Plains GP Holdings, L.P.

Good day and thank you for standing by. Welcome to the PAA and PAGP First Quarter 2025 Earnings Conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1-1 on your telephone. You will then hear an automated message advising you your hand is raised. To withdraw your question, please press star 1-1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Blake Fernandez, Vice President of Investor Relations. Please go ahead.

Thank you, Michelle. Good morning and welcome to Plains All American First Quarter 2025 Earnings Call. Today's slide presentation is posted on the Investor Relations website under the News and Events section at .plains.com. An audio replay will also be available following today's call. Important disclosures regarding forward-looking statements and non-GAAP financial measures are provided on slide 2. An overview of today's call is provided on slide 3. A condensed consolidating balance sheet for PAGP and other reference materials are in the appendix. Today's call will be hosted by Willie Chang, Chairman and CEO, Al Swanson, Executive Vice President, and CFO, along with other members of the management team. With

that, I will turn the call over to Willie. Thank you, Blake. Good morning, everyone, and thank you for joining us. This morning, we reported solid first quarter performance with an adjusted EBITDA of tributable Plains of $754 million, which Al will cover in more detail. Before providing an update on our efficient growth initiatives, I'd like to offer some thoughts on the current market and policy environment. The ongoing uncertainty on trade tariffs is weighing on economic forecasts in creating significant volatility. Additionally, the dissension among OPEC members and the prospects of incremental supply coming to market has resulted in a lower price commodity than anticipated at the beginning of the year. Nevertheless, we believe a lower price environment will ultimately reinforce the cyclical nature of the commodity markets, leading to a constructive medium to long-term outlook. Slide 4 outlines several supply and demand dynamics that we believe will contribute to a supportive backdrop over time. Despite the current market volatility, our business remains resilient. Assuming a $60 to $65 WT environment persists for the remainder of the year, we would expect both our 2025 EBITDA guidance and Permian Growth Outlook could be in the lower half of the respective ranges. Our NGL segment remains largely insulated from lower commodity prices, with approximately 80% of our estimated C3 Plus spec products sales hedged for 2025. In this environment, we believe it's important, more important than ever, to remain focused on what we can control. As a result, we continue to execute on our efficient growth strategy, generating significant free cash flow, maintaining a highly flexible balance sheet where our leverage ratio remains towards the low end of our target range, and returning capital to our unit holders. Turning to a few highlights, in our NGL segment, our transition to more fee-based earnings continues with our 30,000 barrel a day fractionation bottleneck project at Fort Sask, having been placed into service during the second quarter, along with other expansions of our NGL and condensate gathering systems being completed throughout the year. These projects are supported by long-term customer commitments and enhance our integrated NGL value chain. In our crude segment, we had two small strategic transactions. We acquired the remaining 50% equity in the Cheyenne pipeline in the Rockies. This asset serves as a vital connection between Guernsey and downstream crude oil pipelines, Saddlehorn, and White's Cliffs, which Plains owns an equity interest in. In May, we acquired Black Knight Midstream, a Midland-based and crude gathering system for approximately 55 million. Both transactions complement our existing asset base and build upon our track record of successful bolt-on transactions. As shown on slide five, over the last several years, we've successfully deployed approximately 1.3 billion into bolt-on acquisitions. We continue to believe these opportunities present attractive risk-adjusted returns, and our balance sheet flexibility provides financial capacity to continue to progressing the opportunities set. Before turning the call over to Al, I do wanna say thank you and acknowledge our colleague, Harry Paphonis, our president and co-founder of the company. Harry's played an integral part in building Plains since its inception decades ago. We're very thankful for his relentless focus on developing lasting relationships, customer service, and operational excellence, together with an unwavering commitment to integrity, accountability, and teamwork. We wish Harry the very, very best in his retirement. With that, I'll turn the call over to you,

Al. Thanks, Willie. We reported first quarter crude oil segment adjusted EBITDA of $559 million, which was impacted by winter weather and higher than expected refinery downtime. These events drove volumes below expectations in the quarter. However, we have seen a recovery in April and May with a healthy ramp in our gathering volumes across our system. Moving to our NGL segment, we reported segment adjusted EBITDA of $189 million, which benefited from higher frac spreads and NGL sales volumes driven by stronger border flows. Slide six and seven in today's presentation contain segment adjusted EBITDA walks that provide additional details on our first quarter performance. With regard to trade tariffs, I would like to provide an update since our last earnings call. Currently, the energy product imported into the United States from our Canadian operations are exempt under the USMCA, limiting the direct impact of tariffs on our business. While there is a fair amount of uncertainty in the markets today, you will see on slide eight, we left our key assumptions unchanged for the year, including a $75 per barrel WTI price and 200 to 300,000 barrels per day of year over year Fermion growth. Key sensitivities are provided within the slide, allowing investors to analyze various scenarios. As illustrated on slide nine, we expect to generate strong cash flow this year with adjusted free cash flow of about $1.1 billion, which excludes changes in assets and liabilities and is reduced by approximately $635 million for acquisitions. With that, I'll turn the call back to Willie.

Thank you, Al. We're off to a solid start for the year, albeit in a more volatile and uncertain market. As shown on slide 10, we continue to make progress on our key financial objectives and are well positioned to execute our strategy in a highly volatile environment. In summary, our strong balance sheet offers financial capacity and flexibility. We continue to demonstrate capital discipline while executing on our fish and growth strategy, including our focus on bolt-on acquisitions, and we remain committed to returning cash to our unit holders. Before we hand back to Blake, Harry, would you like to make a few comments?

Yes, thank you, Willie. I appreciate that. Before we go to Q&A, first I'd like to thank Willie for his kind remarks and his leadership. I've enjoyed working with him over these last 10 years. He has a great team, and I can tell you the team is as strong as it's ever been. I'd also like to thank all of you for joining us on our quarterly earnings calls and your continued interest in planes. With that, I'll turn it over to Blake, to lead us into Q&A.

Thanks, Harry, and again, congrats. As we enter the Q&A session, please limit yourself to two questions. For those with additional questions, please feel free to return to the queue. This will allow us to address questions from as many participants as possible in our available time this morning. The IR team will also be available after the call to address additional questions. Michelle, I think we're ready to go to the Q&A session,

please. Thank you. As a reminder, to ask a question, please press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. One moment for our first question. Our first question is gonna come from the line at Gabriel Maureen with Mizzouho. Your line is open. Please go ahead.

Hey, good morning, everyone, and congrats to Harry on all of the retirement and an excellent career at planes. I wanted to ask first about capital allocation in the current environment. It seems like you're still committed to the distribution growth in 2026, but given volatility in the unit price and the like, I was wondering if there's any thoughts in the shifting of a mindset to maybe spend more on buybacks versus distribution growth, again, given all the volatility out there?

Gabe, this is Al. I'll take a shot at it. No really change in our view with regard, focus will be continued to be on distribution growth as the primary method for returning cash to shareholders. Unit repurchases are a component of our capital allocation. No change there, opportunistic and market dislocation. We did buy a small amount in April, just as we were going into blackout. It was only about $7.5 million worth. I think it was about 475,000 units. It's a component, but I wanna say there's been no change in our thinking around opportunistic and market dislocation, so we'll see what the future brings.

Got it, thanks Al, appreciate that. And then, May, if I can ask sort of on the M&A landscape, you've clearly been, have continued success here with these tuck-in deals. Just with all the volatility out there, the latest you're seeing in terms of whether that volatility is kind of a catalyst to do more deals, or you think it's kind of been an impediment to price discovery in the current environment?

Yeah, Gabe, this is Willie, I'll take that one. Clearly, more volatile markets create a little more questions, and what I would tell you is that good deals always take time to get to win-win, and I think we're positioned very well to be able to do that because of the nature of what we see in the value chain. We think we still have a pretty ample supply of opportunities out there, and we continue to chase them. And we'll, you know, maybe the only other thing to mention is in an environment like this, capital discipline is absolutely critical, and we take a real hard look at risk-adjust returns, but we expect to be able to get to more win-win deals throughout the year. Appreciate it, thanks,

Willie.

Thank you, one moment for our next question. Our next question will come from the line of Manav Gupta with UBS. Your line is open, please go ahead.

Good morning, looks like you were able to bring up your fractionation complex in Canada, so help us understand the cadence of earnings in Canada now that this plant is up and running.

Manav, it's Chris Chandler. So yeah, we were excited to bring up the expanded capacity of 30,000 barrels a day at our PFS facility in Edmonton, Alberta. We brought it up just ahead of our new commercial contracts taking effect. They don't all ramp to full volume immediately. They'll ramp over the remainder of this year and a little into next year. This is also part of a multi-project effort where we're doing some additional connectivity and gathering investments along that value chain that'll also come online throughout 2025. So I think you'll see that gradually contribute throughout the year and on a kind of full run rate basis starting in 2026.

Perfect, can we get a few more details about the Black Knight Midstream Permian Basin, the deal you did for about 55 million, the benefits of the deal and why you decided to go ahead with that one, thank you.

Sure, it's right in the middle of our Northern Midland Basin gathering footprint. It's a position that we operated on behalf of the producer and their affiliates. And we negotiated a transaction with them. It's got some long-term capital synergies helping us to get to other positions that are on the other side of that. It's in the absolute core of the Northern Midland Basin. The producer on the system is one of their top assets, so we feel very comfortable with the rock, the resource, the inventory, the purchasing multiple that we did. And it's a good, as Willie said, a win-win. It's a good win for our private equity partner that developed the asset, and it's a great win for Plains Longer Terms to own this asset.

Thank you.

Thank you, one moment for our next question. Our next question's gonna come from the line of Michael Blum with Wells Fargo. Your line is open, please go ahead.

Thanks, and good morning, everyone. I wonder if you can give us your latest thoughts on conversations with producers, what they're telling you, and just your latest outlook on premium volumes. I realize you kept the guidance at 200,000 to 300,000 barrels, but I'm curious where you think that's sort of really trending, and also for 26, thanks.

Sure, Michael. I'll stick to 25, but what I can tell you is you've already grown over 100,000 barrels from the end of last year to now, so the 200,000 barrels a day does not seem very Herculean as a growth expectation for this. I'd say by and large, the producers are in a very similar situation. It's a bit of wait and see. The volatility just started a month ago, and so you don't make two or three of your plans based on one month of activity, and you've seen some rebound in it. So I think in the next three months, it's a function of time, and it's a function of flat price, and so it's a short period of time at this price. If it sustains for a longer period of time here, you will see some flattening out. If it goes below this, below $55 a barrel, you've heard from the producer community, you would start to go to flat and maybe even decline. If it gets above $65 for an extended period of time, you'll see it go the other way. You'll see it back to growth. So from our standpoint, there's a bit of wait and see at this point. You're right in this position where you shouldn't see much difference in activity for the next three to six months, six plus months. You might see some deferral completions and maybe some rigs go down, but it's very consistent what you've heard from the upstream community. That's what they're telling us as well. So like I said, our guidance here is just predicated on what could happen in the price range, but the volatility literally started a month ago, so it's a function of time and price.

And Michael, this is Willie. I think the key point in this is when you think about 25, with the sensitivities that we've given, the impacts to us are very modest, could be very modest. And really the broader thing is to stay engaged and understand what's going on in the rest of the world. This is gonna be a 26 plus issue if it becomes an issue. But as we've outlined on our slide deck, I actually think this is just gonna reinforce the cyclability in the cycles of commodities. As prices go lower, tend to bring more activity in, prices go higher, it's the other way around.

Great, understood, appreciate that. And then second question, just wanted to ask, how should we think about the acquisition multiples you paid for the two bolt-on deals this quarter?

Jeremy, go ahead and take that. So as opposed to multiples, they both hit our return thresholds or higher. Willie mentioned capital discipline. The first was a reduction in future MBCs in exchange for taking ownership of the asset from a partner and we priced in our rates of return there. And we've done as well or better filling the pipeline after the fact. And so that's the first one, the gathering transaction. And once again, our goal is to earn our base return with limited synergy allocation and to compress that multiple with synergy. So I'd say both of them fit the model of the previous 12 acquisitions.

Thanks.

Thank you, one moment for our next question. Our next question is gonna come from the line of Jeremy Tonette with JPMorgan. Your line is open, please go ahead.

Hey, good morning, this is Broth and Reddy, on for Jeremy. The materials highlighted expectations for 300 to 400 million of annual growth capbacks. Maybe just wondering how you think about cap expense at this point and how much might be locked in for 2026.

Hi Robin, this is Chris Chandler. We left our investment capital guidance for 2025 unchanged at 400 million net to planes. We just wrapped up the expansion project at Fort Sass that we mentioned and we have some related NGL supply and connectivity projects that'll happen later this year. On the Permian side where the rest of our capital is largely allocated, that connection capital and gathering spend is designed to pace our producers but we do typically schedule that work six to 12 months out so we're nearly in the 2026 on that segment. But if we were to see a large change in activity from the producers, we could adjust our capital and would obviously do so in response to anything that happens in that area. As for 2026, we haven't and won't provide guidance yet but we are feeling comfortable that that capital spend will be in our long-term capital guidance range of 300 to 400 million net to planes.

Got it, thank you. And then on the frag spread, for the hedging it looks like it stepped up to 80% and just wondering if we get your latest thoughts on the hedging philosophy this year and moving forward.

Jeremy? Yeah, it's consistent. We take a fundamental view. We recognize the need to maintain steady cash flow, we set targets and we continue to execute. So we're opportunistic around hedging. Because of the backward market, we're more hedged in the front end than the back end but that's been consistent with the last several years. So I don't think anything's changed in the last several years in the strategy.

Thank you.

Thank you, and one moment for our next question. Our next question is gonna come from the line of Sunu Sibyl with Seaport Global. Your line is open, please go ahead.

Yeah, hi, good morning everybody and congrats to Harry on a successful career at Plains. My first question was related to the sensitivity that was provided with regard to the perlmian production. I was curious, is the underlying assumption there that the marginal barrel is moving to a particular market, i.e. Cushing or also Houston, and that's kind of primary driver of that sensitivity. And then is that sensitivity based on your full year volumes or obviously you have almost four months plus of 2025 already in, so we should think about that sensitivity on full year volumes or more like eight month volumes?

Sunil, this is Jeremy. That guidance was for the full year and like I said earlier, we've already grown over 100,000 barrels a day, so the view of 200 to 300 still stands for exit to exit, 24 to 25. As to the permeant base and the supply push, the market's gonna price where the marginal barrel goes, so we don't necessarily have assumptions upfront that prices will dictate that, but it's a supply push market and they have a 60 to $80 commodity they're moving, that last 50 cents is just gonna be dictated by the consumer, not necessarily the producer.

Okay, thanks for that. And then one clarification, so for full year 25, you're guiding in the NGL segment 45,000 barrels per day of spec sales. I presume there is a fair bit of functionality in that, so how much of that could they do in Q1?

Sunil, I think that's a follow up question for the IR team, but the seasonality, we use our eight million barrels of storage to optimize when we sell, so the market tells us when to sell those commodities, so we produce the spec sales, condensate is sold relatively, butane and propane are the two that are sold seasonally, but that's a function of price and timing and maximizing value, but that's probably a better follow up question for the IR team.

And Sunil, this is Willie, you'll remember the typical saddle that we have, the colder months obviously more propane is typically sold, so again, our team can follow up with you on that.

Thanks for that.

Thank you.

Thank you, one moment for our next question. Our next question will be from the line of AJ O'Donnell with TPH, your line is open, please go ahead.

Good morning everyone, I was just wondering if I could start on some of the prepared comments about the volume recovery in April and May. Just wondering if you could provide some additional details around that, where you're seeing that along your system and maybe how that could translate into higher long haul throughput for the remainder of the year, thanks.

AJ, hi, this is Jeremy, thank you for the question, some of that recovery was you had a strong fourth quarter and then you had weather events in January and February, which kept production down, so some of that was just production coming back online, also deferral of completions just to get around the weather. So this is very typical, you have the best weather periods here in the spring and the fall, and so you see a lot of completions. So at surge of completions, so as we said earlier, the impact of prices, we really haven't seen any impact of prices so far and we don't expect it for the next month or two. So I think Al was just stating that while volumes were a little bit down in the first quarter, that was really a function of interbasin, which is the lowest margin part of our value chain, and that's really feeding some of the long haul and the long haul down there was driven by downstream demand. So to get to your question on long haul, as you get to the summer driving season and refineries ramp back up, you're gonna see a pickup in those refining markets and their demand for crews, you'll see more crew. So it's an interrelated question.

Okay, appreciate the detail there. And then maybe just one more on kind of the longer term outlook. You know, granted, we're all kind of theorizing about what's gonna happen over the next six to 12 months here with all the backdrop of volatility, but just curious if you guys could provide maybe some updated views about how you're thinking around total, permanent, long haul utilization filling up. I know there were some materials provided in a previous investor deck where you're talking about that 80% threshold and pipes hitting that. Yeah, just any comments about how you're thinking about the forward market there.

Yeah, AJ, that's really a function of production. So I think everybody has their own views of production. I think Willie said at the beginning, which is this is probably not a pause, this is not the stop of growth. You hear different views on that, but our view is the world's gonna need this crude oil for a period of time, there's a great resource, there's very well capitalized producers. They're saying pause at the 55 to 60 range and you've seen prices pause, which means as you see things recover on the demand side and you get more certainty around investment and decisions associated with the tariffs and all that settles out, you see demand recovery, you see the need for more crude oil recover, this is all related. So we're not gonna make long-term statements. Utilization of pipelines is related to volumes, but longer term growth profile and expectation for the permeant hasn't changed. So I don't think that's changed the material. It just might be a timing thing.

AJ, I just reinforced that. It's when you think about the current volatility, you've got the tariffs and OPEC, right? Those are the two things that are the catalyst for the volatility and I think a lot of our business plan and everyone else's business plan is gonna really rest on when that ultimately gets resolved and no one knows the answer to that. So we'll just have to keep following it. Thank you very much. Thank you.

Thank you and one moment for our next question. Our next question is gonna be from the line of John Mackey with Goldman Sachs. Your line is open. Please go ahead.

Hey, team, thanks for the time. We've talked a lot about the upstream side, but you guys are also really tied in on the demand side as well. I'd just be curious if you have any read on kind of real-time demand signals and any sign of slowdown specifically you're seeing either on the refining side or on the export side. Thanks.

So those are two different questions. I'd say that very healthy is the global refining markets. And candidly, you haven't seen gasoline prices move much, but you've seen crude prices go down. So crack spreads are very strong and we're seeing all the refineries come out of turnarounds and run very strong. So I'd say that's a part of the reason for lower volumes in the first quarter was driven by lower movements to refineries. That's all picking up. So that part of the business is very healthy. On the export side, that changes month to month and even within one week periods within given months. You've seen some slowdown on movements internationally, but the barrels have to move, so they get priced to move. Like I said, the Permian is $60 to $80 commodity and that's gonna push to the water and it's gonna price to be sold. So I'd say we're seeing healthy margins globally for refining, so that's the thing to pay attention to on a forward basis, that demand appears to be healthy.

I appreciate that, thanks. And maybe just going back to, I think it was Gabe's question and will you come to it a little bit more here, but just on capital allocation, I think now at the end of the quarter, you're still at the bottom end of the leverage range. Just curious how you guys are thinking about kind of managing within that range given the potential for the backdrop on the macro side to get a little softer. Is that changing your view at all and where you wanna be in that specifically?

You know, John, I'll start out and certainly add, but we've been very clear about our capital allocation plan. One, we're committed to returning cash to the unit holders and we've got our targeted increase to a coverage limit that we've announced years ago and we're gonna execute on that. We are also very optimistic and continue to work on the bolt-ons and we think that opportunity set us out there and that is really the primary goal focus on the highest return options for cash. So those two are gonna drive it. Our leverage is at the lower end. If there were some transactions that made sense, we've always said that we would allow the leverage to go up with the understanding and the planning that it doesn't stay up. So we're using that leverage range really to our benefit as we think about what we might be able to do as far as growing in a capital discipline way. Al, anything to add?

The only thing I would add is it is a range, the leverage range. We don't have the stated desire to be at the bottom end or below on a sustained basis. So we do look at the ability to use some of that capacity for strategic quality investments as we look ahead. We just recently in the last year got triple B rated at all three agencies. We do not view and have no interest in putting leverage at a point that would jeopardize any of those ratings.

I appreciate it, Keller. Thank you.

Thank you and one moment for our next question. Our next question is gonna come from the line of Teresa Chin with Barclays. Your line is open, please go ahead.

Morning, I wanted to go back to the comment about M&A opportunities and the volatile landscape effectively creating more opportunities within this part of your capital allocation strategy. Are you seeing more sellers come to market at this juncture or do you expect this to happen as the year unfolds depending on where pricing goes? And if there are more sellers coming to market, would you expect a more rapid pace of acquisitions just given the state of your leverage, your balance sheet and might only have a short window to execute? How do you view that?

Hey, Teresa, it's Willie. The answer to your question is I think it's a pretty broad range of opportunities. I mean, if you looked at the list of things that we've done, I would argue that some of those transactions were done because of where perhaps a refiner was in the cycle and wanting to monetize. And we've had similar discussions with upstream folks on where do they wanna deploy capital and how do they monetize. So this truly is kind of a back and forth with our partners on an everyday basis on how do you win and how do we get to something. And the thing I would point out is, and I think you understand our system well, because of the network that we have and the relationships we have with a lot of these partners, we can create value in many different ways. So lots of times it's not just simply a bid ask on the asset, it's a bid ask on the asset, but we have more opportunities to create value that create win-win situations. So I know it's a little bit general, but hopefully it gives you the dynamics of all the different things that we look at.

Thank you so much.

Thanks, Teresa.

Thank you. And I'm showing no further questions at this time. And I would like to hand the conference back over to Willie Chang for closing remarks.

Thanks, Michelle. Well, thanks everyone for dialing in. Strong start to the quarter. We look forward to seeing you on the road and giving you more updates. Have a great day.

This concludes today's conference call. Thank you for participating. You may now disconnect.