Plains All American Pipeline, L.P. and Plains GP Holdings Report First-Quarter 2019 Results

HOUSTON–(BUSINESS WIRE)–Plains All American Pipeline, L.P. (NYSE:
PAA
) and Plains GP Holdings (NYSE:
PAGP
) today reported first-quarter 2019 results.

First-Quarter Highlights

  • Delivered 1Q19 financial and operating results ahead of expectations
  • Completed August 2017 deleveraging plan; updated financial policy and
    targeted metrics; increased annual distribution
  • Increased 2019 Adjusted EBITDA guidance
  • Executing Permian-focused capital program, sanctioning new growth
    projects, and advancing new commercial opportunities

“Our first-quarter results and increased 2019 guidance reflect continued
solid execution of our business plan,” stated Willie Chiang, Chief
Executive Officer of Plains All American Pipeline. “We have meaningfully
improved our financial positioning, and we remain focused on executing
2019 goals and advancing a number of initiatives that position us for
continued fee-based growth with attractive returns in 2020 and beyond.”

       

Plains All American Pipeline, L.P.

 

Summary Financial Information
(unaudited)

(in millions, except per unit data)

 
Three Months Ended
March 31,
%
GAAP Results 2019     2018 Change
Net income $ 970 $ 288 237 %
Diluted net income per common unit $ 1.20 $ 0.33 264 %
Diluted weighted average common units outstanding (1) 800   727   10 %
Distribution per common unit declared for the period $ 0.36   $ 0.30   20 %
 

____________________

(1)     For the three months ended March 31, 2019, includes all
potentially dilutive securities outstanding (our Series A preferred
units and equity-indexed compensation awards) during the period. See
the “Computation of Basic and Diluted Net Income Per Common Unit”
table attached hereto for additional information.
 
       
Three Months Ended
March 31,
%
Non-GAAP Results (1) 2019     2018 Change
Adjusted net income (2) $ 565 $ 310 82 %
Diluted adjusted net income per common unit (2) $ 0.69 $ 0.36 92 %
Adjusted EBITDA $ 862 $ 593 45 %
Implied DCF per common unit $ 0.90 $ 0.61 48 %
 

____________________

(1)     See the section of this release entitled “Non-GAAP Financial
Measures and Selected Items Impacting Comparability” and the tables
attached hereto for information regarding certain selected items
that PAA believes impact comparability of financial results between
reporting periods, as well as for information regarding non-GAAP
financial measures (such as Adjusted EBITDA and Implied DCF) and
their reconciliation to the most directly comparable measures as
reported in accordance with GAAP.
(2) During the fourth quarter of 2018, we began classifying net
gains and losses on asset sales and asset impairments as a selected
item impacting comparability in the calculation of adjusted net
income. Prior period amounts have been recast to reflect this
change. See the “Selected Items Impacting Comparability” table
attached hereto for additional information.
 

Segment Adjusted EBITDA for the first quarter of 2019 and 2018 is
presented below:

   

Summary of Selected Financial Data by
Segment
(unaudited)

(in millions)

 
Segment Adjusted EBITDA
Transportation     Facilities    

Supply and
Logistics

Three Months Ended March 31, 2019 $ 399   $ 184   $ 278  
Three Months Ended March 31, 2018 $ 335   $ 185   $ 72  
Percentage change in Segment Adjusted EBITDA versus 2018 period 19 % (1 )% 286 %
Percentage change in Segment Adjusted EBITDA versus 2018
period further adjusted for impact of divested assets
26 % 1 % N/A  
 

First-quarter 2019 Transportation Segment Adjusted EBITDA increased by
19% over comparable 2018 results. This increase was primarily driven by
increased volume on our Permian Basin systems, including the start-up of
our Sunrise II pipeline in the fourth quarter of 2018. First-quarter
2019 results also benefited from increased volumes on certain of our
pipelines in the Central region and increased volumes into our Eagle
Ford JV system, which receives volumes from our Cactus pipeline. These
favorable results were partially offset by our sale of an interest in
the BridgeTex pipeline and asset sales in the Rocky Mountain region.

First-quarter 2019 Facilities Segment Adjusted EBITDA was in line with
comparable 2018 results.

First-quarter 2019 Supply and Logistics Segment Adjusted EBITDA
increased versus comparable 2018 results due to favorable crude oil
differentials and improved NGL margins.

2019 Full-Year Guidance

The table below presents our full-year 2019 financial and operating
guidance:

   

Financial and Operating Guidance
(unaudited)

(in millions, except volumes, per unit and per barrel data)

 
Twelve Months Ended December 31,
2017     2018     2019 (G)
+ / –
Segment Adjusted EBITDA
Transportation $ 1,287 $ 1,508 $ 1,735
Facilities 734   711   665  
Fee-Based $ 2,021 $ 2,219 $ 2,400
Supply and Logistics 60 462 450
Adjusted other income/(expense), net 1   3    
Adjusted EBITDA (1) $ 2,082   $ 2,684   $ 2,850  
Interest expense, net (2) (483 ) (419 ) (400 )
Maintenance capital (247 ) (252 ) (230 )
Current income tax expense (28 ) (66 ) (45 )
Other (12 ) 1   (5 )
Implied DCF (1) $ 1,312 $ 1,948 $ 2,170
Preferred unit distributions paid (3) (5 ) (161 ) (200 )
Implied DCF Available to Common Unitholders $ 1,307   $ 1,787   $ 1,970  
 
Implied DCF per Common Unit (1) $ 1.82 $ 2.46 $ 2.71
Implied DCF per Common Unit and Common Equivalent Unit (1) $ 1.67 $ 2.38 $ 2.66
 
Distributions per Common Unit (4) $ 1.95 $ 1.20 $ 1.38
Common Unit Distribution Coverage Ratio 0.94x 2.05x 1.96x
 
Diluted Adjusted Net Income per Common Unit (1) $ 1.10 $ 1.88 $ 2.10
 
Operating Data
Transportation
Average daily volumes (MBbls/d) 5,186 5,889 7,000
Segment Adjusted EBITDA per barrel $ 0.68 $ 0.70 $ 0.68
 
Facilities
Average capacity (MMBbls/Mo) 130 124 125
Segment Adjusted EBITDA per barrel $ 0.47 $ 0.48 $ 0.44
 
Supply and Logistics
Average daily volumes (MBbls/d) 1,219 1,309 1,300
Segment Adjusted EBITDA per barrel $ 0.13 $ 0.97 $ 0.95
 
Expansion Capital $ 1,135 $ 1,888 $ 1,350
 
Second-Quarter Adjusted EBITDA as Percentage of Full Year 22% 19% 21%
 

____________________

(G)    

2019 Guidance forecasts are intended to be + / – amounts.

(1) See the section of this release entitled “Non-GAAP Financial
Measures and Selected Items Impacting Comparability” and the
Non-GAAP Reconciliation tables attached hereto for information
regarding non-GAAP financial measures and, for the historical 2017
and 2018 periods, their reconciliation to the most directly
comparable measures as reported in accordance with GAAP. We do 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 we have defined as
“Selected Items Impacting Comparability” without unreasonable
effort, due to the uncertainty and inherent difficulty of predicting
the occurrence and financial impact of and the periods in which such
items may be recognized. Thus, a reconciliation of non-GAAP
financial measures to the equivalent GAAP financial measures could
result in disclosure that could be imprecise or potentially
misleading.
(2) Excludes certain non-cash items impacting interest expense such
as amortization of debt issuance costs and terminated interest rate
swaps.
(3) Cash distributions paid to our preferred unitholders during the
year presented. The distribution requirement of our Series A
preferred units was paid-in-kind for all 2017 quarterly
distributions and for the February 2018 quarterly distribution.
Distributions on our Series A preferred units were paid in cash
beginning with the May 2018 quarterly distribution. The distribution
requirement of our Series B preferred units is payable semi-annually
in arrears on May 15 and November 15. A pro-rated initial
distribution on the Series B preferred units was paid on November
15, 2017.
(4) Cash distributions per common unit paid during 2017 and 2018.
2019 (G) reflects the cash distribution per common unit paid in
February and the increased annualized distribution rate of $1.44 per
common unit for the remainder of the year.
 

Plains GP Holdings

PAGP owns an indirect non-economic controlling interest in PAA’s general
partner and an indirect limited partner interest in PAA. As the control
entity of PAA, PAGP consolidates PAA’s results into its financial
statements, which is reflected in the condensed consolidating balance
sheet and income statement tables included at the end of this release.
Information regarding PAGP’s distributions is reflected below:

           
Q1 2019 Q4 2018 Q1 2018
Distribution per Class A share declared for the period $ 0.36 $ 0.30   $ 0.30  
Q1 2019 distribution percentage change from prior periods 20 % 20 %
 

Conference Call

PAA and PAGP will hold a joint conference call at 4:00 p.m. CT on
Tuesday, May 7, 2019 to discuss the following items:

  1. PAA’s first-quarter 2019 performance;
  2. Financial and operating guidance for the full year of 2019;
  3. Capitalization and liquidity; and
  4. PAA and PAGP’s outlook for the future.

Conference Call Webcast Instructions

To access the internet webcast please go to https://event.webcasts.com/starthere.jsp?ei=1237216&tp_key=17fd1f999f

Alternatively, the webcast can be accessed at www.plainsallamerican.com,
under the Investor Relations section of the website (Navigate to:
Investor Relations / either “PAA” or “PAGP” / News & Events / Quarterly
Earnings). Following the live webcast, an audio replay in MP3 format
will be available on the website within two hours after the end of the
call and will be accessible for a period of 365 days. A transcript will
also be available after the call at the above referenced website.

Non-GAAP Financial Measures and Selected Items Impacting
Comparability

To supplement our financial information presented in accordance with
GAAP, management uses additional measures known as “non-GAAP financial
measures” in its evaluation of past performance and prospects for the
future. The primary additional measures used by management are earnings
before interest, taxes, depreciation and amortization (including our
proportionate share of depreciation and amortization and gains and
losses on significant asset sales of unconsolidated entities), gains and
losses on asset sales and asset impairments and gains on investments in
unconsolidated entities, adjusted for certain selected items impacting
comparability (“Adjusted EBITDA”) and implied distributable cash flow
(“DCF”).

Management believes that the presentation of such additional financial
measures provides useful information to investors regarding our
performance and results of operations because these measures, when used
to supplement related GAAP financial measures, (i) provide additional
information about our core operating performance and ability to fund
distributions to our unitholders through cash generated by our
operations and (ii) provide investors with the same financial analytical
framework upon which management bases financial, operational,
compensation and planning/budgeting decisions. We also present these and
additional non-GAAP financial measures, including adjusted net income
attributable to PAA and basic and diluted adjusted net income per common
unit, as they are measures that investors, rating agencies and debt
holders have indicated are useful in assessing us and our results of
operations. These non-GAAP measures may exclude, for example, (i)
charges for obligations that are expected to be settled with the
issuance of equity instruments, (ii) gains or losses on derivative
instruments that are related to underlying activities in another period
(or the reversal of such adjustments from a prior period), the
mark-to-market related to our Preferred Distribution Rate Reset Option,
gains and losses on derivatives that are related to investing activities
(such as the purchase of linefill) and inventory valuation adjustments,
as applicable, (iii) long-term inventory costing adjustments, (iv) items
that are not indicative of our core operating results and business
outlook and/or (v) other items that we believe should be excluded in
understanding our core operating performance. These measures may further
be adjusted to include amounts related to deficiencies associated with
minimum volume commitments whereby we have billed the counterparties for
their deficiency obligation and such amounts are recognized as deferred
revenue in “Other current liabilities” on our Condensed Consolidated
Financial Statements. Such amounts are presented net of applicable
amounts subsequently recognized into revenue. Furthermore, the
calculation of these measures contemplates tax effects as a separate
reconciling item, where applicable. We have defined all such items as
“selected items impacting comparability.” Due to the nature of the
selected items, certain selected items impacting comparability may
impact certain non-GAAP financial measures, referred to as adjusted
results, but not impact other non-GAAP financial measures. We do not
necessarily consider all of our selected items impacting comparability
to be non-recurring, infrequent or unusual, but we believe that an
understanding of these selected items impacting comparability is
material to the evaluation of our operating results and prospects.

Although we present selected items impacting comparability that
management considers in evaluating our performance, you should also be
aware that the items presented do not represent all items that affect
comparability between the periods presented. Variations in our operating
results are also caused by changes in volumes, prices, exchange rates,
mechanical interruptions, acquisitions, divestitures, expansion projects
and numerous other factors. These types of variations may not be
separately identified in this release, but will be discussed, as
applicable, in management’s discussion and analysis of operating results
in our Quarterly Report on Form 10-Q.

Our definition and calculation of certain non-GAAP financial measures
may not be comparable to similarly-titled measures of other companies.
Adjusted EBITDA, Implied DCF and other non-GAAP financial performance
measures are reconciled to Net Income (the most directly comparable
measure as reported in accordance with GAAP) for the historical periods
presented in the tables attached to this release, and should be viewed
in addition to, and not in lieu of, our Condensed Consolidated Financial
Statements and notes thereto. In addition, we encourage you to visit our
website at www.plainsallamerican.com
(in particular the section under “Financial Information” entitled
“Non-GAAP Reconciliations” within the Investor Relations tab), which
presents a reconciliation of our commonly used non-GAAP and supplemental
financial measures.

Forward-Looking Statements

Except for the historical information contained herein, the matters
discussed in this release consist of forward-looking statements that
involve certain risks and uncertainties that could cause actual results
or outcomes to differ materially from results or outcomes anticipated in
the forward-looking statements. These risks and uncertainties include,
among other things, declines in the actual or expected volume of crude
oil and NGL shipped, processed, purchased, stored, fractionated and/or
gathered at or through the use of our assets, whether due to declines in
production from existing oil and gas reserves, reduced demand, failure
to develop or slowdown in the development of additional oil and gas
reserves, whether from reduced cash flow to fund drilling or the
inability to access capital, or other factors; the effects of
competition, including the effects of capacity overbuild in areas where
we operate; market distortions caused by over-commitments to
infrastructure projects, which impacts volumes, margins, returns and
overall earnings; unanticipated changes in crude oil and NGL market
structure, grade differentials and volatility (or lack thereof);
environmental liabilities or events that are not covered by an
indemnity, insurance or existing reserves; fluctuations in refinery
capacity in areas supplied by our mainlines and other factors affecting
demand for various grades of crude oil, NGL and natural gas and
resulting changes in pricing conditions or transportation throughput
requirements; maintenance of our credit rating and ability to receive
open credit from our suppliers and trade counterparties; the occurrence
of a natural disaster, catastrophe, terrorist attack (including
eco-terrorist attacks) or other event, including cyber or other attacks
on our electronic and computer systems; failure to implement or
capitalize, or delays in implementing or capitalizing, on expansion
projects, whether due to permitting delays, permitting withdrawals or
other factors; shortages or cost increases of supplies, materials or
labor; the impact of current and future laws, rulings, governmental
regulations, accounting standards and statements, and related
interpretations; tightened capital markets or other factors that
increase our cost of capital or limit our ability to obtain debt or
equity financing on satisfactory terms to fund additional acquisitions,
expansion projects, working capital requirements and the repayment or
refinancing of indebtedness; the availability of, and our ability to
consummate, acquisition or combination opportunities; the successful
integration and future performance of acquired assets or businesses and
the risks associated with operating in lines of business that are
distinct and separate from our historical operations; the currency
exchange rate of the Canadian dollar; continued creditworthiness of, and
performance by, our counterparties, including financial institutions and
trading companies with which we do business; inability to recognize
current revenue attributable to deficiency payments received from
customers who fail to ship or move more than minimum contracted volumes
until the related credits expire or are used; non-utilization of our
assets and facilities; increased costs, or lack of availability, of
insurance; weather interference with business operations or project
construction, including the impact of extreme weather events or
conditions; the effectiveness of our risk management activities;
fluctuations in the debt and equity markets, including the price of our
units at the time of vesting under our long-term incentive plans; risks
related to the development and operation of our assets, including our
ability to satisfy our contractual obligations to our customers; general
economic, market or business conditions and the amplification of other
risks caused by volatile financial markets, capital constraints and
pervasive liquidity concerns; and other factors and uncertainties
inherent in the transportation, storage, terminalling and marketing of
crude oil, as well as in the storage of natural gas and the processing,
transportation, fractionation, storage and marketing of natural gas
liquids as discussed in the Partnerships’ filings with the Securities
and Exchange Commission.

Plains All American Pipeline, L.P. is a publicly traded master limited
partnership that owns and operates midstream energy infrastructure and
provides logistics services for crude oil, NGLs and natural gas. PAA
owns an extensive network of pipeline transportation, terminalling,
storage and gathering assets in key crude oil and NGL producing basins
and transportation corridors and at major market hubs in the United
States and Canada. On average, PAA handles more than 6 million barrels
per day of crude oil and NGL in its Transportation segment. PAA is
headquartered in Houston, Texas. More information is available at www.plainsallamerican.com.

Plains GP Holdings is a publicly traded entity that owns an indirect,
non-economic controlling general partner interest in PAA and an indirect
limited partner interest in PAA, one of the largest energy
infrastructure and logistics companies in North America. PAGP is
headquartered in Houston, Texas. More information is available at www.plainsallamerican.com.

   

PLAINS ALL AMERICAN PIPELINE, L.P. AND SUBSIDIARIES

FINANCIAL SUMMARY (unaudited)

       
 

CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS

(in millions, except per unit data)

 
Three Months Ended
March 31,
2019     2018
REVENUES $ 8,375 $ 8,398
 
COSTS AND EXPENSES
Purchases and related costs 7,119 7,519
Field operating costs 326 292
General and administrative expenses 76 79
Depreciation and amortization (1) 136 127
(Gains)/losses on asset sales and asset impairments, net (1) 4    
Total costs and expenses 7,661 8,017
 
OPERATING INCOME 714 381
 
OTHER INCOME/(EXPENSE)
Equity earnings in unconsolidated entities 89 75
Gain on investment in unconsolidated entities 267
Interest expense, net (101 ) (106 )
Other income/(expense), net 25   (1 )
 
INCOME BEFORE TAX 994 349
Current income tax expense (30 ) (13 )
Deferred income tax benefit/(expense) 6   (48 )
 
NET INCOME $ 970   $ 288  
 
NET INCOME PER COMMON UNIT:
Net income allocated to common unitholders — Basic $ 917 $ 237
Basic weighted average common units outstanding 727 725
Basic net income per common unit $ 1.26   $ 0.33  
 
Net income allocated to common unitholders — Diluted $ 957 $ 237
Diluted weighted average common units outstanding 800 727
Diluted net income per common unit $ 1.20   $ 0.33  
 

____________________

(1)     Effective for the fourth quarter of 2018, we reclassified
amounts related to gains and losses on asset sales and asset
impairments from “Depreciation and amortization” to “(Gains)/losses
on asset sales and asset impairments, net” on our Condensed
Consolidated Statements of Operations.
 
   

NON-GAAP ADJUSTED RESULTS

(in millions, except per unit data)

 
Three Months Ended
March 31,
2019     2018
Adjusted net income $ 565   $ 310
 
Diluted adjusted net income per common unit $ 0.69   $ 0.36
 
Adjusted EBITDA $ 862   $ 593
 
       

PLAINS ALL AMERICAN PIPELINE, L.P. AND SUBSIDIARIES

FINANCIAL SUMMARY (unaudited)

             
 

CONDENSED CONSOLIDATED BALANCE SHEET DATA

(in millions)

 
March 31,
2019
December 31,
2018
ASSETS
Current assets $ 4,247 $ 3,533
Property and equipment, net 14,889 14,787
Goodwill 2,529 2,521
Investments in unconsolidated entities 3,263 2,702
Linefill and base gas 907 916
Long-term operating lease right-of-use assets, net 477
Long-term inventory 181 136
Other long-term assets, net 893   916
Total assets $ 27,386   $ 25,511
 
LIABILITIES AND PARTNERS’ CAPITAL
Current liabilities $ 4,182 $ 3,456
Senior notes, net 8,943 8,941
Other long-term debt, net 234 202
Long-term operating lease liabilities 383
Other long-term liabilities and deferred credits 882   910
Total liabilities 14,624 13,509
 
Partners’ capital 12,762   12,002
Total liabilities and partners’ capital $ 27,386   $ 25,511
 
       

DEBT CAPITALIZATION RATIOS

(in millions)

 
March 31,
2019
December 31,
2018
Short-term debt $ 149 $ 66
Long-term debt 9,177   9,143  
Total debt $ 9,326   $ 9,209  
 
Long-term debt $ 9,177 $ 9,143
Partners’ capital 12,762   12,002  
Total book capitalization $ 21,939   $ 21,145  
Total book capitalization, including short-term debt $ 22,088   $ 21,211  
 
Long-term debt-to-total book capitalization 42 % 43 %
Total debt-to-total book capitalization, including short-term debt 42 % 43 %
 
   

PLAINS ALL AMERICAN PIPELINE, L.P. AND SUBSIDIARIES

FINANCIAL SUMMARY (unaudited)

       
 

COMPUTATION OF BASIC AND DILUTED NET
INCOME PER COMMON UNIT
(1)

(in millions, except per unit data)

 
Three Months Ended
March 31,
2019     2018
Basic Net Income per Common Unit
Net income $ 970 $ 288
Distributions to Series A preferred unitholders (37 ) (37 )
Distributions to Series B preferred unitholders (12 ) (12 )
Other (4 ) (2 )
Net income allocated to common unitholders $ 917   $ 237  
 
Basic weighted average common units outstanding 727 725
 
Basic net income per common unit $ 1.26   $ 0.33  
 
Diluted Net Income per Common Unit
Net income $ 970 $ 288
Distributions to Series A preferred unitholders (37 )
Distributions to Series B preferred unitholders (12 ) (12 )
Other (1 ) (2 )
Net income allocated to common unitholders $ 957   $ 237  
 
Basic weighted average common units outstanding 727 725
Effect of dilutive securities:
Series A preferred units (2) 71
Equity-indexed compensation plan awards (3) 2   2  
Diluted weighted average common units outstanding 800   727  
 
Diluted net income per common unit $ 1.20   $ 0.33  
 

Contacts

Plains All American Pipeline, L.P. and Plains GP Holdings
Roy
Lamoreaux
Vice President, Investor Relations & Communications
(866)
809-1291

Brett Magill
Director, Investor Relations
(866)
809-1291

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