PLAINS GP HOLDINGS, L.P. 3Q23 Earnings Call
November 3, 2023
Forward-Looking Statements &
Non-GAAP Financial Measures Disclosure
- This presentation contains forward-looking statements, including, in particular, statements about the performance, plans, strategies and objectives for future operations of Plains All American Pipeline, L.P. ("PAA") and Plains GP Holdings, L.P. ("PAGP"). These forward-looking statements are based on PAA's current views with respect to future events, based on what we believe to be reasonable assumptions. PAA and PAGP can give no assurance that future results or outcomes will be achieved. Important factors, some of which may be beyond PAA's and PAGP's control, that could cause actual results or outcomes to differ materially from the results or outcomes anticipated in the forward-looking statements are disclosed in PAA's and PAGP's respective filings with the Securities and Exchange Commission.
- This presentation also contains non-GAAP financial measures relating to PAA, such as Adjusted EBITDA attributable to PAA, Implied DCF and Free Cash Flow. A reconciliation of these historical measures to the most directly comparable GAAP measures is available in the Investor Relations section of PAA's and PAGP's website at www.plains.com, select "PAA" or "PAGP," navigate to the "Financial Information" tab, then click on "Non-GAAP Reconciliations." PAA does not provide a reconciliation of non-GAAP financial measures to the equivalent GAAP financial measures on a forward-looking basis as it is impractical to forecast certain items that it has defined as "Selected Items Impacting Comparability" without unreasonable effort. Definitions for certain non-GAAP financial measures and other terms used throughout this presentation are included in the appendix.
Investor Contacts
Blake Fernandez
Vice President, Investor Relations
Blake.Fernandez@plains.com
Michael Gladstein
Director, Investor Relations
Michael.Gladstein@plains.com
Investor Relations
866-809-1291plainsIR@plains.com
2
3Q23 Results & Highlights
Another Quarter of Solid Execution
Strong Execution | Segment Performance | Self-Funding Capital |
$662 | $553 / $99 | $379 | |
3Q23 Adj. EBITDA | 3Q23 Crude / NGL | 2023 YTD Investment & Maintenance | |
attributable to PAA ($MM) | Segment Adj. EBITDA ($MM) | Capital Net to PAA ($MM) | |
Raising Full-Year | Proposed Annualized | Lowering Leverage | |
Guidance | Distribution Increase(1) | Ratio Target Range(2) | |
$2.60 - $2.65 | $0.20/unit | 3.25x - 3.75x | |
2023(G) Adj. EBITDA | ~19% Increase in Distribution | Reducing long-term leverage | |
attributable to PAA ($Bln) | Payable February 2024 | ratio target range by 0.5x | |
2023(G): Furnished November 3, 2023. Please visit https://ir.paalp.comfor a reconciliation of Non-GAAP financial measures reflected above to most directly comparable GAAP measures. | 3 | ||
(1) Subject to Board approval - management intends to recommend increase payable commencing in February 2024. (2) Includes 50% debt treatment for preferred equity. |
Raising Full-Year 2023 Guidance
Strong year-to-date performance and contribution from bolt-on acquisitions
Adj. EBITDA attributable to PAA
$2.60 - $2.65B
Year-End Leverage Ratio
<3.5x
Free Cash Flow (FCF)
$1.45B(1)
(includes A&D activity)
Investment Capital
(Net to PAA)
$325MM
2023(G): Furnished November 3, 2023. Non-rangebound metrics align with midpoint of Adj. EBITDA attributable to PAA; amounts intended to be +/-. | 4 |
(1) Free Cash Flow estimate includes net A&D inflows of ~$5MM & ~$65MM of working capital outflows. |
Permian Gathering Bolt-On Acquisitions
Enhancing Permian footprint through supply aggregation & system liquidity
Overview of Transactions
- Permian JV acquired Rattler Midstream's Southern Delaware Basin crude gathering system(1) and LM Energy's Touchdown crude gathering system(2)
- Aggregate cash consideration of ~$205MM (~$135MM net to PAA)
- Capital disciplined; bolt-on acquisitions funded with excess FCF
- Expect to generate unlevered returns consistent with Plains' return thresholds (300 to 500 basis points > WACC)
- Continued optimization of Permian footprint
- Further positions the Permian JV to expand its service offerings and extend commercial relationships with new and existing customers
- Acquisition closed on September 1, 2023. (2) Acquisition closed on November 1, 2023.
Midland
Basin
Midland
Wink
Crane
Delaware
Basin
McCamey
LM ENERGY
SOUTHERN DELAWARE
PERMIAN LONG-HAUL
PERMIAN JV
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Lowering Long-Term Leverage Ratio Target Range
Maintaining flexibility for returns to equity holders & disciplined investment opportunities
Balance sheet leverage vs. leverage ratio target range
Includes 50% debt treatment for preferred equity
Reducing leverage target range by 0.5x
Range lowered to 3.25x - 3.75x(1)
Ensure balance sheet flexibility
Potential to operate above / below target short-term | |||
for strategic M&A or market environment | 4.5x | 3.7x | <3.5x |
Investment Grade balance sheet
Achieve & maintain mid-BBB / Baa credit ratings
NEW
Leverage Ratio
Target Range
3.75x
3.25x
2023(G): Furnished November 3, 2023.
(1) Includes 50% debt treatment for preferred equity.
2021 | 2022 | 2023(G) |
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Delivering on Increasing Returns of Capital to Equity Holders
Targeting multi-year, sustainable distribution growth
($/Unit; Common Distribution Coverage)
2024: +$0.20/unit annualized (+19%) vs. 2023
(Payable Feb-24)(1)
$1.27 | ||||
$1.07(~220%) | Future Considerations | |||
$0.87 (~265%) | Subject to board approval, financial positioning, business | |||
$0.72 (~285%) | outlook & investment opportunities | |||
Upon reaching target coverage, further distribution | ||||
increases driven by future DCF growth & competing | ||||
allocation priorities | ||||
Future potential increases expected to be payable in the | ||||
first quarter of each calendar year | ||||
2021 | 2022 | 2023 | 2024 | |
(1) Subject to Board approval - management intends to recommend increase payable commencing in February 2024. | 7 |
Financial & Operational Metrics
Financial ($MM, except per-unit metrics) | 2023(G)(1) |
Adjusted EBITDA attributable to PAA | $2,600 - $2,650 |
Crude Oil Segment | $2,125 |
NGL Segment | $480 |
Other | $20 |
Implied DCF to Common | $1,650 |
Distribution Coverage (Common) | 220% |
Year-End Leverage Ratio | <3.5x |
Cash Flow from Operations (CFFO)(2) | $2,450 |
Net Divestitures & (Acquisitions) | $5 |
Free Cash Flow (FCF) | $1,450 |
Free Cash Flow after Distributions (FCFaD) | $450 |
Operational (Mb/d) | Capital | |||||||
Crude Pipeline Volumes(3) | Crude Oil | Net to PAA | Consolidated | |||||
8,380 | Investment | $325 | $420 | |||||
Permian | 6,310 | Crude | 255 | 350 | ||||
Other | 2,070 | Permian JV | 170 | 265 | ||||
NGL | Other | 85 | 85 | |||||
C3+ Spec Product Sales(4) | NGL | 70 | 70 | |||||
53 | Maintenance | $210 | $225 | |||||
Fractionation Volumes | 115 | Total | $535 | $645 | ||||
2023(G): Furnished November 3, 2023. (1) Non-rangebound metrics align with midpoint of Adj. EBITDA attributable to PAA; amounts intended to be +/-. (2) Free Cash Flow estimate includes net A&D inflows of ~$5MM & ~$65MM of working capital outflows. | 8 | |||||||
(3) Permian JV, Cactus II & Red River volumes on a consolidated (8/8ths) basis. (4) C3+ sales on this slide refers to the sale of spec C3, C4 and C5+ exposed to frac spread. |
Free Cash Flow Priorities
Committed to significant return of capital, continued capital discipline & financial flexibility
2023(G) Capital Allocation
Represents +/- $1.45B of Free Cash Flow
FCFaD | Targeting multi-year, sustainable distribution growth | |
+/- $450 | & opportunistic repurchases | |
(Available for 2023 Net Debt Reduction(1)) | 2024: $0.20/unit annual distribution increase to $1.27/unit(2) | |
2024+: targeting ~$0.15/unit annual distribution growth | ||
(until ~160% coverage reached) |
+/- $1,000 | Distributions | Disciplined | Balance sheet stability & | |
(Common & Preferred) | capital investments | financial flexibility | ||
Self-fund annual routine | Resilient through cycles; | |||
capital (inv. & maint.) with | create dry powder | |||
cash flow | ||||
Uses | 9 | |||
2023(G): Furnished November 3, 2023. (1) Excludes cash on balance sheet which can be used for debt reduction. (2) Subject to Board approval - management intends to recommend increase payable commencing in February 2024. |
Plains' Investment Opportunity
Generating multi-year Free Cash Flow & increasing returns of capital to equity holders
Attractive Current Yield of ~8%
Meaningful coverage, targeting multi-year distribution growth
Significant Free Cash Flow
2023(G): +/- $1.45B FCF / $450MM FCFaD
Balance Sheet Strength
YE-2023(G): Leverage <3.5x
Strategically Located in Growth Basins
Premier North American Crude & Canadian NGL Assets
2023(G): Furnished November 3, 2023. | 10 |
Yield based on closing unit price as of 11/2/23 & annualized distribution of $1.27. |
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Disclaimer
Plains GP Holdings LP published this content on 03 November 2023 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 03 November 2023 11:41:46 UTC.
