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 and welcome Peter 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 a question. During the session you will need to press star 1 on your telephone keypad.

If you require any further assistance you May press Star zero.

I would a without a for did you I would like to welcome their speaker for today, just a ROI lamoreaux, Sir the floor is yours.

Thank you Karl good afternoon, and welcome to Plains, All American and second quarter, 2020.1 earnings call. Today's slide presentation is posted on Investor Relations website under news and events section and Plains, All American Dot Com. We're an audio replay will also be available following today's call important disclosures regarding forward looking statements and non-GAAP financial measures are provided on slide 2 a condense.

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

Willie Chiang Chairman and CEO and Al Swanson, Executive Vice President and Chief Financial Officer will host a call.

Other members of our team will be available for Q&A, including Harry Bufano President for.

This 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 on a second quarter results and full year guidance with respect for the Permian Basin joint venture that we intend to form a the oryx midstream.

Given the transactions and unexpected 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 plus or minus $2.175 billion.

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

Summary of our financial highlights as provided on slide 3.

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

These initiatives take time to develop a 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 a recap as provided on slide 4.

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

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

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

And importantly on a sustainability last week and 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 overview for the last 3 years and screens favorably relative to peers on overall emissions for.

A 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 a commodity price signals have increased producer activity and the Permian ramp earlier and the year and a stabilized in recent months, we expect growth activity 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, a 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 Orix.

A 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 for $450 million, excluding proceeds from asset sales.

As is illustrated on slide 5 we plan to continue allocating our free cash flow and a balanced manner with a 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.

And 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 a $110 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.

And as Willy mentioned and as illustrated on this slide roughly $70 million of our second quarter. Adjusted EBITDA was a function of tiny timing benefits.

Thats, a majority of which occurred within our supply and logistics segment.

Each represented gains from our decision to monetize certain contango positions earlier than forecast.

In addition to earlier than a forecast 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. Our performance was driven by stronger throughput across various pipeline systems and hub terminals plus a degree of Opex savings.

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

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

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

As a June 30 long term debt outstanding was approximately $8.4 billion, which is net of $750 million a senior notes due in June of 'twenty, and 'twenty, 2 and a $200 million term loan associated with our gas storage business.

Both of which were reclassified as a short term debt as of quarter and.

The gas storage term loan was repaid yesterday.

While our long term debt to adjusted EBITDA ratio was 3.5 times at quarter and it was 3.9 times when including the amounts classified as short term.

And 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 and 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 facility segment due to the gas storage sales closing earlier than forecast.

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

Our current guidance does not reflect a 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 and tell our fourth quarter 2021 earnings call and fed.

Fury and.

This will allow us time to for to furnish a.

2022 guidance with a benefit of timely data following the completion of producer budgeting season, and and 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 a $100 million a year to date a reduction in 2021 investment capital and our continued expectation for investment capital from 2022 forward to be in a range of $2 million to $300 million annually.

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

<unk> and 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 a $103 million, which approximately half of this repurchased and 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 to 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 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 continuing to maximize multi year free cash flow and optimize our asset portfolio reduce debt and return cash to equity holders a 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 a continued progress in the coming months with that I'll turn the call over to Roy who will lead us and Q&A.

And as we enter the Q&A session. Please limit yourself to 1 question and 1 follow up question and then return to the queue. If you're a additional follow ups and this will allow us.

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

Karl will now and ready to open the call for questions.

Thank you Sir again.

Have a question 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 going and I wanted to focus on the guidance that was percentage for this year, it's quite a a little bit confusing but.

I think I quite a asked this question on the last call you had a strong first quarter. There was a modest increase in guidance and you'd mentioned conservatism at the time and trying to square away a thoughts.

What's shaky on here because.

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

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

On a roll forward into the following 2 quarters.

And just trying to understand the moving pieces here again.

It was revised lower and so forth.

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

<unk>.

Yeah.

Thanks for the questions generic I'll start and 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 and contango holdings, a contango storage benefits as well as some additional NGL sales and we had and our Canadian business.

And if you think about a $40 million.

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

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

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

Clearly some of the opportunistic.

And al earnings around crude.

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

On the us side had a U S Gulf coast to Midland differentials.

And how opportunities and that corridor, but.

And it's led to more transportation and movements from Midland to Cushing and we've seen more movement a basin and so the ethanol impact was.

Offset by transportation, similar thing and Canada tighter differentials.

The proration along the Enbridge system has been consistent with what we've seen for differentials have been tighter and that's led to a lesser snow there, but what <unk> seen is more volume because Canadian producers have more cash flow and so that's led to more tariff revenue. So we've seen outperformance on the tariff side, but less performance on the SNL size a week.

That is a positive trade off and a natural hedge on our business.

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

Inventory on crude.

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

And the inflection point, we expect to be later into 2022.

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

On guidance for this for this year.

Okay.

And 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.

And what you thought previously or did I mishear that.

Jeremy go ahead here. This is Jeremy just to clarify the growth we experienced a first quarter through April to production and the Permian from for 3 to 4.5.

On a previous exit rate estimate a 4.4 to 4.5 we still feel strongly and the exit rate and we would take a closer to the 4.5 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. The activity today is basically a forecast for your production and 6 months.

For now so we would expect activity to be fairly constant and yield production will be fairly constant through the year and so it's not a a reduction as to where we were I think that.

The offset to a Willy mentioned was business consistently and a year, where we thought it was but the asset sale a P&G and basically we've received proceeds but 2 months earlier, that's a close to $15 billion that we had and take out of what we would've forecasted for that benefit and guidance.

Okay perfect.

And that makes a lot more sense and I'd.

Do you think everybody appreciates, earning more in fee based versus ethanol.

Maybe just for my follow up question here.

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

And I imagine with the asset sell complete youll, probably use about 300 million and the proceeds to sort of immunize. The lost EBITDA from a from a leverage perspective.

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

It was quite a bit ratio for the end of this year.

Al you want to take that.

Yes, cheniere than a <unk>.

75% or more.

That we've indicated to go for debt reduction.

And as clearly the first priority the up to 25% it was really a limit and not a target.

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

This year and just take our numbers as a 135 billion and free cash flow after after dividends.

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

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

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

It's a core piece of what we're 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 a specific targets or a dollar amount that we're going to purchase and the second half.

Alright, perfect really appreciate the color today 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.

I first just wanted to follow up.

On a on the SNL EBITDA guidance for the year. So it's a zero and not to make this overly simplistic, but you reference early monetization of a contango positions and some NGL sales. So you you had some positive margin activities realized for the year I guess what is there something on.

Offsetting within the SNL segment or any activities, where 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 that a a bit earlier some of the movements between market locations are and tighter differentials and historical period. So that's a benefit to transportation offset by some on.

The ethanol side, that's largely and we had forecast as a contango monetization, but instead of doing that ratably throughout the year spreads got to a point, where we chose to monetize that early so that was in our initial our initial forecast and the <unk>.

He is forecast all of those components for the timing of the NGL sales. This is just a movement between quarters that we generally have a basis blows out our guidance will opportunities opportunistically sell on a given quarter versus store and and sell it and the future quarter. So its just an acceleration of earnings that were already in the plan for ethanol and that.

And because we're talking about $25 million and the context, a $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 on a Canadian side and the U S side, and specifically those movements and fishing.

Hey, Keith this is Willie a couple of other points as you'll recall on 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 a storage fees up and Canada, all the way through the year as well. So it's not just pure capturing upside it's taken out of storage and being having to pay for that across the entire year.

Got it and.

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

Any issues to be mindful of where you're thinking about on a regulatory approval front or where do you see this as just a very straightforward transaction from a FTC perspective.

He is probably inappropriate to put any specific comments on and we have filed and we're kind of on the process for 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 a Tristan Richardson from through a securities. Your line is open.

Hey, good evening guys.

Really appreciate your comments on the Permian dynamics on that.

Stabilization and 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.

Demand balance.

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

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 and time Theres a lot of variables around that but as supply and demand balance balance is a little bit and tightens up our expectation would be there'd be more there'll be growth and the Permian and.

And we will give you better guidance as we get to February on what we expect the.

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

And I think as you see a trend of windowing and spare capacity and increasing demand for batesville.

Willie said this is a dynamic supply and demand and class theyre going to wait until all spare capacity has gone to add activity I think part of the reason al mentioned on the call and that we're going to wait to give guidance on February because for 1 and see what the capital allocation is and what that timing will be so we can give you guys a better estimate on what they'll be but certainly we have.

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

And I appreciate it and then and now.

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

As we kind a model out for.

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 Tristan, but we continue to challenge the organization to capture cost savings opportunities and they continue to deliver.

We of course had a benefit for winter storm urea and 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 and 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.

Hi, just wanted to kind of.

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

Based on our calculations and kind of a methodology that you had laid out before it seems like the pace of buybacks is a bit slower than what we might have expected year to date, given the asset sale proceeds and with <unk>.

Just wondering if you were kind of locked out of a market for periods of time with orix or you might and.

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

Jeremy This is Willie and I'll 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 as a business outlook. So when you look at the first part of the year.

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

You should expect that some of this would probably not occur earlier in a 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 and or cadence and what we're going to do but I'd take you back for that slide 11 on the many many different things that we look at as we.

Weighted.

Yes.

And I would concur with what Willie said and again.

On.

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

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

And this years up to 25%, let's say the high and would be $250 million.

We bought $50 million today.

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

And to telegraph specific timing and valuation and et cetera.

And P&G closed yesterday so.

And until until transactions closed, there's always risk associated with them. So.

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

Yeah.

What I would tell you is.

Until a specific transaction comes up there's judgments that you apply.

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

The fact that we've kind of a have the asset sales proceeds and at June 30, probably has more to do with it and anything out right.

Got it understood and then just a quick second question here. It seems like there is a there's been some a robust M&A interest if not a activity.

Of the border there and was just wondering given.

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

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

A divestiture there can make sense.

Well, 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.

Yes.

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

Our next question comes from the line of peers Hammond a pie.

Piper Sandler please ask your question.

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 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 a 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 larger public companies have more disciplined and some of the smaller ones may not have quite the same amount that Jeremy do you want to comment on that.

I think.

There's a few categories its more nuanced and IV and then I think there was a.

Handful call it half a dozen a price.

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

Upon across.

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

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

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

And that's indicating that hey, we're going to wait and see how this goes I think there's a general view that the current price may be 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.

And Catherine and margin that can hedge a nice margins and cash returns. So we are seeing that but it's more nuanced and all private and all.

There is a day.

There is a handful that are getting out in front of it and we certainly have exposure to a number other than and we appreciate that and like it but the larger ones are there and they are ready and they'll be better capitalized at the end of this because of paying down debt and <unk>.

And setting up for a long term durable corporate structure, so healthy and he's a good for us and the long term.

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

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

I'm sorry.

Maintenance capital and other instruments, yes, yes, Chris wants to take both of those yeah. This is a key.

Chris Chandler and fear so I can take those let's start with maintenance capital and the reduction quarter on quarter is primarily driven by the cancellation of about a <unk> connection project.

There's been some smaller reductions and efficiencies captured and other areas, but that's the main piece there and then on maintenance capital on a full year outlook of a $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.

And that maintenance capital down to the range and and it's in now which has dipped 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 a thank you for acknowledging the progress we've made there it just reinforces how we're looking at every single dollar financial discipline, not only capex for maintenance Capex operating Capex I mean, there's that's really been a tremendous focus.

The organization is to streamline and be a sufficient as we can.

Thank you Willy.

Thank you.

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

Hi, just.

A cancellation of a highly I have any impact on the optimal cap line reversal like could you take a more from a telco or anything like that or is it not really work like that.

Jeremy <unk>.

G&A and highest Jeremy.

The project works on its own and it'll be largely a heavy based project from a dose that's out there is incremental capacity available to move and I think there is some timing and some other open seasons and negotiations between shippers that can free up capacity and the fatone and more capacity for telco for heavy and longer term be a positive for cash.

And I think thats, the easiest way to say and.

And just any clearer gene and cap line stands on its own right. So that project has enough return to drive itself. The behavior connector impact less volume is going to cap line and the near term, but as Jeremy pointed out once that project starts floor and our expectation is there shouldn't.

Should it be additional volume that'll be able to get there at some point in time.

And.

And then I know youre not commenting on Eric thoughts and my question Super High level and you had this really helps us slides showing how many downstream connections and.

Eric Schippers gain and.

Generally can be a kind of get the timeframe that you would expect there could be a sort of switching a downstream and the Permian is that a.

Near term thing or is that more medium term as NBC you start to hear a lot.

Jeremy.

G&A and can you clarify what you mean switching a downstream and I just want to make sure I understand what the question and maybe let me take a stab a at your question was timing on downstream capability to connect right GTS basically youre, obviously, adding a ton of potential downstream options to orix and that could be obviously, a big synergy for you and I'm just trying to understand if that would be a near term.

<unk>.

Obviously, that's something that the transaction and that's there and everything or if it's more everybody has too. Many MVC is right now and so it is going to be more like and 3 or 4 years.

And start to rollout.

Yeah. So what we've done on a JV as we haven't incorporated any of that into our assumption on a 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 a PFS from Goldman Sachs. Your line is open.

Hey, guys. Just curious your commentary about end of your 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 a battle between Houston, and Houston area destinations versus corpus and where producers are other shippers want a flow barrels.

I'll start with that Michael This is Willie.

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

And market dynamics, and it's nice to have a 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 there's just too many variables that are out there.

Got it and can you go.

You have a view on.

<unk>.

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

Jeremy.

Michael This is Jeremy and I think the guidance 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 leave and the corpus market and that's been for a long period of time. So I think both have pros and cons a lot a volume gets absorbed in the Houston local market and incremental barrels a foot processes.

And so I think over time Youll see those 2 markets Youll see some at St. James Youll see summit.

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

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

And do you think.

You probably already know this but the heavier barrels and the medium grade.

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

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

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

And Michael This is Jeremy a lot of other shippers on Wink to Webster for current buyers and that market. So a win.

A barrel start to flow and it's almost like moving your purchasing from Houston to Midland. So, it's almost a swapping a whereas the barrels move and how they move and.

So I don't see a changing a ton and there could be some incremental benefits and the Houston market from an export, but usually and this case and in a way the T and these are structure and overtime its more than the domestic refining demand as opposed to incremental exports.

Got it thank you guys.

Our last question comes from the line a sunny.

And you'll see ball 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 guidance on the cost for each segment. So.

You did $433 million and Q2 and every time for that segment and.

Guidance full year, a it's implying a fairly significant downtick from that number is.

Is it because of some and we see that you've got and Q2 already.

Items at a probably start moving that number and in the second half.

Can you repeat the question please.

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

On $65 million.

And you already did close to $10 million and the first half.

And then specifically and the second quarter, you did $433 million. So it seems like you're a guidance is suggesting that there will be a downtick and in that segment in the second half sounds like Q2 numbers.

And I'm just curious is that.

That's a function of NBC is that you got in Q2, and the transport segment or any other.

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 payment and.

And recognition of the EBITDA.

Okay.

And then on the facilities segment, the full year guidance kind.

Kind of a breakeven so clearly on the spreads were challenged and.

2021, and it seems like on the NGL side.

And you had some you know.

And because of the hedging that you undertook.

Okay.

A negative kind of a headwind so when we think about <unk> segment.

Crude differentials kind of stay where they are.

22, a forward.

How should we think about that segment.

Going forward and in terms of contribution.

I think you should wait for our guidance in February that will give you a much better clarity on that.

Okay.

Got it thanks, guys, that's all and thanks Neal.

That concludes our Q&A session and we'll now turn the call over back to the company for closing remarks.

And 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].

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 a recession to ask a question. During the session you will need to press star 1 on your telephone keypad.

If you require any further assistance you May press Star zero.

I would draw without a for did you I would like to welcome there a speaker for today that's a.

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 a plains, all American dot com or an audio replay will also be available following today's call.

And disclosures regarding forward looking statements and non-GAAP financial measures are provided on slide 2 a condensed consolidating balance sheet for PAGP and other reference materials are located in the appendix.

And really chain, chairman and CEO and Al Swanson Executive Vice President and Chief Financial Officer will host a call.

Other members of our team will be available for Q&A, including Harry <unk>, President and <unk>.

Chris generally 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 on a second quarter results and full year guidance with respect for the Permian Basin joint venture that we intend to form a the oryx midstream.

And given the transaction is not expected to close until the fourth quarter and we do not plan to share any additional information beyond what was provided on our on 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 plus or minus $2.175 billion.

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

Summary of our financial highlights as provided on slide 3.

And previous calls we have discussed reaching a positive inflection point and our business. We've been advancing a number of initiatives aimed to maximize free cash flow with a 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 other initiatives coming to fruition since our first quarter call and May a recap as provided on slide 4.

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

And importantly on a sustainability last week, we 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 against for the last 3 years and screens favorably relative to peers on overall emissions for.

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

Regarding our macro view or a 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 a commodity price signals have increased producer activity in the Permian ramp earlier and the year and a 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, a Permian and 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 based on JV with Orix.

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

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

And as Willy mentioned and as illustrated on the slide roughly $70 million of our second quarter. Adjusted EBITDA was a function of tiny timing benefit that.

The majority of which occurred within our supply and logistics segment, which represented gains from our decision to monetize certain contango positions earlier than forecast.

In addition to earlier than forecasted NGL sales.

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

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

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

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

As a June 30 long term debt outstanding was approximately $8.4 billion, which is net of $750 million a 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 a short term debt as of quarter and the.

A gas storage term loan was repaid yesterday.

Our long term debt to adjusted EBITDA ratio was 3.5 times at quarter and it was 3.9 times when including the amounts 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.

And 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 facility segment due to the gas storage sales closing earlier than forecast.

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

Fury.

This will allow us time to FERC to furnish.

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

Based on JV on a full year basis.

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

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

Including 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 a $103 million, which approximately half of this repurchased and the second quarter, our near term capital allocation plans remain consistent with allocating at least 75% of <unk> 2021 on free cash flow after distributions to debt reduction.

<unk> and.

And the balance equity repurchases.

And 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 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 continuing to maximize multiyear free cash flow and 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 our clients and we look forward to providing you with additional updates on a continued progress in the coming months.

That I will turn the call over to Roy who will lead us and 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 queue, if you're a additional follow ups on.

This will allow us.

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

Karl will now ready to open the call for questions.

Thank you Terry again as a reminder, 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 and I wanted to focus on the guidance that was percentage for this year, it's kind of a little bit confusing but.

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

Part of what's what's shaky on here because it is.

As a sort of a look through it as you mentioned in your prepared remarks, and the second quarter was a strong quarter.

<unk> million dollars was related to timing, but you did have $40 million of over performance for light.

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

And just trying to understand the moving pieces here and get.

Ethanol was revised lower and so forth but.

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

<unk>.

Thanks for the questions generic I'll start and 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 and contango holdings, a contango storage benefits as well as some additional NGL sales and we had and our Canadian business.

And if you think about a 40 million and what we've factored in there is a $40 million is outperformance, but we did also have the asset sales.

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

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

Clearly some of the opportunistic SNL earnings around crude.

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

Tobacco.

On the U S side had a U S Gulf coast to Midland differentials, less ethanol opportunities and that corridor.

It's.

And that has led to more transportation and movements from Midland to Cushing and we've seen more movement a basin and so the ethanol impact was offset by transportation similar thing and Canada tighter differentials.

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

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

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

Inventory on crude.

See where demand goes and and Opex compliance, but really the.

And the inflection point, we expect to be later into 2022.

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

And 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 you thought previously or did I mishear that.

Jeremy go ahead here. This is Jeremy just to clarify the growth, we experienced and FERC quarter through April to production and the Permian from for 3 to 4 to 5 we had a previous exit rate estimate a 4.4 to 4.5 we still feel strongly and the exit rate and we would take a closer to that for a 5 and potentially slightly higher but it's been effectively <unk>.

And 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 and 6 months from now so we would expect activity to be fairly constant and yield production would be fairly constant through the year and so it's neither a reduction as to where we were I think the on.

Offset to a Willy mentioned was business consistently and a year, where we thought it was but the asset sale a P&G and basically we received proceeds but 2 months earlier that is close to $15 billion that we had to take out and what we would've forecasted for that benefit and guidance.

Okay perfect.

That makes a lot more sense and.

And I do think everybody appreciates, earning more in fee based versus now maybe.

And maybe just for my follow up question here.

You see the buybacks that net.

And executing on a.

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

But what a post that point do you basically expect a complete kind of.

Allocating 75% towards buybacks and 75 per cent to watch that as kind of a.

The ratio for the end of this year.

Al you want to take that.

And yes cheniere than on the <unk>.

75% or more.

We've indicated to go for debt reduction.

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

Youre a $300 million math is actually very close so if you look at it.

This year and just took take our numbers as a $135 billion a free cash flow after after dividends.

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

And the reality of it and as we bought 50 already we don't intend to provide specific kind of timing and pace and value of which will completed.

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

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

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

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. So it's a zero and not to make this overly simplistic, but you referenced early monetization of a contango positions and some NGL sales. So you you had some positive margin activities realized for the year.

What is there something offsetting within the SNL segment or any activities were.

And you are 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 that and a bit earlier some of the movements between market locations are and tighter differentials and historical period. So there is a benefit to transportation offset by some on the.

On the ethanol side, that's largely and we had forecasted the contango monetization, but instead of doing that ratably throughout the year spreads got to a point, where we chose to monetize that early so that was and our initial our initial forecast and the previous forecast all of those components for and the timing. The NGL sales. This is just moving.

And then between quarters and we generally have so phases blows out our guidance low opportunity opportunistically sell on a given quarter versus store and and sell it and in the future quarter. So its just an acceleration of earnings and we're already in the plan for ethanol and that because we're talking about $25 million and the context, a $2.175 billion.

That movement was driven by higher transportation, but lower SNL associated with some of those movement and so.

Still a very positive to the entity on on the Canadian side and in the U S side, and specifically those movements and Cushing.

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

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

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

Got it and.

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

He issues to be mindful of a youre thinking about on a regulatory approval front or where do you see this as just a very straightforward transaction from a FTC perspective.

Keith probably inappropriate to put any specific comments on it and we have filed and we're kind of on the process for 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 first and then Richardson from through a securities. Your line is open.

Hey, good evening guys.

Really appreciate your comments on the Permian dynamics and that that's.

A 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.

Demand balance.

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

And that occurs on that timeline that the transport.

And meaningfully grow next year.

And we will give you a better guidance as we get to February on what we expect.

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

And I think as you see a trend of waning spare capacity and increasing demand for rigs will come. So as Willie said this is a dynamic supply and demand and cloud and they are going to wait until all spare capacity has gone to add activity I think part of the reason al mentioned on a call that we're going to wait to give guidance for February is for wanting to see with a capital allocation.

And as and what that timing will be so we can give you guys a better estimate on what that way, but certainly we have.

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

And I appreciate it and then and 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 a some of this is as permanent and or ratable.

And as we kind a model out for.

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 on moving parts interest and but we continue to challenge the organization to capture a cost savings opportunities and they continue to deliver.

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

We are we are finding opportunities everywhere, we look and we're a.

Capturing those and certainly expect to be able to sustain and 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.

I just wanted to kind of a.

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

Just wondering if you were kind of locked out of a market for periods of time with orix or you might and you might have a faster pace kind of going forward just as youre able to do that just kind a curious if you can expand a bit more on that.

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

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

You should expect that some of this would probably not occur earlier and the year because we factor all 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 and or cadence on 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.

And it.

Yes.

And I would concur with what Willie said and again.

On.

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

And again, if you walk through the math I think cheniere hit it pretty close.

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

We bought $50 million today.

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

And to telegraph, a specific timing and valuation and et cetera.

And P&G closed yesterday so.

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

Got it so just wanted to clarify there where are you guys locked out or just wanted to make sure I understand and that strength.

Yeah.

What I would tell you is.

And a specific transaction comes up there's judgments that you.

And why.

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

The fact that we can have the asset sales proceeds and at June 30, probably has more to do with it than anything going on right.

Got it understood and then just a quick second question here. It seems like there is a there's been sort of a robust M&A interest if not a activity.

Of the border there and was just wondering given.

Some of those a 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 F. A divestiture there 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.

Okay.

Got it and I'll leave it there thanks.

And you.

Our next question comes from the line a Pearce Hammond.

Piper Sandler please ask your question.

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

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

Kind of a consensus view.

As far as when you interact with producers.

I think.

There's a few categories its more nuanced and IV and then I think there is a.

A handful call it half a dozen a.

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

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

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

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

That's indicating that we're going to wait and see how this goes I think there's a general view that set for the current price may be 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.

And Kathryn and margin that can hedge a nice margins and cash and returns. So we are seeing that but it's more nuanced and all private and all.

There is a day.

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

And setting up a long term durable corporate structure, so healthy and he's a good for us and the long term.

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

Congrats on lower and the investment a maintenance capex for this year by about $65 million for 10% just curious what the driver was there.

I'm sorry.

Maintenance capital and other instruments, yes, yes, Chris wants to take both of those yes. This is a.

This channel and appear so I can take those let's start with maintenance capital and the reduction quarter on quarter is primarily driven by the cancellation of the behavior a connection project.

There's been some smaller reductions and efficiencies captured and other areas, but that's the main piece there and then on maintenance capital our full year outlook of a $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.

And that maintenance capital down to the arrangements and now which has dipped 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 we've made there it just reinforces how we're looking at every single dollar financial discipline, not only capex for maintenance Capex operating Capex I mean, that's really been a tremendous focus on.

And the organization is to streamline and be a sufficient as we can.

Thank you Willy.

Thank you.

Our next question comes from the line of Jean and Barry from Bernstein. Your line is open.

Hi.

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

Jeremy <unk>.

G&A and highest Jeremy.

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

And I think thats, the easiest way to say and.

And just to be clear gene and cap line stands on its own right. So that project has enough return a dry itself the behavior connector impact less volume is going to cap line and the near term, but as Jeremy pointed out once that project starts floor and our expectation is there.

It should be additional volumes and that'll be able to get there at some point in time.

And that makes sense and.

And then I know youre not commenting on Orix I'll keep my question and Super High level and you had this really help a flag showing how many downstream connections and.

Eric Schippers.

And really generally can you kind of give a timeframe that you would expect there could be a sort of switching a downstream and the Permian and that and near term thing or is that more medium term as NBC and start to hear a lot.

Jeremy G&A.

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

<unk>.

And obviously, that's something that the transaction and that's there and everything or if it's more everybody has too. Many MVC is right now so it is going to be more like and 3 or 4 years.

And as Dr. Rolla.

Yeah. So what we've done on a JV as we haven't incorporated any of that into our assumptions on a 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 a PFS from Goldman Sachs. Your line is open.

Hey, guys, just curious share commentary about end of year 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 a battle between Houston, and Houston area destinations versus corpus and where producers are other sure.

<unk> won a flow barrels.

I'll start with that Michael This is Willie.

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

And market dynamics, and it's nice to have a 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 there's just too many variables that are out there.

Got it and do you guys have a view on.

<unk>.

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

Jeremy.

Michael This is Jeremy and I think that the guidance across the street might have a different answer but I think the public data would indicate that there's over 1 million barrels a day leave and the corpus market and that's.

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

At Nederland as well so I think.

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

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

Got it thanks, a lot later.

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

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

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

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

And Michael This is Jeremy a lot of other shippers on Wink to Webster current buyers and that market. So a win.

Barrels start to flow and it's almost like moving your purchasing from Houston and Midland So it's on.

Almost a swapping of where the barrels move and how they move and so I don't see a changing a ton and there could be some incremental benefit to the Houston market from an export but and usually in this case and in a way the T. And these are structure and overtime its more to meet domestic refining demand as opposed to Inc.

A mineral exports.

Got it thank you guys.

Our last question comes from the line on.

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 guidance on the transport segment. So.

You did $433 million and Q2, and every time that segment and your guidance full year, that's implying a fairly significant downtick from that number is.

Is it because it's on and we see that you've got and Q2 R&D cost.

Items, such as a problem, it's a moving that number and the second half.

Can you repeat the question please.

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

$165 million.

And you already did close to $10 million and the first half.

And then specifically and the second quarter, you did $433 million. So it seems like you're a guidance is suggesting that there will be a downtick and in that segment and the second half from the Q2 numbers.

And I'm just curious is that.

That's a function of NBC is that you got in Q2 and the transport segment.

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 payment and.

And recognition of the EBITDA.

Okay.

And then on the facilities segment, the full year guidance kind.

Kind of breakeven, so clearly and on the spreads were challenged and.

2021, and it seems like on the NGL side.

And you had some you know.

And because of the hedging that you undertook there was a.

What I'll say.

A negative kind of a headwind so when we think about <unk> segment.

Crude differentials kind of stay where they are.

22, a forward how should.

Should we think about that segment.

Going forward and in terms of contribution.

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

Okay.

Got it thanks guys.

Yeah.

That concludes our Q&A session and we'll now turn the call over back to the company for closing remarks and.

And 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.

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

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