592 -------- --------- Net cash provided by operating activities 49,491 65,655 -------- --------- Cash flows from investing activities: Acquisition (2,365) (461,165) Net additions to property and equipment (67,522) (27,265) Additions to pipeline linefill and minimum tank inventory (16,106) -- Other 181 -- -------- --------- Net cash used in investing activities (85,812) (488,430) -------- --------- Cash flows from financing activities: Issuance of common units, net of fees and offering expenses -- 289,122 Capital contribution from the general partner -- 8,569 Net proceeds from senior notes offering -- 170,997 Proceeds from bank credit facilities 182,094 203,291 Repayment of bank credit facilities (81,463) (195,661) Deferred financing costs -- (4,676) Distributions to partners (68,714) (46,224) Issuance of common units pursuant to exercise of unit option -- 707 Related parties (28) (1,171) -------- --------- Net cash provided by financing activities 31,889 424,954 -------- --------- Effect of exchange rate changes on cash 83 213 -------- --------- Net increase in cash and cash equivalents (4,349) 2,392 Cash and cash equivalents, beginning of period 18,064 23,383 -------- --------- Cash and cash equivalents, end of period $13,715 $25,755 ======== ========= *T -0- *T PACIFIC ENERGY PARTNERS, L.P. CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND OPERATING HIGHLIGHTS BY SEGMENT Three Months Ended September 30, 2006 and 2005 (Unaudited) (Amounts in thousands) West Rocky Intersegment Coast Mountain and Business Business Intrasegment Unit Unit Eliminations Total -------- --------- ------------- -------- Three Months Ended September 30, 2006: Revenues: Pipeline transportation revenue $18,224 $21,500 $(2,729) $36,995 Storage and terminaling revenue 23,467 -- 23,467 Pipeline buy/sell transportation revenue -- 10,010 10,010 Crude oil sales, net of purchases 9,494 572 (142) 9,924 -------- --------- -------- Net revenue 51,185 32,082 80,396 -------- --------- -------- Expenses: Operating expenses 21,505 15,412 (2,871) 34,046 Depreciation and amortization 5,528 4,870 10,398 -------- --------- -------- Total expenses 27,033 20,282 44,444 -------- --------- -------- Share of net income of Frontier -- 373 373 -------- --------- -------- Operating income(7) $24,152 $12,173 $36,325 ======== ========= ======== Operating Data (barrels per day, in thousands) Line 2000 and Line 63 pipeline systems 111.0 Rangeland pipeline system: Sundre - North 19.7 Sundre - South 48.5 Western Corridor system 26.6 Salt Lake City Core system 126.7 Frontier Pipeline 46.2 Rocky Mountain Products Pipeline(8) 59.2 Three Months Ended September 30, 2005: Revenues: Pipeline transportation revenue $13,887 $14,887 $(1,491) $27,283 Storage and terminaling 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 -------- --------- -------- 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(7) $9,813 $13,644 $23,457 ======== ========= ======== Operating Data (barrels per day, in thousands) Line 2000 and Line 63 pipeline systems 104.4 Rangeland pipeline system: Sundre - North 19.3 Sundre - South 48.1 Western Corridor system 26.8 Salt Lake City Core system 125.6 Frontier Pipeline 49.6 Rocky Mountain Products Pipeline(8) -- *T -0- *T PACIFIC ENERGY PARTNERS, L.P. CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND OPERATING HIGHLIGHTS BY SEGMENT Nine Months Ended September 30, 2006 and 2005 (Unaudited) (Amounts in thousands) West Rocky Intersegment Coast Mountain and Business Business Intrasegment Unit Unit Eliminations Total -------- --------- ------------- --------- Nine Months Ended September 30, 2006: Revenues: Pipeline transportation revenue $52,083 $60,790 $(7,221) $105,652 Storage and terminaling revenue 65,420 -- 65,420 Pipeline buy/sell transportation revenue -- 31,136 31,136 Crude oil sales, net of purchases 26,000 1,860 (407) 27,453 -------- --------- --------- Net revenue 143,503 93,786 229,661 -------- --------- --------- Expenses: Operating expenses 63,200 43,548 (7,628) 99,120 Depreciation and amortization 16,534 14,158 30,692 -------- --------- --------- Total expenses 79,734 57,706 129,812 -------- --------- --------- Share of net income of Frontier -- 1,246 1,246 -------- --------- --------- Operating income(7) $63,769 $37,326 $101,095 ======== ========= ========= Operating Data (barrels per day, in thousands) Line 2000 and Line 63 pipeline systems 112.6 Rangeland pipeline system: Sundre - North 21.9 Sundre - South 44.5 Western Corridor system 26.3 Salt Lake City Core system 125.3 Frontier Pipeline 46.6 Rocky Mountain Products Pipeline(8) 60.3 Nine Months Ended September 30, 2005: Revenues: Pipeline transportation revenue $46,525 $41,348 $(4,806) $83,067 Storage and terminaling 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 -------- --------- --------- Expenses: Operating expenses 46,507 30,604 (5,046) 72,065 Line 63 oil release costs(3) 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(7) $31,962 $32,183 $64,145 ======== ========= ========= Operating Data (barrels per day, in thousands) Line 2000 and Line 63 pipeline systems 120.8 Rangeland pipeline system: Sundre - North 21.3 Sundre - South 45.3 Western Corridor system 24.0 Salt Lake City Core system 119.8 Frontier Pipeline 46.4 Rocky Mountain Products Pipeline(8) -- *T -0- *T PACIFIC ENERGY PARTNERS, L.P. (Unaudited) (Amounts in thousands) RECONCILIATION OF OPERATING INCOME BY SEGMENT TO CONDENSED CONSOLIDATED STATEMENTS OF INCOME Three Months Ended Nine Months Ended September 30, September 30, ------------------- ----------------- 2006 2005 2006 2005 ---------- -------- -------- -------- Operating income by Business Unit: West Coast Business Unit $24,152 $9,813 $63,769 $31,962 Rocky Mountain Business Unit 12,173 13,644 37,326 32,183 ---------- -------- -------- -------- 36,325 23,457 101,095 64,145 General expenses and other income (expense):(7) General and administrative expense (5,649) (4,115) (18,236) (12,987) Merger costs(1) (1,112) -- (4,529) -- Accelerated long-term incentive plan compensation expense(2) -- -- -- (3,115) Reimbursed general partner transaction costs(4) -- -- -- (1,807) Interest expense (10,853) (6,237) (30,029) (17,679) Other income 720 494 1,455 1,387 Income tax benefit (expense)(5) (196) (1,433) 2,536 (2,137) ---------- -------- -------- -------- Net income $19,235 $12,166 $52,292 $27,807 ========== ======== ======== ======== *T -0- *T LIMITED PARTNERS AND GENERAL PARTNER ALLOCATION OF NET INCOME Three Months Ended Nine Months Ended September 30, September 30, ------------------ ----------------- 2006 2005 2006 2005 --------- -------- -------- -------- Net income for the limited partner interests: Net income $19,235 $12,166 $52,292 $27,807 Costs allocated to general partner: LBP Option Plan costs(9) 370 -- 1,250 -- Senior Notes consent solicitation and other costs -- -- -- 893 Severance costs -- -- -- 914 --------- -------- -------- -------- Total costs allocated to general partner 370 -- 1,250 1,807 --------- -------- -------- -------- Income before costs allocated to general partner 19,605 12,166 53,542 29,614 Less: General partner incentive distribution rights paid (331) -- (917) -- --------- -------- -------- -------- Subtotal 19,274 12,166 52,625 29,614 Less: General partner 2% ownership (386) (243) (1,053) (592) --------- -------- -------- -------- Net income allocated to limited partners $18,888 $11,923 $51,572 $29,022 ========= ======== ======== ======== Net income for the general partner interest: General partner 2% ownership $386 $243 $1,053 $592 Incentive distribution payments to general partner 331 -- 917 -- Costs allocated to general partner (370) -- (1,250) (1,807) --------- -------- -------- -------- Net income (loss) allocated to general partner $347 $243 $720 $(1,215) ========= ======== ======== ======== *T -0- *T PACIFIC ENERGY PARTNERS, L.P. (Unaudited) (Amounts in thousands, except per unit amounts) RECONCILIATION OF NET INCOME TO RECURRING NET INCOME(10) Three Months Ended Nine Months Ended September 30, September 30, ------------------- ----------------- 2006 2005 2006 2005 ---------- -------- -------- -------- Net income $19,235 $12,166 $52,292 $27,807 Add: Merger costs(1) 1,112 -- 4,529 -- Add: Accelerated long-term incentive plan compensation expense(2) -- -- -- 3,115 Add: Line 63 oil release costs(3) -- -- -- 2,000 Add: Reimbursed general partner transaction costs(4) -- -- -- 1,807 Less: Deferred tax rate adjustment(5) -- -- (4,560) -- ---------- -------- -------- -------- Recurring net income $20,347 $12,166 $52,261 $34,729 ========== ======== ======== ======== Recurring net income for the general partner interest $369 $243 $719 $695 ========== ======== ======== ======== Recurring net income for the limited partner interest $19,978 $11,923 $51,542 $34,034 ========== ======== ======== ======== Basic and diluted recurring net income per limited partner unit $0.51 $0.39 $1.31 $1.13 ========== ======== ======== ======== *T -0- *T RECONCILIATION OF NET INCOME TO EBITDA(11) Three Months Ended Nine Months Ended September 30, September 30, ------------------ ------------------ 2006 2005 2006 2005 --------- -------- --------- -------- Net income $19,235 $12,166 $52,292 $27,807 Interest expense 10,853 6,237 30,029 17,679 Depreciation and amortization 10,398 6,560 30,692 19,695 Income tax (benefit) expense 196 1,433 (2,536) 2,137 --------- -------- --------- -------- EBITDA $40,682 $26,396 $110,477 $67,318 ========= ======== ========= ======== *T -0- *T PACIFIC ENERGY PARTNERS, L.P. RECONCILIATION OF NET INCOME TO DISTRIBUTABLE CASH FLOW(12) (Unaudited) (Amounts in thousands) Three Months Ended Nine Months Ended September 30, September 30, ------------------- ----------------- 2006 2005 2006 2005 ---------- -------- -------- -------- Net income $19,235 $12,166 $52,292 $27,807 Depreciation and amortization 10,398 6,560 30,692 19,695 Amortization of debt issue costs and accretion of discount on long-term debt 625 487 1,847 1,424 Non-cash employee compensation under long-term incentive plan 236 -- 732 1,429 Costs allocated to general partner(6) 370 -- 1,250 1,807 Deferred income tax expense (benefit)(5) (289) 22 (4,824) 239 Sustaining capital expenditures (1,502) (2,243) (4,148) (3,070) ---------- -------- -------- -------- Distributable cash flow 29,073 16,992 77,841 49,331 Less: net (increase) decrease in operating assets and Liabilities (22,783) 165 (30,259) 13,592 Less: share of income of Frontier (373) (516) (1,246) (1,363) Add: distributions from Frontier -- 667 622 1,317 Less: non-cash employee compensation under long-term incentive plan added (deducted) above (236) -- (732) (1,429) Add: employee compensation under long-term incentive plan 236 -- 782 2,886 Less: costs reimbursed by general partner -- -- -- (1,807) Add: other non-cash adjustments (16) (40) (1,665) 58 Add: sustaining capital expenditures 1,502 2,243 4,148 3,070 ---------- -------- -------- -------- Net cash provided by operating activities $7,403 $19,511 $49,491 $65,655 ========== ======== ======== ======== Total distributable cash flow $29,073 $16,992 $77,841 $49,331 General partner interest in distributable cash flow (2,192) (458) (4,423) (1,659) ---------- -------- -------- -------- Limited partner interest in distributable cash flow $26,881 $16,534 $73,418 $47,672 ========== ======== ======== ======== *T -0- *T PACIFIC ENERGY PARTNERS, L.P. RECONCILIATION OF RECURRING NET INCOME GUIDANCE TO NET INCOME GUIDANCE AND EBITDA GUIDANCE(13) (Unaudited) (Amounts in millions) Three Months Ending Year Ending December 31, 2006 December 31, 2006 -------------------- ----------------- Low High Low High ---------- --------- --------- ------- Recurring net income guidance(14) $13.7 $16.0 $65.9 $68.2 Less: Merger costs (1.4) (1.2) (5.9) (5.7) Add: Deferred tax rate adjustment -- -- 4.6 4.6 ---------- --------- --------- ------- Net income guidance(15) $12.3 $14.8 $64.6 $67.1 Add: Depreciation and amortization 10.6 11.0 41.3 41.7 Add: Interest expense 10.8 11.5 40.8 41.5 Add: Income tax expense (benefit)(16) -- 0.2 (2.5) (2.3) ---------- --------- --------- ------- Earnings before interest, tax, depreciation and amortization (EBITDA) $33.7 $37.5 $144.2 $148.0 ========== ========= ========= ======= *T -0- *T PACIFIC ENERGY PARTNERS, L.P. NOTES TO FINANCIAL SCHEDULES (Unaudited) (Amounts in millions, except volume data) *T (1) On June 12, 2006, we announced that we had entered into a merger agreement with Plains All American Pipeline, L.P. ("PAA"), pursuant to which we will be merged into PAA. PAA will acquire common units (except for common units purchased from LB Pacific, LP) of Pacific Energy through a tax-free unit-for-unit merger in which each unitholder of Pacific Energy will receive 0.77 newly issued PAA common units for each Pacific Energy common unit. Under the terms of a separate agreement, PAA will acquire from LB Pacific, LP and its affiliates ("LB Pacific") the general partner interest and incentive distribution rights of the Partnership as well as 5.2 million common units and 5.2 million subordinated units for a total of $700 million in cash. For the three and nine months ended September 30, 2006, we incurred $1.1 million and $4.5 million, respectively, in professional fees and other costs directly related to the merger. (2) On March 3, 2005, in connection with a change in control of the Partnership's general partner, all restricted units outstanding under the Long-Term Incentive Plan immediately vested pursuant to the terms of the grants. The Partnership recognized compensation expense of $3.1 million relating to the accelerated vesting. Of this compensation expense, $0.6 million was considered operating expense and $2.5 million was general and administrative expense. (3) 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. (4) In 2005, our general partner reimbursed us $1.8 million for transaction costs incurred in connection with the change in control of our general partner. Generally accepted accounting principles require us to record an expense with the reimbursement shown as a partner's capital contribution. (5) During the nine months ended September 30, 2006, we recognized into earnings a $4.6 million deferred tax benefit to adjust our deferred tax liability for recently enacted reductions in the Canadian provincial and federal income tax rates. (6) See "Limited Partners and General Partner Allocation of Net Income" schedule included herein. (7) General and administrative expenses, merger costs, accelerated long-term incentive plan expense, reimbursed general partner transaction costs, net interest expense, other income and income tax expense are not allocated among the West Coast and Rocky Mountain business units. (8) The Rocky Mountain Products Pipeline was purchased on September 30, 2005. (9) In January 2006, LB Pacific, LP ("LBP"), the owner of our General Partner, granted options under its LBP Option Plan (the "Plan") to certain of our officers and key employees. Under the Plan, participants are granted options to acquire partnership interests in LBP. We are not obligated to pay any amounts to LBP for the benefits granted or paid to our officers and key employees under the Plan, although generally accepted accounting principles require that we record an expense in the Partnership's financial statements with a corresponding increase in the general partner's capital account. For the three and nine months ended September 30, 2006, we recorded compensation expense of $0.4 million and $1.3 million, respectively, relating to the LBP Option Plan. (10) Recurring net income is a non-GAAP financial measure. This measure is used to more precisely compare year over year net income by eliminating one-time, non-recurring charges. You should not consider recurring net income as an alternative to net income, income before taxes, cash flow from operations, or any other measure of financial performance presented in accordance with accounting principles generally accepted in the United States. Our recurring net income may not be comparable to similarly titled measures of other entities. (11) EBITDA (earnings before interest, taxes, depreciation and amortization expense) is used as a supplemental performance measure by management to assess (i) the financial performance of our assets without regard to financing methods, capital structures or historical cost basis, (ii) the ability of our assets to generate cash sufficient to pay interest cost and support our indebtedness, (iii) our operating performance and return on capital as compared to those of other companies in the midstream energy sector, without regard to financing and capital structure, and (iv) the viability of projects and the overall rates of return on alternative investment opportunities. You should not consider EBITDA as an alternative to net income, income before taxes, cash flow from operations, or any other measure of financial performance presented in accordance with accounting principles generally accepted in the United States. Our EBITDA may not be comparable to similarly titled measures of other entities. Additional information regarding EBITDA is included in our annual report on Form 10-K for the year ended December 31, 2005. For the three and nine months ended September 30, 2006, EBITDA has been reduced by $1.1 million and $4.5 million, respectively, for costs directly related to the proposed merger with Plains All American Pipeline, L.P. For the nine months ended September 30, 2005, EBITDA was reduced by $3.1 million of compensation expense relating to the accelerated vesting of our long term incentive compensation plan, $2.0 million of oil release costs and $1.8 million of general partner costs that was required by GAAP to be recorded in our income statement. There was no unusual impact on EBITDA for the three months ended September 30, 2005. (12) 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 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, 2005. (13) The guidance for the three months ending December 31, 2006 and for the twelve months ending December 31, 2006 are 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 1, 2006. We undertake no obligation to publicly update or revise any forward-looking statements. (14) Recurring net income guidance for the twelve months ending December 31, 2006 excludes $4.5 million of merger costs and a $4.6 million deferred tax benefit to adjust our deferred tax liability for reductions in the Canadian provincial and federal income tax rates that were enacted into law in the second quarter of 2006. (15) Included in the net income guidance for the year ending December 31, 2006 is forecast general and administrative expense of $23 million to $24 million. (16) Included for the year ending December 31, 2006 is forecast cash tax expense of $2.7 million and forecast deferred tax benefit of $5.1 million.