Q2 2021 Plains All American Pipeline LP and Plains GP Holdings LP Earnings Call

August 3, 2021

[music].

Okay.

Good day, and thank you for standing by.

Welcome to the PAA and PAGP second quarter 2021 earnings call.

At this time all participants are in a listen only mode.

After the speaker's presentation, there will be question and answer session.

As of the crushing during the session you will need to press star 1 on your telephone keypad.

The require any further assistance you May press Star zero.

I would all without of or did you all would like to welcome your speaker for today, Mr. Roy Lamoreaux, Sir the floor is yours.

Thank you Karl good afternoon, and welcome to Plains, All American second quarter 2021 earnings call. Today's slide presentation is posted on Investor Relations website under news and events section of the Plains, All American Dot com or an audio replay will also be available. Following today's call important disclosures regarding forward looking statements of non-GAAP financial measures of provided on slide 2 of <unk>.

<unk> consolidated balance sheet for PAGP and other reference materials are located in the appendix.

Really Cheng chairman and CEO and Al Swanson, Executive Vice President and Chief Financial Officer will host our call.

Other members of our team will be available for Q&A, including Harry the finest President Chris General Executive Vice President and Chief Operating Officer, Jeremy Goebel, Executive Vice President and Chief Commercial Officer, and Chris <unk>, Senior Vice President and Chief Accounting Officer before turning the call over to William I'll Note that we will focus today's discussion of our second quarter results.

In full year guidance with respect to the Permian Basin joint venture that we intend to form of the oryx midstream given the the transaction is not expected to close until the fourth quarter, we do not plan to share any additional information beyond what was provided on our July 13th conference call with that I will now turn the call over to Willie.

Thank you Ryan and thanks to everyone for joining our call. This afternoon, we reported better than expected second quarter, adjusted EBITDA of $579 million and we increased our full year guidance by $25 million to plus or minus $2.1.75 billion.

Our second quarter results benefited from certain timing related items, which as al will discuss are incorporated within our full year guidance of.

A summary of our financial highlights as provided on slide 3.

In previous calls we have discussed reaching a positive inflection point in our business. We've been advancing a number of initiatives aimed to maximize free cash flow with the near term benefit of accelerating debt reduction, while returning capital to our equity holders.

These initiatives take time to develop Immaterialize and I'm very pleased with the progress we have made with several of the initiatives coming to fruition since our first quarter call in may of a recap as provided on slide 4.

On asset sales yesterday, we closed the $850 million sale of our natural gas storage business, which was roughly 2 months ahead of schedule. We continue to progress additional opportunities and expect to achieve $920 million until last net sales in 2021, well exceeding our initial target of 750.

Regarding portfolio optimization, we announced the execution of the definitive agreement to form of the strategic plains of <unk> joint venture through of cash the transaction. This debt free entity will align directly with our optimization strategies.

As for our capital program, we have further reduced our 2021 investment of capital by $50 million to plus or minus $325 million or 25, 25% below our February guidance with the majority of the reduction related to the cancellation of the the Haley of connection project.

And importantly on the sustainability lastly, the published our 2020 sustainability report greatly increasing our quantitative disclosures, including our scope 1 and scope 2 greenhouse gas emissions data, which reflect a reduction over the last 3 years and screens favorably relative to peers on overall emissions the full of.

Report is posted on our website highlights from which are included within today's presentation.

Regarding our macro view, our fundamental outlook remains positive and we expect global crude oil supply and demand to continue to rebalance over the next several quarters.

While recent OPEC plus actions have largely been consistent with our expectations. We continue to monitor potential near term headwinds to global demand recovery.

As commodity price signals have increased producer activity in the Permian ramp earlier in the year and of stabilized in recent months, we expect growth activity to resume as supply and demand balance further improves which we expect to be mid 2022.

We believe plains is well positioned for a multiyear period of Permian growth with significant operating leverage and assets underpinned by high quality long term cash flow.

Further reinforcing this will be the completion of our recently announced Permian basin JV with the oryx.

Our wink to Webster entering full service later this year as well as the completion of projects outside of the Permian such as the cap line reversal.

As a collective result of this progress we have further increased our 2021 estimated free cash flow after distributions to plus or -135 billion or $450 million, excluding proceeds from asset sales.

As is illustrated on slide 5 we plan to continue allocating our free cash flow in a balanced manner with the near term focus on debt reduction and allocating a larger percentage overtime to equity holders with that I'll turn the call over to al. Thanks Willie.

An overview of our second quarter results as illustrated on slide 6 within the context of our full year guidance and directional estimates for the EBITDA contribution by quarter.

The quarter adjusted EBITDA of $579 million was roughly 100 of $10 million above the high end of the percentage range estimated for the second quarter within our may guidance, which acknowledge the potential for timing shifts across individual quarters.

As Willy mentioned and as illustrated on the slide roughly $70 million of our second quarter. Adjusted EBITDA was the function of tiny timing benefit the vast majority of which occurred within our supply and logistics segment, which represented gains from our decision to monetize certain contango positions earlier than forecasted.

In addition to earlier than the forecast NGL sales.

Additionally, roughly $40 million of our second quarter adjusted EBITDA was driven by over performance.

The majority of our over performance occurred within our transportation segment is incorporated within our updated full year guidance.

Our performance was driven by stronger throughput across various pipeline systems and hub terminals plus the degree of Opex savings.

Additional detail on our second quarter of fee based segment results are summarized on slide 7.

An overview of our capitalization and liquidity metrics is provided on slide 8 total.

Total debt increased approximately $250 million during the quarter as a result of normal working capital items, although it's still of approximately $370 million lower than year end 2020.

As of June 30, long term debt outstanding was approximately $8.4 billion.

Which is net of $750 million of senior notes due in June of 2022, and a $200 million term loan associated with our gas storage business, both of which were reclassified as short term debt as of quarter end.

The GAAP storage term loan was repaid yesterday.

While our long term debt to adjusted EBITDA ratio was 3.5 times at quarter end. It was 3.9 times when including the amount of classified as short term. This remains above the high end of our target range and reiterate our commitment to further debt reduction.

That said, we have made progress towards our deleveraging objectives and are pleased with Moody's recent review for upgrades announcements.

Moving to slide 9 as mentioned previously we have increased our 2021 adjusted EBITDA guidance by $25 million, which reflects a net $50 million increase to our fee based segments and a $25 million decrease to our ethanol segment.

Fee based guidance reflects transportation segment performance to date.

As well as a $10 million to $15 million negative impact on the facilities segment due to the gas storage sales closing earlier than forecast.

Our guidance includes the $25 million reduction due to changes in market conditions that we expect to result in less favorable crude oil differentials in the back half of the year.

Our current guidance does not reflect the Permian basin JV appreciating that the transaction is not expected to close until the fourth quarter and we will not have a material contribution to our full year results. I would also note that we do not intend to provide our outlook for 2022 until our fourth quarter 2021 earnings call in fed.

Fury.

This will allow us time to FERC to furnish.

2022 guidance with the benefit of timely data following the completion of producer budgeting season, and incur and incorporate the anticipated contribution of the Permian Jason.

Based on JV on a full year basis.

Additionally, our updated capital guidance is provided on slide 10, which reflects the $100 million year to date reduction in 2021 investment capital and our continued expectation for investment capital from 2022 forward to be in the range of $2 million to $300 million.

The only.

Before returning the call the will the slide 11 provides a recap of our capital allocation plans for the year.

<unk>, a summary of equity repurchase activity, we have completed since receiving board authorization in November.

In aggregate, we have repurchased 11.5 million units totaling $103 million, which.

<unk> half of this repurchased in the second quarter.

Our near term capital allocation plans remain consistent with allocating at least 75% of 2021 free cash flow after distributions to debt reduction.

And the balance the equity repurchases.

Our expected total allocation pace and timing remains consistent with the original intentions through a balanced approach as described on slide 5 with that I will turn the call back to Willy.

Thank you al.

We continue to execute on our strategy and we've made good progress on our 2021 goals and longer term objectives, which are reflected on slide 12.

Our outlook for the business and industry as a whole remains constructive and we are intently focused on operating excellence, while continue to maximize multi year free cash flow optimize our asset portfolio reduce debt and return cash to equity holders of <unk>.

Summary of key takeaways from today's call is provided on slide 13.

We appreciate your investment in and support of Plains, and we look forward to providing you with additional updates on our continued progress in the coming months.

That I will turn the call over to Roy who will lead us in Q&A. Thanks, Willie as we enter of the Q&A session. Please limit yourself to 1 question and 1 follow up question and then return to the queue. If you have additional follow ups. This will allow us.

To address the top questions from as many participants as practical in our available time. This afternoon. Additionally, our investor relations team plans to be available throughout the week to address additional questions.

We will now ready to open the call for questions.

Thank you Sir again as the primary.

If you have questions. Please press star 1.

Our first question comes from the line of Shneur <unk> from UBS. Your line is open.

Hi, good afternoon guys.

I guess instead of a strategic question I was kind of I wanted to focus on the the guidance that was percentage for this year as part of the little bit confusing but.

I think I kind of ask this question on the last call.

The first quarter, there was a modest increase in guidance and you'd mentioned conservatism at the time they are trying to square away of thoughts.

Part of what's what's shaking out here because it is the.

The sort of look through it as you mentioned in your prepared remarks, the second quarter was the strong quarter $70 million was related to timing, but you did have 40 million of of over performance.

And you raised your fee based guidance for the year for about $50 million do you only expect the small benefit of that to kind of roll forward into the following 2 quarters.

Just trying to understand the moving pieces here again.

It was revised lower and so forth.

I'm just trying to understand if there is an element of conservatism here or how we should sort of think about the guidance.

That's it.

Thanks for the questions generic all start this is willie.

I think what we tried to show you on our waterfall chart is.

Moving some SNL earnings because of market conditions from later in the year into the second quarter.

Both in Contango holdings contango storage benefits as well as some additional NGL sales that we had in our Canadian business.

If you think about the 40 million of what we.

We've factored in there is the $40 million is outperformance, but we did also have the asset sales.

Our gas storage business was 2 months earlier, so when you take the 40 and you subtract the impact of the.

The asset sales happening a little bit sooner gets you closer to that $25 million and frankly, it's what we expect to be it's a it's a realistic assessment.

Clearly some of the opportunistic <unk>.

All earnings around crude.

Has it has not been of strong as we expected earlier in the year. So those are kind of the moving pieces. There I don't know if anyone else wants to add anything.

Willie I think part of the just to address the question, we would expect to receive and instead of the same lines nearest wildly.

Why wouldn't we dropped the SNL and increased transportation I think part of that speaks to what Willie said sort of.

To back that up.

On the U S side tighter U S Gulf coast to Midland differentials less ethanol opportunities in that corridor.

Got it.

It has led to more transportation of movements from Midland to Cushing, but we've seen more movement of basin. So the ethanol all impact was offset by transportation similar thing in Canada tighter differentials.

All the proration of along the Enbridge system has been consistent with what we've seen the differentials have been tighter.

The less SNL, there, but what <unk> seen is more volume because the Canadian producers have more cash flow and so that's what the more tariff revenue. So we've seen outperformance on the tariff side, but less performance on the SNL sides of we view that as a positive trade off in the natural hedge of our business.

Hey, Shneur 1 of them that was Jeremy but 1 additional point I would make is in my prepared comments, we talk about the trajectory of Permian production as I said, we had the increase early in the year, we're actually seeing the stabilization of the production numbers in the Permian and really until the supply and demand balance gets a little tighter to continue.

The inventory on crude.

See where demand goes and in opec's compliance, but really the the.

The inflection point, we expect to be later into 2022.

Which also perhaps is a bit of a different view than we had before.

On guidance for this for this year.

If I cannot burn my second question just to clarify something you just said there. So are you basically saying that your exit rate for 'twenty..1 is now lower and you expect that to happen in 'twenty 2.

Or what's the thought previously or did I mishear that.

Jeremy go ahead here. This is Jeremy just to clarify the growth we experienced in the first quarter through April 2 of production in the Permian from 4.3 to 4 of 5 we had a previous exit rate estimate of 4.4% to 4 of 5 we still feel strongly in the exit rate and we would say it's closer to the 4 of 5 and potentially slightly higher but it's been effectively <unk>.

Across our system and other systems from from April to now and then looking forward. The activity today is basically a forecast for your production of 6 months from now so we would expect activity to be fairly constant and yield production of would be fairly constant through the year and so it's another of reduction as to where we were I think the all.

Offsets what will you mentioned was business consistent at the end of the year, where we thought it was but the asset sale of P&G is basically we received proceeds of about 2 months earlier, that's close to $15 billion that we had to take out of what we would have forecasted for that benefit and guidance.

Okay perfect.

That makes a lot more sense.

And I do think everybody appreciates, earning more in fee based versus that can all maybe.

Maybe just for my follow up question here.

You see the the buybacks that net.

<unk> been executing on.

Imagine with the asset sell complete youll, probably use about $300 million of the proceeds of just sort of immunize the lost EBITDA from the leverage perspective.

But of post that point do you basically expect to complete kind of allocating 75% towards buyback with 75 per cent to watch that.

That's kind of the ratio for the end of this year.

Al you want to take that.

Yes, cheniere the of the <unk>.

75% or more.

That we've indicated to go for debt reduction.

It is clearly the first priority the up to 25% it was really a limit not of target.

Your $300 million math is actually very close.

You look at it.

This year.

Take our numbers the $135 billion of free cash flow after the after dividends.

Adjusted for the 300, you would come up with the total number of potential of up to $2.50.

The reality of it is we bought 50 already we don't intend to provide specific kind of timing pace and value of which we will complete it.

That being a priority, but clearly the repurchase program and our intent.

The core piece of what we're looking to do and we do intend to continue to utilize it but we don't feel its appropriate for us to.

To provide specific.

Targets or a dollar amount that we're going to purchase in the second half.

All right perfect really appreciate the color of today's guidance. Thank you.

Right.

Thanks Shneur.

Our next question comes from the line of Keith Stanley from Wolfe Research. Your line is open.

Hi, good afternoon.

First just wanted to follow up.

On a on the SNL EBITDA guidance for the year, so 2 of <unk>.

Zero and not to make this overly simplistic, but you reference early monetization of the contango positions and some NGL sales. So you you had some positive margin activities realized for the year I guess, what is there something offsetting within the SNL segment or any activities were.

Youre, losing money this year given winter storm Yuri or other factors that are just offsetting any gains you had.

Jeremy go ahead, Keith this is Jeremy I tried to articulate the hasn't been earlier some of the movements.

<unk> market locations are at tighter differentials in the historical periods, so that the benefit to transportation offset by some on the the ethanol side, that's largely as we had forecasted the contango monetization, but instead of doing that ratably throughout the year spreads got to the point, where we chose to monetize that early so that was in our initial <unk>.

Our initial forecast from the previous forecast all of those components for the timing of the NGL sales. This is just movement between quarters that we generally have sort of basis blows out of our guys all opportunities opportunistically sell in a given quarter versus store it and sell it in the future quarter. So its just an acceleration of earnings that were already.

In the plan for ethanol and that because we're talking about $25 million in the context of $2.175 billion that movement was driven by higher transportation, but lower SNL associated with some of those movements. So it is still very positive to the entity.

Of the Canadian side and in the U S side, specifically of those movements in Cushing.

Hey, Keith this is Willie of couple of other points as you'll recall in our first quarter earnings we did talk about.

Frac spreads that were put on late last year, which impacted.

The the Canadian business at a lower level and also don't forget we pay storage fees up in Canada, all the way through the year as well. So it's not just pure capturing upside it's taken out of the storage as being having to pay for that across the entire year.

Got it and.

Please let me know if you if you don't want to touch anything with the Orix, but I was just curious since I don't think it came up on the call you had between quarters any issues to be mindful of where you're thinking about on the regulatory approval front or where do you see this is just the very straightforward.

Transaction from our FTC perspective.

He is probably inappropriate to put any specific comments on it and we have filed and we're kind of in the process with the FTC, we would expect approval, but have to go through the process.

Got it thank you.

Thanks.

Our next question comes from the line of Tristan Richardson from true Securities. Your line is open.

Hey, good evening guys.

Really appreciate your comments on the Permian dynamics and the.

Stabilization, you talked about but I guess I know youre not providing guidance for 'twenty 2 at this time, but should we think that as that supply.

The demand balance.

Tightens up or normalizes as you talked about kind of that mid 2022 timeframe should we think the.

That occurs on that timeline that the.

<unk> Court.

Can meaningfully grow next year.

Well I think the conclusion you should take from that is 1 that's an assumption at this point in time Theres, a lot of variables around that but as supply and demand balance balances a little bit and tightens up our expectation would be there'd be more there'll be growth in the Permian.

And we'll give you better guidance as we get to February on what we expect.

The Permian trajectory of debate, but the way I would take that interest in this kind of stable until up tighter supply and then we'd start seeing increased volumes, which should infer additional transportation volumes really this is Jeremy I would just say, it's not linear like that you wouldn't imagine that the rigs will wait until the.

I think as you see the trend of windowing spare capacity and increasing demand the rigs will come so as Willie said this is the dynamic supply and demand in the cloud they're going to wait until all of spare capacity of gone to add activity I think part of the reason al mentioned on the call that we're going to wait to give guidance of February because we wanted to see what the capital allocation.

<unk> is and what that timing will be so we can give you guys of better estimate of what the way, but certainly we have.

The contracts in place and we have capacity available to capture incremental production of as it comes to market and we're well positioned for that.

I appreciate it and then and all.

You talked about maybe some opex savings versus what you had planned was part of the over performance versus previous guidance is there other initiatives going on there should we think of some of this is as permanent and or ratable.

As we kind of model out.

The cost profile next year.

Interest and I'm going to ask Chris Chandler to comment on that Chris sure of this is Chris channel. There are a number of moving parts Tristan, but we continue to challenge the organization to capture cost savings opportunities and they continue to deliver.

We of course had the benefit from winter storm urea in the first quarter. So that's impacted the <unk> comparison, but.

We are we are finding opportunities everywhere, we look and we're capturing those and certainly expect to be able to sustain at a portion of those going forward. So we still see opportunities and we're still capturing them.

I appreciate it thank you guys very much.

Thanks Tristan.

Our next question comes from the line of Jeremy Tonet.

J P. Morgan you May now ask your question.

Hi, good afternoon.

All right.

All right just wanted to kind of come.

Come back to the buyback situation a little bit here seeing what you might be able to say.

Based on our calculations and kind of the methodology that you had laid out before it seems like the pace of buybacks is a bit slower than what we might've expected year to date, given the asset sale proceeds and was just wondering if you were kind of locked out of the market for periods of time with orix or you might and you might have a faster pace kind of going forward yes.

As you are able to do that just kind of curious if you can expand a bit more on that.

Jeremy This is Willie I'll make a comment and I know all can follow up on it if you think about the trajectory and the factors that we look at a lot of it is business outlook. So when you look at the first part of the year.

The question of certainty of of being able to execute on some of these.

You should expect that some of this would probably not occur earlier in the year, because we factor all of these things when we think about buybacks. Our intention is to continue to have some buybacks and again as al said, we're not going to be specific on volumes or cadence of what we're going to do but I'd take you back to that slide 11 on the many many different things that we look at as we.

<unk>.

Yes.

I would concur with what Willie said and again.

The 25% up to 25% I do think some folks of the interpret that as a target versus versus the limit.

Again, if you walk through of the math I think cheniere hit it pretty close.

This years up to 25%, let's say the high end would be $250 million.

We bought $50 million today.

Again, we don't believe it's prudent for us to.

To telegraph specific timing and evaluation of the et cetera.

P&G closed yesterday so.

Yes.

Until the until transactions close there's always risk associated with them.

So just wanted to clarify there where are you guys locked out of or just wanted to make sure I was understanding that strength.

Yeah.

What I would tell you is.

Until a specific transaction comes up there's judgments that you <unk>.

Hi.

Again, we don't think that had any meaningful impact on what we've done year to date.

The fact that we've kept all of the asset sales proceeds in hand at June 30, probably has more to do with that than anything at all right.

Got it understood and then just a quick second question here. It seems like there is the spend some of our robust M&A interest if not activity.

Of the border there and was just wondering given.

Some of those strong markers out there I'm wondering your thoughts on the Canadian business.

Seems like that could be a powerful way to return capital to unitholders here. So just wondering your latest thoughts on that of.

Divestiture of their can make sense.

While Jeremy we look at lots of things, but we can't really share any thoughts premature to be sharing any thoughts about anything we might be looking at all.

Yeah.

Got it I'll leave it there thanks. Thank you.

Our next question comes from the line of Pearce Hammond of Pi.

Piper Sandler please ask your question.

Good afternoon, and thanks for taking my question.

My first pertains to producer disciplines, we've certainly heard the public's public e&ps have been more disciplined on the production front and then maybe the privates have been a little less so so I'm. Just curious are you hearing any change to that.

Kind of consensus view.

As far as when you interact with producers.

This is Willie again, I think we're probably consistent with what youre seeing the the larger public companies have more disciplined and some of the smaller ones may not have quite the same amount of Jeremy do you want to comment on that.

I think.

There's a few categories, it's more nuanced than that even I think there is the.

A handful of call it half of dozen.

Private producers that are really taking advantage of the opportunity where there's discipline across.

The space and they are getting out in front of it and theyre going to grow production.

But by and large the producer community has been very disciplined within the larger producers. They are cautiously optimistic about next year, but.

I haven't seen any change in the rig count and close to 3 months I think it's been 4% growth in the last 3 months.

That's the indicating that hey, we're going to wait and see how of this goes I think there's a general view that the current price maybe a little bit synthetic because there is productive capacity to meet demand today and they don't want to get out in front of that so it's a prudent approach there is some opportunity for under Levered private operators to get out in front of us.

In categories of margin that can hedge nice margins and capture returns. So we are seeing that but it's more nuance than all private.

Alex it's theirs.

There's a handful that are getting out in front of it and we certainly have exposure to a number of them and we appreciate that market, but the larger ones that are there and they are ready and there'll be better capitalized at the end of this because of paying down debt.

And setting up the long term durable corporate structure, so healthy and these are good for us in the long term.

Great. That's excellent color. Thank you and then my follow up and I apologize if I missed this in the prepared remarks or in the Q&A, but.

Congrats on lowering the investment of maintenance Capex for this year by about $65 million per 10% just curious what the driver of was there.

I'm sorry.

Maintenance capital and yet Chris wants to take both of those yeah. This is Chris.

Chris Chandler appear so I can take the let's start with maintenance capital the reduction quarter on quarter is primarily driven by the cancellation of the behavior of connection project.

There's been some smaller reductions and efficiencies captured in other areas, but that's the main piece there and then our maintenance capital of our full year outlook of $180 million is unchanged from the prior quarter, but we have over time due to a number of factors, including asset sales and investment programs and reliability improvements been able to bring that.

Maintenance capital down to the range of that in now which is quite a bit from where it was a few years ago. So hope that helps.

Yes. It does thank you very much. Thank you Hey, Pearce. This is Willie again I think thank you for acknowledging the progress we've made there it just reinforces how we're looking at every single dollar of financial discipline, not only capex the maintenance Capex operating Capex I mean, that's really been of tremendous focus of the organization is the <unk>.

Streamline and be as sufficient as we can.

Thank you Willy.

Thank you.

Our next question comes from the line of Jean Ann Salisbury from Bernstein. Your line is open.

Hi, the.

The cancellation of the highly of has any impact on the optimal cap line reversal like could you take more of them to take out or anything like that or is it not really work like that.

Jeremy <unk>.

<unk> highest jeremy.

So the the project works on its own and it'll be largely of heavy based project from the telcos out there is incremental capacity available to move and I think theres. Some timing of some other open seasons in the negotiations between shippers that could free up capacity of the poker and more capacity per telco for heavy in the longer term view of positive for cash.

And I think that's the easiest way to sales.

And just to be clear Jinan cap line stands on its own right. So that project has enough return of dry itself. The behavior of connector impacts less volume is going to cap line in the near term, but as Jeremy pointed out once that project starts flowing our expectation is there.

The additional volumes that will be able to get there at some point in time.

That makes sense.

And then I know youre not commenting on the Rx I'll keep my question Super High level. You had this really helps us slides showing how many downstream connections and all.

Eric Schippers with game.

Generally can you kind of get the timeframe that you would expect there to be sort of switching of downstream in the Permian is that of near term thing all right that more medium term as nbc's start to rollout.

Jeremy G&A.

Jean Ann can you clarify what you mean switching of downstream I just want to make sure I understand what the question maybe let me take a stab of it. Your question was timing on downstream capability to connect <unk>.

<unk> basically youre, obviously, adding of kind of potential downstream options to ericsson that that could be obviously, the big Center day for you and I'm just trying to understand if that would be of near term.

Obviously, that's the thing that the transaction goes through and everything or if it's more everybody had too many mpc's right now so it is going to be more of like in 3 or 4 years does that.

Dr Rolla.

Yeah. So what we've done on the JV, we haven't incorporated any of that into our assumption on the JV and the point on the connectivity and flexibility is ultimately it's going to be a a much better mousetrap to be able to serve our producers to be able to get volume as to where they need to get to.

Okay. Thank you thanks.

Thanks, Jean Ann.

Our next question comes from the line of Michael The Pts from Goldman Sachs. Your line is open.

Hey, guys. Just curious your commentary about <unk> exit rate for Permian production. How are you thinking about the end of the year and the beginning of next year in terms of kind of the battle between Houston, and Houston area of destinations versus corpus and where producers or other <unk>.

Or is 1 of the flow barrels.

I'll start with that Michael This is Willie.

What we've always talked about our system being able to have access to multiple markets. There's so much that goes on.

And market dynamics that it's nice to have the flexibility to go to both I think it would be difficult for us to to give you exit rates to each market as it sits today because of just too many variables that are out there.

Got it and do you guys have the view.

Of.

Which you think golfers better export opportunities for shippers, who want to get their barrels on a boat.

Amy.

Michael This is Jeremy I think the guys across the street might have a different answer, but I think the public data would indicate that there's over a million barrels a day, leaving the corpus market.

It's been for a long period of time, So I think both have the pros and cons of lot of volume gets absorbed in the Houston local market and incremental barrels of oil across the dock and so I think over time, you'll see those 2 markets Youll see some at the St. James Youll see summit.

At Nederland as well, so I think depending on where the barrels are located and what the logistics of all of the ultimately went out as to what the most favorable markets, but I think there is a need for all of them to clear because there's multiple logistical constraints across the Gulf coast. The corpus seems to be heavily focused on crude oil exports.

And Houston has got a lot of different diversity across its exports and then youll see a smaller amount at nederland and the St. James.

Got it but you.

You've probably already noticed but the heavier barrels and the medium grade.

The U S refiners like to run that so when you think about exports the.

<unk> volumes typically will go into the water. So that also has a factor that factors into the decision on where to take the take the molecules.

Understood just 1 last 1 went to Webster is fully in service do you think that dynamic changes much.

Michael This is Jeremy a lot of the shippers on Wink to Webster current buyers in that market. So when the.

Barrel of start to flow, it's almost like moving your purchasing from Houston to Midland. So it's all.

Almost the swapping of where the barrels move and how they move and so I don't see of changing of ton there could be some incremental benefits of the Houston market from an export but usually in this case and the way the T&D or structured over time, it's more of than the domestic refining demand as opposed to incur.

The mineral exports.

Got it thank you guys.

Our last question comes from the line of.

Sunil Sibal from Seaport Global Securities. Your line is open.

Yes, hi, good afternoon, guys and thanks for taking my question. So just a couple of clarification starting on the guidance on the transport segment. So.

You did $433 million in Q2, and every time that segment and the guidance full year of its implying a fairly significant downtick from that number is.

Is it because of some of them receives that you got in Q2 R&D costs.

Items at the kind of beta of moving that number in the second half.

Can you repeat the question please.

So when I look at the transportation segment full year guidance.

$165 million.

And you're already close to $810 million in the first half.

And then specifically in the second quarter, you did $433 million. So it seems like your guidance is suggesting that there will be a day.

<unk> taken in that segment in the second half of the Q2 numbers.

I was just curious is that the.

The function of NBC is that you got in Q2 in the transport segment.

The other factors, it's a combination of some deferral of the benefit from Q1 on the cost side, where we captured on the transportation side and it's also has to do with the MVC and timing of payments.

In recognition of the EBITDA.

Okay.

Then on the facilities segment, the full year guidance of.

Kind of a breakeven so clearly the spread sort of challenged.

2021, and it seems like on the NGL side.

You had some you know.

Because of the hedging that you undertook there was the.

Okay.

Negative kind of go ahead Greg.

Think about SME segment.

Crude differentials kind of stay where they are.

22 of forward.

How should we think about that segment.

Going forward in terms of contribution.

I think you should wait for our guidance in February of that'll give you much better clarity on that.

Okay got it.

Thanks, guys. That's all of thanks Neal.

Yeah.

That concludes our Q&A session I will now turn the call over back to the company for closing remarks.

This was willing thanks for dialing in and we always appreciate your interest and support of Plains and I wish you a nice evening. Thank you very much for dialing in.

Thank you again for participating this concludes today's conference call you may now disconnect.

[music].

Uh huh.

[music].

Good day, and thank you for standing by and welcome to the PAA and PAGP second quarter 2021earnings 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 the question. During the session you will need the press star 1 on your telephone keypad.

If you require any further assistance please press star zero.

I would draw without of or did you all would like to welcome your speaker for today, the sort of Roy Lamoreaux, Sir the floor is yours.

Thank you Karl good afternoon, and welcome to Plains, All American second quarter 2021 earnings call. Today's slide presentation is posted on Investor Relations website under news and events section of Plains, All American Dot Com. We're an audio replay will also be available. Following today's call important disclosures regarding forward looking statements of non-GAAP financial measures of provided on slide 2 of condense.

Consolidated balance sheet for PAGP and other reference materials are located in the appendix.

The only chain chairman and CEO and Al Swanson, Executive Vice President and Chief Financial Officer will host our call.

Other members of our team will be available for Q&A, including Harry the <unk> President, Chris Chandler Executive Vice President and Chief Operating Officer, Jeremy Goebel, Executive Vice President and Chief Commercial Officer, and Christopher Volk, Senior Vice President and Chief Accounting Officer before turning the call over to William I'll note that we all focus today's discussion of our second quarter results.

The full year guidance with respect to the Permian Basin joint venture that we intend to form of the oryx midstream given the the transaction is not expected to close until the fourth quarter, we do not plan to share any additional information beyond what was provided on our July 13th conference call with that I will now turn the call over to Willie.

Our second quarter results benefited from certain timing related items, which as al will discuss are incorporated within our full year guidance of <unk>.

Summary of our financial highlights as provided on slide 3.

These initiatives take time to develop Immaterialize and I am very pleased with the progress we have made with several of the initiatives coming to fruition since our first quarter call in may of a recap as provided on slide 4.

On asset sales yesterday, we closed the $850 million sale of our natural gas storage business, which was roughly 2 months ahead of schedule. We continue to progress additional opportunities and expect to achieve $920 million until asset sales in 2021, well exceeding our initial target of 750.

Regarding portfolio optimization, we announced the execution of a definitive agreement to form of the strategic plains of ARX joint venture through a cash the transaction this debt free entity will align directly with our optimization strategies.

And importantly out of sustainability Lastly, the group published our 2020 sustainability report greatly increasing our quantitative disclosures, including our scope 1 and scope 2 greenhouse gas emissions data, which reflect a reduction over the last 3 years and screens favorably relative to peers on overall emissions the floor.

Report is posted on our website highlights from which are included within today's presentation.

Regarding our macro view, our fundamental outlook remains positive and we expect global crude oil supply and demand to continue to rebalance over the next several quarters.

While recent OPEC plus actions have largely been consistent with our expectations. We continue to monitor potential near term headwinds to global demand recovery.

As commodity price signals have increased producer activity in the Permian ramp earlier in the year and of stabilized in recent months, we expect growth activity resumed as supply and demand balance further improves which we expect to be mid 2022.

We believe plains is well positioned for a multiyear period of Permian growth with significant operating leverage and assets underpinned by high quality long term cash flow.

Further reinforcing this will be the completion of our recently announced Permian Basin JV with the arts.

Our wink to Webster entering full service later this year as well as the completion of projects outside of the Permian such as the cap line reversal.

As the collective result of this progress we have further increased our 2021 estimated free cash flow after distributions to plus or -135 billion or $450 million, excluding proceeds from asset sales.

An overview of our second quarter results as illustrated on slide 6 within the context of our full year guidance and directional estimates for the EBITDA contribution by quarter.

Second quarter adjusted EBITDA of $579 million was roughly 100 of $10 million above the high end of the percentage range estimated for the second quarter within our may guidance, which acknowledge the potential for timing shifts across individual quarters.

In addition to earlier than forecast the NGL sales.

Additionally, roughly $40 million of our second quarter adjusted EBITDA was driven by over performance the.

The majority of our over performance occurred within our transportation segment is incorporated within our updated full year guidance of.

Our performance was driven by stronger throughput across various pipeline systems and hub terminals per.

The degree of Opex savings.

Additional detail on our second quarter of fee based segment results are summarized on slide 7.

An overview of our capitalization and liquidity metrics is provided on slide 8 total.

Total debt increased approximately $250 million during the quarter as a result of normal working capital items, although it's still of approximately $370 million lower than year end 2020.

As of June 30, long term debt outstanding was approximately $8.4 billion, which is net of $750 million of senior notes due in June of 2022, and a $200 million term loan associated with our gas storage business, both of which were reclassified as short term debt.

As of quarter end.

Of the gas storage term loan was repaid yesterday.

While our long term debt to adjusted EBITDA ratio was 3.5 times at quarter end. It was 3.9 times when including the amount of classified as short term.

This remains above the high end of our target range and reiterate our commitment to further debt reduction.

That said, we have made progress towards our deleveraging objectives and are pleased with Moody's recent review for upgrade announcements.

The base guidance reflects transportation segment performance to date.

As well as a $10 million to $15 million negative impact on the facilities segment due to the gas storage sales closing earlier than forecast.

The net our guidance includes the $25 million reduction due to changes in market conditions that we expect to result in less favorable crude oil differentials in the back half of the year.

Fury this will allow us time to FERC to furnish.

2022 guidance with the benefit of timely data following the completion of producer budgeting season, and incur and incorporate the anticipated contribution of the Permian Jason based.

Based in JV on a full year basis.

Additionally, our updated capital guidance is provided on slide 10, which reflects the $100 million year to day reduction in 2021 investment capital and our continued expectation for investment capital from 2022 forward to be in the range of $2 million to $300 million annually.

Before returning the call the will of Slide 11 provides a recap of our capital allocation plans for the year.

<unk>, a summary of equity repurchase activity, we have completed since receiving board authorization in November.

In aggregate, we have repurchased 11.5 million units totaling $103 million, which.

<unk> half of this repurchased in the second quarter.

Our near term capital allocation plans remain consistent with allocating at least 75% of 2021 free cash flow after distributions to debt reduction.

And the balance the equity repurchases.

Our expected total allocation pace and timing remains consistent with our original intention through a balanced approach as described on slide 5 with that I'll turn the call back to Willy.

Thank you al.

We continue to execute on our strategy and we've made good progress on our 2021 goals and longer term objectives, which are reflected on slide 12.

Our outlook for the business and industry as a whole remains constructive and we are intently focused on operating excellence will continue to maximize multi year free cash flow optimize our asset portfolio reduce debt and return cash to equity holders of <unk>.

Summary of key takeaways from today's call is provided on slide 13.

We appreciate your investment in and support of appliance and we look forward to providing you with additional updates on our continued progress in the coming months with that I'll turn the call over to Roy who will lead us in Q&A. Thanks, Willie as we enter the Q&A session. Please limit yourself to 1 question and 1 follow up question and then return to the acuity of additional fall of.

This will allow us.

Karl will now ready to open the call for questions.

Thank you Terry again from the primary if you have questions. Please press star 1.

Our first question comes from the line of Shneur gross shiny from UBS. Your line is open.

Hi, good afternoon guys.

I guess instead of a strategic question all I wanted to focus on the the guidance that was percentage for this year, it's kind of a little bit confusing but.

I think I'm kind of asking the question on the last call you had a strong first quarter. There was a modest increase in guidance and you had mentioned conservatism at the time they were trying to square away if that's.

Part of what's what's shaking out here because it is.

Is the sort of look through it you know as you mentioned in your prepared remarks, the second quarter was the strong quarter.

<unk> million was related to timing, but you did have 40 million of of over performance flight.

And you raised your fee based guidance for the year for about $50 million do you only expect the small benefit of that.

Kind of rolled forward into the following 2 quarters.

Just trying to understand the moving pieces here again.

All was revised lower and so forth.

Just trying to understand if there is an element of conservatism here or how we should sort of think about the guidance.

That's it.

Thanks for the questions generic all start this is Willie I think what we tried to show you on our waterfall chart is.

Moving some SNL earnings because of market conditions from later in the year into the second quarter.

Both in Contango holdings contango storage benefits as well as some additional NGL sales that we had in our Canadian business.

If you think about the $40 million of what we factored in there is the $40 million is outperformance, but we did also have the asset sales.

Our gas storage business was 2 months earlier, so when you take the 40 and you subtract the impact of the.

The asset sales happening a little bit sooner gets you closer to that $25 million and frankly, I'd say, it's what we expect to be it's of a realistic assessment.

Clearly some of the opportunistic <unk>.

All earnings around crude.

And it has not been of strong as we expected earlier in the year. So those are kind of the moving pieces. There I don't know if anyone else wants to add anything no Willie I think part of the just to address the question. We would expect to receive in its in the same lines near the why wouldn't we dropped the SNL and increased transportation I think part of that speaks to what really sets of tobacco.

On the U S side tighter U S Gulf coast to Midland differentials.

In all opportunities in that corridor, but it has led to more transportation of movements from Midland to Cushing, but we've seen more movement of basin. So the ethanol all impact was offset by transportation similar thing in Canada tighter differentials.

Of the proration of along the Enbridge system has been consistent with what we've seen the differentials have been tighter that led to less ethanol there, but what <unk> seen is more volume because the Canadian producers have more cash flow and so that's what the more tariff revenue. So we've seen outperformance on the tariff side, but less performance on the SNL sides of it.

Get out of the positive trade off and the natural hedge in our business.

Hey, Shneur 1 of them that was Jeremy but 1 additional point I would make is in my prepared comments, we talk about the trajectory of Permian production and as I said, we had the increase early in the year, we're actually seeing.

<unk> of the production numbers in the Permian and really until the supply and demand balance gets a little tighter to continued the inventory on crude.

Let's see where demand goes and in opec's compliance, but really the the the.

The inflection point, we expect to be later into 2022.

Which also perhaps is a bit of a different view than we had before.

On guidance for this for this year.

Okay.

What's the thought previously or did I mishear that.

Jeremy go ahead here. This is Jeremy just to clarify the growth we experienced in the first quarter through April to production of the Permian from 4.3 to 4 of 5 we had a previous exit rate estimate of 4.4 to 4 of 5 we still feel strongly in the exit rate and we would say it's closer to the 4 of 5 and potentially slightly higher but it's been effectively flat.

Across our system and other systems from from April to now and then looking forward of the activity today is basically a forecast for your production of 6 months from now so we would expect activity to be fairly constant and yield production to be fairly constant through the year and so it's the other a reduction as to where we were I think that the off.

Set Willy mentioned was this is consistent at the end of the year, where we thought it was but the asset sale of P&G is basically we received proceeds of 2 months earlier, that's close to $15 billion that we had to take out of what we would've forecasted for that benefit and guidance.

Okay perfect.

That makes a lot more sand and all.

I do think everybody appreciates, earning more in the base versus ethanol.

Maybe just for my follow up question here.

Good to see the the buybacks that you've been executing on.

I imagine with the assets all complete.

We'll probably use about 300 million of the price needs to sort of immunize the lost EBITDA from the from a leverage perspective.

But of post that point do you basically expect to complete kind of allocating 75% towards buybacks and 75% towards that.

Kind of the ratio for the end of this year.

All you want to take that.

Yeah, Cheniere the of the 75% or more.

That we've indicated to go for debt reduction.

It is clearly the first priority the up to 25% it was really a limit not of target.

Year 300 million math is actually very close so if you look at it.

This year just took it take our numbers is the $135 billion of free cash flow after after dividends.

Adjusted for the 300, you would come up with a total number of potential of up to $2.50 the.

The reality of it is we bought 50 already we don't intend to provide specific kind of timing pace and value of which will complete it.

That being a priority, but clearly the repurchase program and our intent.

It's a core piece of the order, we're looking to do and we do intend to continue to utilize it but we don't feel its appropriate for us to provide specific targets or dollar amounts that were going to purchase in the second half.

Alright, perfect really appreciate the color of today's guidance. Thank you and have a great 1.

Thanks Cheniere.

Our next question comes from the line of Keith Stanley from Wolfe Research. Your line is open.

Hi, good afternoon.

First just wanted to follow up.

On a on the SNL EBITDA guidance for the year.

Of zero and not to make this overly simplistic, but you referenced early monetization of the contango positions and some NGL sales. So you had some positive margin activities realized for the year I guess, what is there something offsetting within the SNL segment or any activities were.

Youre, losing money this year, given winter storm, Yuri or or other factors that are just offsetting any gains you had.

Jeremy go ahead, Keith this is Jeremy I tried to articulate that of a bit earlier some of the movements between market locations are at tighter differentials in the historical periods, so that the benefit to transportation offset by some on the.

The SNL side ex largely as we had forecast of the contango monetization, but instead of doing that ratably throughout the year spreads got to the point, where we chose to monetize that early so that was in our initial our initial forecast.

Forecast in the previous forecast all of those components for the timing of the NPL sales. This is just movement between quarters that we generally have the phases blows out of our guys are all opportunities opportunistically sell in a given quarter versus store it and sell it in the future quarter. So its just an acceleration of earnings that were already in the plan for <unk>.

And all and that because we're talking about $25 million in the context of $2.175 billion that movement was driven by higher transportation, but lower SNL associated with some of those movements. So it's still very positive to the entity on the.

The Canadian side in the U S side, specifically it is moving.

Cushing.

Hey, Keith this is Willie a couple of other points as you'll recall in our first quarter earnings we did talk about <unk>.

Frac spreads that were put on late last year, which impacted.

The the Canadian business at a lower level and also don't forget we pay storage fees up in Canada, all the way through the year as well. So it's not just pure capturing upside it's taken out of the storage and being having to pay for that across the entire year.

Got it and.

Please let me know if you don't want to touch anything with the Orix, but I was just curious since I don't think it came up on the call you had between quarters.

He issues to be mindful of or Youre thinking about on the regulatory approval front or what do you see this is just the very straightforward transaction from our FTC perspective.

He is probably inappropriate to put any specific comments on it we have filed and we're kind of in the process with the FTC, we would expect approval, but have to go through the process.

Got it thank you.

Thanks.

Our next question comes from the line of Tristan Richardson from true Securities. Your line is open.

Hey, good evening guys.

Really appreciate your comments on the Permian dynamics and the stabilization.

<unk>, you talked about but I guess I know youre not providing guidance for 'twenty 2 at this time, but should we think that.

Has that supply demand.

And balance.

The tightens up or normalizes as you talked about kind of that mid 2022 timeframe should we think the teeth.

That occurs on that timeline that the transport.

Can meaningfully grow next year.

Well I think the conclusion you should take from that is 1 that's an assumption at this point in time, there is a lot of variables around that but as supply and demand balance balances a little bit and tightens up our expectation would be there'd be more there'll be growth in the Permian and.

And we'll give you better guidance as we get the February on what we expect.

The Permian trajectory of debate, but the way I would take that interest in this kind of stable until a tighter supply and then we'd start seeing increased volumes, which should infer additional transportation volumes really this is Jeremy I would just say, it's not linear like that you wouldn't imagine that the rigs will wait until the.

I think as you see the trend of waning spare capacity and increasing demand the rates of Alcon. So as Willie said this is the dynamic supply and demand of time theyre going to wait until all of spare capacity of gone to add activity I think part of the reason al mentioned on the call that we're going to wait to give guidance of February because of all want to see with the capital allocation.

<unk> is and what that timing will be so we can give you got the better estimate of what they'll be but certainly we have.

The contracts in place and we have capacity available to capture incremental production of as it comes to market and we're well positioned for that.

I appreciate it and then and now you talked about maybe some opex savings versus what you had planned was part of the over performance versus previous guidance is there other initiatives going on there should we think of some of this is as permanent and or ratable.

As we kind of model out sort of.

The cost profile next year.

Interest and I'm going to ask Chris Chandler to comment on that Chris sure. This is Chris channel. There are a number of moving parts interest in but we continue to challenge the organization to capture cost savings opportunities and they continue to deliver.

We of course had the benefit from winter storm urea in the first quarter. So that's impacted the <unk> comparison, but.

We are we are finding opportunities everywhere, we look and were cash.

Capturing those and certainly expect to be able to sustain at a portion of those going forward. So we still see opportunities and we're still capturing them.

I appreciate it thank you guys very much.

Thanks Tristan.

Our next question comes from the line of Jeremy Tonet.

J P. Morgan you May now ask your question.

Hi, good afternoon all.

I just wanted to kind of.

Come back to the buyback situation, a little bit here I seeing what you might be able to say.

And you might have a faster pace kind of going forward. Just as you are able to do that just kind of curious if you can expand a bit more on that.

Jeremy This is Willie all make a comment and I know al can follow up on it if you think about the trajectory and the factors that we look at a lot of it is business outlook. So when you look at the first part of the year.

And the question of certainty of being able to execute on some of these.

Volumes of ore cadence and what we're going to do but I'd take you back to that slide 11 on the many many different things that we look at as we evaluate it.

Yes.

And I would concur with what Willie said and again.

The 25% of.

225% I do think some folks of the interpret that as a target versus versus the limit.

Again, if you walk through the math I think cheniere hit us pretty close.

This years up to 25%, let's say the high end would be $250 million.

We bought $50 million today.

Again, we don't believe it's prudent for us to.

The telegraph the specific timing and evaluation of the et cetera.

P&G closed yesterday so.

The.

Until the until transactions close there's always risk associated.

Got it so just wanted to clarify the where are you guys locked out or just wanted to make sure I was understanding that strength.

Yeah.

What I would tell you is.

Until a specific transaction comes out of those judgments that you apply.

We don't think that had any meaningful impact on what we've done year to day.

Yes.

The fact that we've kept all of the asset sales proceeds in hand at June 30, probably has more to do with it then anything at all right.

Got it understood and then just a quick second question here. It seems like there is the <unk>.

Some of our robust M&A interest if not all activity up north of the border there and was just wondering given.

Some of those strong markers out there I'm wondering your thoughts on the Canadian business. It seems like that could be a powerful way to returning capital to unitholders here. So just wondering your latest thoughts on that.

Divestitures, there can make sense.

While Jeremy we look at lots of things, but we can't really share of any thoughts premature to be sharing any thoughts about anything we might be looking at all.

Yes.

Got it I'll leave it there thanks. Thank you.

Our next question comes from the line of Pierre Tammen Pie.

Piper Sandler please ask your question.

Yes, good afternoon, and thanks for taking my question.

My first pertains to producer disciplines, we've certainly hurts the public's public e&ps have been more disciplined on the production price and then maybe the privates have been a little less so so I'm. Just curious are you hearing any change to that.

Kind of consensus view.

As far as when you interact with producers.

I think.

There's a few categories, it's more nuanced than that even I think there is the.

Handful of call it half of dozen.

Private producers that are really taking advantage of the opportunity we're disciplined across.

The space and they're getting out in front of it and theyre going to grow production.

But by and large the producer community has been very disciplined within the larger producers. They are cautiously optimistic about next year, but we.

I haven't seen any change in the rig count and close to 3 months of instrument and 4% growth in the last 3 months.

That's the indicating that the hey, we're going to wait and see how of this goes I think there's a general view that the current price maybe a little bit synthetic because there is productive capacity to meet demand today and they don't want to get out in front of that so it's a prudent approach there is some opportunity for under Levered private operators to get out in front of us.

In categories of margin that can hedge nice margins and cash flow returns. So we are seeing that but it's more nuance than all private.

Alex it's theirs.

And setting up the long term durable corporate structure, so healthy and these are good for us in the long term.

Great. That's excellent color. Thank you and then my follow up and I apologize if I missed this in the prepared remarks or in the Q&A, but.

Congrats on lowering the investment of maintenance Capex for this year by about $65 million per 10% just curious what the driver was there.

I'm sorry.

Maintenance capital and other instruments, yet, yes, Chris wants to take both of those yes. This is Chris Chandler appear so I can take those let's start with maintenance capital of the reduction quarter on quarter is primarily driven by the cancellation of the behavior of connection project.

Net maintenance capital down to the range of units in now which is down quite a bit from where it was a few years ago. So hope that helps.

Yes. It does thank you very much. Thank you Hey, Pearce. This is Willie again I think thank you for acknowledging the progress that we've made there.

Just reinforces how we're looking at every single dollar financial discipline, not only capex the maintenance Capex operating capex some of this.

That's really been of tremendous focus of the organization is to streamline and be as efficient as we can.

Thank you Willy.

Thank you.

<unk>.

Our next question comes from the line of Jean Ann That's Barry from Bernstein. Your line is open.

Hi.

Installation of the highly of has any impact on the optimal cap line reversal like could you take more from the telco or anything like that or is it not really work like that.

Jeremy.

The G&A and highest Jeremy so the.

The project works on its own and it'll be largely of heavy based project from the telcos out there is incremental capacity available to move and I think there is some timing of some other open seasons in negotiations between shippers that can free up capacity of the toga and more capacity of the telco for heavy longer term view of positive for cap line I think.

That's the easiest way to say.

And just to be clear Jean Ann.

GAAP line stands on its own right. So that project has enough return of dry itself. The behaviour of connector impact less volume is going to cap line in the near term, but as Jeremy pointed out once that project starts floor of our expectation is there.

Should be additional volumes that will be able to get there at some point in time.

And then I know youre not commenting on our ex I'll keep my question Super High level and you had this really help of slides showing how many downstream connections and all.

Eric Schippers with game and really generally can you kind of get the timeframe that you would expect there to be sort of switching of downstream in the Permian is that of near term thing or is that more medium term as mdc's Dr. Rolla.

Jeremy G&A.

G&A in the can you clarify what you mean switching of downstream I just want to make sure I understand what the question maybe let me take a stab of it. Your question was timing on downstream capability to connect right, Judy basically youre, obviously, adding a ton of potential downstream options to ericsson that that could be obviously, the big Center day for you and I am just trying to understand if that would be of near term.

Uh huh.

Obviously, that's something that the transaction gets there and everything or if it's more everybody has too many mvpds right now so it's going to be more of like in 3 or 4 years.

Dr Rolla.

Yeah. So what we've done on the JV is we haven't incorporated any of that into our assumptions on the JV right and the point on the connectivity and flexibility is ultimately it's going to be a.

A much better mousetrap to be able to serve our producers to be able to get volume as to where they need to get to.

Okay. Thank you thanks.

Thanks, Jean Ann.

Our next question comes from the line of Michael of the PFS from Goldman Sachs. Your line is open hi.

The guys just curious your commentary about <unk> exit rate per Permian production. How are you thinking about the end of the year and the beginning of next year.

In terms of kind of the battle between Houston, and Houston area of destinations versus Corpus and where producers are other shippers want to flow barrels.

I'll start with that Michael This is Willie.

What we've always talked about our system being able to have access to multiple markets. There's so much that goes on.

And market dynamics that it's nice to have the flexibility to go to both I think it would be difficult for us to to.

To give you exit rates to each market as it sits today because of just too many variables that are out there.

Got it and do you guys have a view of.

<unk>.

Which you think golfers better export opportunities for shippers, who want to get their barrels on a boat.

Jeremy.

Michael This is Jeremy I think the the guys across the street might have a different answer but I think the public data would indicate that there's over 1 billion of half barrels a day leave in the corpus market.

<unk> been for a long period of time, So I think both have the pros and cons of lot of volume gets absorbed in the Houston local market and incremental barrels of oil across the dock and so I think over time Youll see those 2 markets Youll see some at the St. James You'll see summit.

At Nederland as well so I think.

Pending on where the barrels are located and what the logistics of all of the ultimately went out as to what the most favorable markets, but I think there is a need for all of them to clear because there's.

Multiple logistical constraints across the Gulf coast, the corpus seems to be heavily focused on crude oil exports and Houston has got a lot of different diversity across its exports and then youll see a smaller amount of nederland and the St. James.

Got it thank you all.

Later, you probably already know this but the heavier barrels and the medium grade.

The U S refiners like to run that so when you think about exports the law.

Lighter volumes typically will go into the water. So that also has a factor that factors into the decision on where to take the take the molecules.

Understood Hey, just 1 last 1 went to Webster is fully in service do you think that dynamic changes much.

Yeah. Michael This is Jeremy a lot of the shippers on Wink to Webster current buyers in that market. So when the.

<unk> start to flow of its almost like moving your purchasing from Houston to Midland. So it's almost of swapping of where the barrels moving how they move and so I don't see it changing of time, there could be some incremental benefits of the Houston market from an export but usually in this case and the way the.

T&D or structure and over time, it's more of than the domestic refining demand as opposed to incremental exports.

Got it thank you guys.

Our last question comes from the line of.

Sunil Sibal from Seaport Global Securities. Your line is open.

Yes, hi, good afternoon, guys and thanks for taking my question. So just a couple of clarifications starting on the guidance from the transport segment. So.

You did $433 million in Q2, and every time that segment and the guidance full year of its implying a fairly significant downtick from that number is.

Is it because of some and we see that you got in Q2 R&D costs.

Items at the probably sort of moving that number in the second half.

Can you repeat the question please.

So when I look at the transportation segment full year guidance of.

$165 million.

And you're already close to $810 million in the first half.

And then specifically in the second quarter, you did $433 million. So it seems like your guidance is suggesting that there will be a day.

<unk> in the in that segment in the second half from the Q2 numbers.

I was just curious is that the.

The other function of NBC is that you got in Q2 in the transport segment or any other factors. It's a combination of some deferral of the benefit from Q1 on the cost side, where we captured on the transportation side and it's also has to do with MDC and timing of the payment and.

In recognition of the EBITDA.

Okay.

Then on the facilities segment, the full year guidance of kind.

Kind of a breakeven so clearly you know the spreads were challenged.

2021, and it seems like on the NGL side.

You had some of you know because of the hedging that you undertook.

Part of it.

The negative kind of the headwind so when we think about SNL segment.

The crude differentials kind of.

They are.

22 of 40 <unk>.

Should we think about that segment.

Going forward in terms of contribution.

I think you should wait for our guidance in February of that'll give you much better clarity on that.

Okay.

Got it thanks, guys. That's all right. Thanks Neil.

That concludes our Q&A session.

I'll now turn the call over back to the company for closing remarks, Hey.

Hey, this is willie thanks for dialing in and we always appreciate your interest and support of Plains and I wish you a nice evening. Thank you very much for dialing in.

Thank you again for participating this concludes today's conference call you may now disconnect.

Q2 2021 Plains All American Pipeline LP and Plains GP Holdings LP Earnings Call

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