Q1 2025 Plains All American Pipeline LP Earnings Call
Good day, and thank you for standing by welcome to the PAA and PAGP first quarter 2025 earnings conference call. At this time all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question. During the session you will need a press star one.
Speaker Change: One on your telephone you will then hear an automated message advising you. Your hand is raised to withdraw your question. Please press star. One again, please be advised that today's conference is being recorded I would now like to hand, the conference over to your speaker today, Blake Fernandez, Vice President of Investor Relations. Please go ahead.
Blake Fernandez: Thank you Michele good morning, and welcome to Plains, All American first quarter 2025 earnings call. Today's slide presentation is posted on the Investor Relations website under the news and events section of the IR Dot planes Dot com an audio replay will also be available following today's call.
Blake Fernandez: Important disclosures regarding forward looking statements and non-GAAP financial measures are provided on slide two.
Blake Fernandez: Overview of today's call is provided on slide three.
Speaker Change: Condensed consolidating balance sheet for PAGP and other reference materials are in the appendix today's call will be hosted by Willie Chiang Chairman and CEO Al Swanson Executive Vice President and CFO, along with other members of the management team with that I will turn the call over to Willie.
Willie Chiang: Thank you Blake good morning, everyone and thank you for joining US. This morning, we reported solid first quarter performance with an adjusted EBITDA attributable plains of a $754 million, which al will cover in more detail.
Willie Chiang: Before providing an update on our efficient growth initiatives I'd like to offer some thoughts on the current market and policy environment the ongoing.
Willie Chiang: Uncertainty on trade tariffs is weighing on economic forecasts and creating significant volatility.
Willie Chiang: Additionally, the dissension among OPEC members and the prospects of incremental supply coming to market has resulted in a lower priced commodity than anticipated at the beginning of the year. Nevertheless.
Willie Chiang: We believe a lower price environment will ultimately reinforced the cyclical nature of the commodity markets, leading to a constructive medium to long term outlook.
Slide four outlines several supply and demand dynamics that we believe will contribute to a supportive backdrop overtime.
Willie Chiang: Despite the given the current market volatility our business remains resilient, assuming a $60 to $65 WT environment persists for the remainder of the year. We would expect both our 2025 EBITDA guidance and Permian growth outlook could be in the lower half of their respective ranges.
Willie Chiang: Our NGL segment remains largely insulated from lower commodity prices with approximately 80% of our estimated C. III plus spec products sales hedged for 2025.
Willie Chiang: In this environment, we believe it's important more important than ever to remain focused on what we can control as a result, we continue to execute on our efficient growth strategy generating significant free cash flow, maintaining a highly flexible balance sheet or our leverage ratio remains towards the low end of our target range and.
Willie Chiang: Returning capital to our unit holders.
Willie Chiang: Turning to a few highlights in our NGL segment are transitioned to more fee based earnings continues with our 30000 barrel a day fractionation bottleneck project at Fort SaaS, having been placed into service during the second quarter, along with other expansions of our NGL and condensate gathering systems being completed throughout the year.
Willie Chiang: These projects are supported by long term customer commitments and enhance our integrated NGL value chain.
Willie Chiang: In our crude segment, we had two small strategic transactions, we acquired the remaining 50% equity in the Cheyenne pipeline in the Rockies. This asset serves as a vital connection between Guernsey and downstream crude oil pipelines saddle horn and white cliffs, which plains owns an equity interest in <unk>.
Willie Chiang: In May we acquired Black Knight Midstream, a Midland basin crude gathering system for approximately 55 million.
Willie Chiang: Both transactions complement our existing asset base and build upon our track record of successful bolt on transactions.
Willie Chiang: As shown on slide five over the last several years, we have successfully deployed approximately $1 3 billion into bolt on acquisitions. We continue to believe these opportunities present attractive risk adjusted returns and our balance sheet flexibility provides financial capacity to continue to progressing the opportunity set.
Speaker Change: Before turning the call over to Al I do want to say, thank you and acknowledge our colleague Erik <unk>, our president and co founder of the company Ares played an integral part in building planes since its inception decades ago, we're very thankful for his relentless focus on developing lasting relationships customer service and.
Speaker Change: <unk> excellence together with an unwavering commitment to integrity accountability and teamwork, we wish her the very very best in his retirement with that I'll turn the call over to you well. Thanks.
Speaker Change: Thanks, Lilly, we reported first quarter crude oil segment, adjusted EBITDA of $559 million, which was impacted by winter weather and higher than expected refinery downtime. These events drove volumes below expectations in the quarter. However, we have seen a recovery in April and may with the healthy ramp in our.
Speaker Change: Gathering volumes across our system moving.
Speaker Change: Moving to our NGL segment, we reported segment adjusted EBITDA of $189 million, which benefited benefited from higher frac spreads and NGL sales volumes driven by stronger border flows.
Speaker Change: Slide six and seven in today's presentation contains segment adjusted EBITDA walk that provide additional details on our first quarter performance with.
Speaker Change: With regard with regard to trade tariffs I would like to provide an update since our last earnings call currently the energy product imported into the United States.
Speaker Change: From our Canadian operations are exempt under the U S MCA limiting the direct impact of tariff on our business.
Speaker Change: While there is a fair amount of uncertainty in the markets. Today, you will see on slide eight we left our key assumptions unchanged for the year.
Speaker Change: Including a $75.
Speaker Change: Per barrel <unk> price and 200 to 300000.
Speaker Change: <unk> per day of year over year Permian growth key sensitivities are provided within the slide allowing investors to analyze various scenarios as illustrated on slide nine we expect to generate strong cash flow. This year with adjusted free cash flow of about $1 1 billion, which excludes.
Speaker Change: Changes in assets and liabilities and is reduced by approximately $635 million for acquisitions with that ill turn the call back to Willy.
Speaker Change: We're off to a solid start for the year, albeit in a more volatile and uncertain market.
Speaker Change: As shown on slide 10, we continue to make progress on our key financial objectives and are well positioned to execute our strategy in a highly volatile environment in summary, our strong balance sheet offers financial capacity and flexibility with.
Speaker Change: We continue to demonstrate capital discipline, while executing on our fishing growth strategy, including our focus on bolt on acquisitions.
And we remain committed to returning cash to our unitholders before we hand back to Blake Gary would you like to make a few comments.
Speaker Change: Yes.
Speaker Change: I appreciate that and this before we go to Q&A first I'd like to thank Lilly for his kind remarks, and his leadership I've enjoyed working with them over the last 10 years, yes.
Speaker Change: Yes, it's a great team, but I can tell you the team is as strong as it's ever been.
Speaker Change: I'd also like to thank all of you for.
Speaker Change: For joining us on our quarterly earnings call and your continued interest in plains.
Blake Fernandez: With that I'll turn it over to Blake.
Speaker Change: This into Q&A, Thanks area and again, congrats as we enter the Q&A session. Please limit yourself to two questions for those with additional questions. Please feel free to return to the queue. This will allow us to address questions from as many participants as possible in our available time. This morning. The IR team will also be available after the call to address additional questions Michelle.
Speaker Change: I think we're ready to go to the Q&A session. Please.
Speaker Change: Thank you as a reminder to ask a question. Please press star one on your telephone and wait for your name to be announced to withdraw. Your question. Please press star one again, one moment for our first question.
Speaker Change: Our first question is going to come from the line of Gabriel Moreen with Mizuho. Your line is open. Please go ahead.
Gabriel Moreen: Hey, good morning, everyone and congrats to hurry on all of the retirement of an excellent current planes.
I wanted to ask first about capital allocation in the current environment. It seems like Youre still committed to the distribution growth in 2026, but given volatility in the unit price and the way I was wondering if theres any thoughts from the shift shifting our mindset to maybe spend more on buybacks versus distribution growth again, given all the volatility.
Gabriel Moreen: Out there.
Speaker Change: Gabe This is al I'll take a shot at it.
Speaker Change: No really change in our in our view.
Speaker Change: With regard focus will be continue to be on distribution growth is the primary method for returning cash to shareholders.
Speaker Change: Unit repurchases are a component of our.
Speaker Change: Our capital allocation no change there opportunistic and market dislocation.
Speaker Change: We did buy a small.
Speaker Change: In.
Speaker Change: April just as we're going into blackout, it was only about $7 $5 million.
Speaker Change: I think it was about 475000 units, it's a component, but I want to say there's been no change in our thinking around.
Speaker Change: Opportunistic in market dislocations, So we'll see what the future brings.
Speaker Change: Got it thanks, I appreciate that and then.
Speaker Change: Maybe if I could ask sort of on the M&A landscape, you've clearly been have continued success here with these tuck in deals.
Speaker Change: Just with all the volatility out there.
The latest you're seeing in terms of whether that volatility is kind of a catalyst to do more deals or do you think it's kind of been an impediment to price discovery in the current environment.
Willie Chiang: Yes, Gabe this is Willie I'll take that one.
Willie Chiang: Clearly, but more volatile markets create a little more questions and what I would tell you is that good deals always take time to get to win win and I think we're positioned very well to be able to do that because of the nature of what we sit in the value chain. We think we still have a pretty ample supply of opportunities out there and we continue to chase them.
Willie Chiang: And we will.
Willie Chiang: Maybe the only other thing to dimension is in an environment like this capital discipline is absolutely critical and we take a real hard look at risk adjusted returns, but we expect to be able to get to more win win deals throughout the year.
Willie Chiang: I appreciate it thanks a lot.
Speaker Change: Thank you one moment for our next question.
Speaker Change: Our next question will come from the line of Manav Gupta with UBS. Your line is open. Please go ahead.
Manav Gupta: Good morning looks like you were able to pick up their fractionation complex in Canada. So help us understand the cadence of earnings in Canada.
Speaker Change: At this time this up and running.
Manav Gupta: Okay.
Manav Gupta: Manav, it's Chris Chandler.
Manav Gupta: So yes.
Manav Gupta: We're excited to bring up the expanded capacity of 30000 barrels a day in our PFS.
Manav Gupta: Facility in Edmonton, Alberta.
Manav Gupta: We brought it up just ahead of our new commercial contracts taking effect.
Manav Gupta: All ramp to full volume immediately although ramp over the remainder of this year and a little into next year.
Manav Gupta: This is also part of a multi project effort, where we're doing some additional connectivity.
Manav Gupta: <unk>.
Manav Gupta: Gathering investments along that value chain that will also come online throughout 2025. So so I think youll see that gradually contribute throughout the year.
Manav Gupta: To kind of full run rate basis, starting in 2026.
Manav Gupta: Okay.
Speaker Change: Can we get a few more details about the black Knight Midstream Permian basin, the dilutive of about $55 million at the benefits of the deal and why you decided to go ahead with that Glenn. Thank you.
Manav Gupta: Sure.
Manav Gupta: In the middle of our northern Midland Basin gathering footprint.
Manav Gupta: <unk> that we operate in on behalf of the.
Manav Gupta: The producer and their affiliates and we negotiated the transaction with them. That's got some long term capital synergies, helping us to get to other physicians that are on the other side of that is in the absolute core of the northern Midland Basin.
Manav Gupta: That producer on the system.
Manav Gupta: One of their top assets, so we feel very comfortable with the rock resource inventory.
Manav Gupta: Purchasing multiple that we did and it's a good.
Manav Gupta: That's why we set a win win is a good win for our private equity partner that.
Manav Gupta: Develop the asset.
Manav Gupta: Great way from playing longer term to own this asset.
Manav Gupta: Thank you.
Speaker Change: Thank you one moment for our next question.
Speaker Change: Our next question is going to come from the line of Michael Blum with Wells Fargo. Your line is open. Please go ahead.
Michael Blum: Thanks, Hey, good morning, everyone. I'm wondering if you can give us your latest.
Michael Blum: Our latest thoughts on conversations with producers, what they're telling you and just your latest outlook on Permian volumes I realize you kept the guidance at 203 300000 barrels, but where do you think that sort of really trying to make and also for 26. Thanks.
Michael Blum: Sure Michael I'll take the 25, but what I can tell you as you have already grown over 100000 barrels a day from the end of last year to now so the 200000 barrels a day without seeing very herculean growth expectation for this I would say by and large.
Michael Blum: Producers are very in a very similar situation is a bit of wait and see the volatility just started a month ago and so you don't make two or three year plans based on one month of activity and you've seen some rebound in that so I think.
Michael Blum: And the next three months, it's a function of time and it's a function of flat price until it's a short period of time at this price if it's sustained for a longer period of time here you will see some flattening out.
Michael Blum: If it goes below this hit below $55 barely heard from the producer community you can start to go to flat and maybe even decline it gets above $65 for an extended period of time, you'll see it go the other way you will see it back to growth. So from our standpoint, there is a bit of wait and see at this point Youre right in this position where you shouldnt see much there.
Michael Blum: And activity for the next three to six months six plus months you might see some deferral of completions and maybe some rigs go down but it is very consistent what you've heard from the upstream community, that's what they're telling us as well so like I said.
Michael Blum: Our guidance here is just predicated on what could happen in that price range, but the volatility literally started months ago. So it's a function of time and price.
Willie Chiang: And Michael This is Willie I think.
Michael Blum: The key point on this is when you think about 25.
Willie Chiang: With the sensitivities that we've given the impacts to us are very modest.
Willie Chiang: Could be very modest and it.
Willie Chiang: The broader thing is to stay engaged and understand what's going on in the rest of the world is going to be at 26 plus.
Willie Chiang: Issue if it if it becomes an issue, but as we outlined on our slide deck I actually think we.
Willie Chiang: Just just going to reinforce their cyclicality.
Willie Chiang: The cycle ability and the cycles of commodities as prices go lower tend to tend to bring more activity and prices go higher it's the other way around.
Willie Chiang: Understood I appreciate that and then.
Willie Chiang: Second question I, just wanted to ask how should we think about the <unk>.
Willie Chiang: Acquisition multiples you paid for the two bolt on deals this quarter.
Glenn: Glenn take that so as opposed to multiple they both hit our return thresholds or higher.
Glenn: You mentioned capital discipline.
Glenn: First was.
Glenn: Reduction in future Mdc's in exchange for taking ownership of the asset from a partner and we priced in our rates of return there and we've done as well or better filling the pipeline. After the fact that the so that's the first one the gathering transaction once again, our goal is to earn our base return.
Glenn: <unk>.
Glenn: With limited synergy allocation in the compressed that multiple with synergies. So I'd say both of them fit the model of the previous 12 acquisition.
Glenn: Thanks.
Speaker Change: Thank you one moment our next question.
Speaker Change: Our next question is going to come from the line of Jeremy Tonet with Jpmorgan. Your line is open. Please go ahead.
Robin Ready: Hey, good morning, this is robin ready.
Speaker Change: For Jeremy the materials highlighted.
Robin Ready: Expectations for $300 million to $400 million of annual growth Capex.
Robin Ready: Maybe just wondering how you think about capex spend at this point and how much might be locked in for <unk>.
Robin Ready: 2026.
Chris Chandler: Hi, Robin this is Chris Chandler.
We left our investment capital guidance for 2025 unchanged at $400 million net to planes. We just wrapped up the expansion project at Fort SaaS that we mentioned and we have some related NGL supply and connectivity projects that will happen later this year.
Chris Chandler: On the Permian side, where the rest of our capital is largely allocated that connection capital and gathering spend is designed to pace our producers.
Chris Chandler: But we do typically schedule of that work six to 12 months out so were nearly in the 2026 on that segment, but if we were to see a.
Chris Chandler: A large change in activity from the producers.
Chris Chandler: We could adjust our capital would obviously do so in response to anything that happens in that area.
Chris Chandler: As for 2026.
Chris Chandler: Haven't and won't provide guidance, yet, but we are.
Chris Chandler: Feel uncomfortable that.
Chris Chandler: That capital spend will be in our long term capital guidance range of 300 to 400 million that the planes.
Chris Chandler: Okay.
Chris Chandler: Got it. Thank you and then on the Frac spread for the hedging it looks like it stepped up to 80% in.
Chris Chandler: Just wondering if we get your latest thoughts on the hedging philosophy this year and moving forward.
Jeremy Tonet: Jeremy Yes.
Chris Chandler: And we take a.
Jeremy Tonet: It'll view, we recognize the need to maintain.
Jeremy Tonet: To maintain steady cash flow when you set targets and we continue to execute so we're opportunistic around hedging.
Jeremy Tonet: Because of the backward dated market, where more hedged than the front end and the back end, but thats been consistent with the last several years I don't think anything's changed in the last several years in our strategy.
Jeremy Tonet: Thank you.
Jeremy Tonet: Thank you and one moment our next question.
Our next question is going to come from the line of Sunil Sibal with Seaport Global Your line is open. Please go ahead.
Sunil Sibal: Yes, hi, good morning, everybody and congrats too heavy on a successful coating plants.
Jeremy Tonet: Well first question was related to the sensitivity that was provided.
Sunil Sibal: The Permian production.
Jeremy Tonet: I was curious.
Sunil Sibal: Is the underlying assumption there that the marginal barrel.
Sunil Sibal: Moving to a particular market.
Sunil Sibal: Michigan.
Sunil Sibal: Austin, Houston, and Thats kind of the primary driver of that sensitivity.
Sunil Sibal: Is that sensitivity based on full year volumes obviously.
Sunil Sibal: Almost four months plus of.
Sunil Sibal: According to already have fiber already in so we should think about that sensitivity on full year volumes on more like eight months volumes.
Sunil Sibal: Sunil This is Jeremy at guidance was for the full year and like I had said earlier.
Sunil Sibal: Already grown over 100000 barrels a day. So the view of 200 to 300 still stands for exit to exit 'twenty four 'twenty five as to the Permian basin that supply post the market has got a price for the marginal barrel goes so they don't necessarily have assumptions upfront that prices will dictate that but the supply push marketing.
Sunil Sibal: At $60 to $80 commodity Theyre moving that last 50 is just going to be dictated by the consumer.
Sunil Sibal: Necessarily the producer.
Sunil Sibal: Okay. Thanks for that.
Sunil Sibal: Then one clarification so forcefully.
Sunil Sibal: 25.
Sunil Sibal: In the NGL segment, 45000 Boes per day off spec sales.
Presume there is a fair bit of seasonality in that so how much of that to date in Q1.
Sunil Sibal: So Neil I think Thats a follow up question for the IR team, but the seasonality we use our 8 million barrels of storage to optimize when we sell to the market tells us to set when to sell those commodities that we produce the spec sales.
Sunil Sibal: Condensate is sold Ratably butane and propane are the two that are sold seasonally but that's a function of price and timing.
Sunil Sibal: Maximizing value, but that's probably a better follow up question for the hour.
Sunil Sibal: And so Neil this is Willie Youll remember the typical satellite we have holder.
Colder months, obviously more propane typically sold in so again, our IR team can follow up with you on that.
Speaker Change: Thanks for that.
Sunil Sibal: Thank you thank.
Sunil Sibal: Thank you one moment for our next question.
Speaker Change: Our next question will be from the line of a J O'donnell with Tpa. Your line is open. Please go ahead.
Speaker Change: Good morning, everyone.
Speaker Change: I was just wondering if I could start on.
Speaker Change: Some of the prepared comments about the volume recovery in April and May.
Speaker Change: Just wondering if you could provide some additional details around that where youre seeing that along your system and maybe how that could translate into.
Speaker Change: Higher long haul throughput for the remainder of the year.
Jeremy Tonet: Hi, This is Jeremy thanks for the question some of that recovery was you had a strong fourth quarter and then you had weather events in January and February which kept production down. So some of that was just.
Jeremy Tonet: Production coming back online also as deferral of completions just to get around the weather. So it's very typical you have the best the best weather periods here in the spring and the fall and so you see a lot of inflation, so that surge of completions. So as we said earlier the impact of prices, we really haven't seen any impact of prices so far Madonna.
Jeremy Tonet: Expected for the next month or two so I think Alex just stating that while volumes were a little bit down in the first quarter that was really a function of.
Jeremy Tonet: Intra basin, which is the lowest margin part of our value chain and that's really feeding some of the long haul and that with the long held down there was driven by downstream demand.
Speaker Change: To your question on long haul as you get to the summer driving season, our refineries ramp back up youre going to see a pickup in those refining markets and their demand for cruise Youll see more crude Jonathan interrelated question.
Jeremy Tonet: Yeah.
Jeremy Tonet: Okay I appreciate the detail there.
Jeremy Tonet: And then maybe just one more kind of the longer term outlook.
Jeremy Tonet: All right granted.
Jeremy Tonet: We're all kind of theorizing about what's going to happen over the next.
Six to 12 months here with all the backdrop of volatility.
Speaker Change: Curious if you guys could provide maybe some updated views about how youre thinking around total Permian long haul utilization filling up I know there were some materials provided in our previous investor deck, where you are talking about that 80% threshold in pipe cutting them out.
Speaker Change: Yes, just any comments about how youre thinking about the forward market there.
Speaker Change: A J, that's really a function of production.
Speaker Change: So I think everybody has their own views of production I think Willie said at the beginning which is this is.
Speaker Change: Probably not a pause is not to stop of growth you hear different views on that but our view is the world is going to need as crude oil for a period of time, there's a great resources very well capitalized producers, they're saying pause.
Speaker Change: 5% to 60 range and you've seen prices pause, which means as you think see things recover on the demand side and you get more certainty around investment in decisions associated with the tariffs and all that settles out you see demand recover you see the need for more crude oil recover. This is all related to we're not going to make long term statements utilization of pipelines is related.
Speaker Change: Two.
Speaker Change: To volumes, but longer term our longer term growth profile of an expectation for the Permian Hasnt changed so I don't think that's changed materially.
Speaker Change: It just might be a timing thing.
Speaker Change: A J I would just reinforce that.
Speaker Change: When you think about the current volatility you have got the tariffs tariffs and OPEC alright. Those are the two things that are in the.
Speaker Change: The catalyst for volatility and I think a lot of our business plan and everyone else's business plan is going to really rest on when that.
Speaker Change: When that ultimately gets resolved and no one no one knows the answer to that.
Speaker Change: We'll just have to keep following.
Speaker Change: Uh huh.
Speaker Change: Thank you very much.
Speaker Change: Thank you. Thank you and one moment. Our next question. Our next question is going to be from the line of John Mackey with Goldman Sachs. Your line is open. Please go ahead.
John Mackey: Tim Thanks for the time.
John Mackey: Talked a lot about the upstream side, but you guys are also really tied in on the demand side as well I'd just be curious if you have any any read on kind of real time demand signals and any sign of slowdown specifically youre seeing either on the refining side or on the export side. Thanks.
John Mackey: So those are two different questions I'd say, the it very healthy the global refining markets.
And candidly you havent seen gasoline prices move much but you've seen crude prices go down to crack spreads are very strong and we're seeing all the refineries come out of turnaround and run very strong. So I'd say, that's a part of the reason for lower volumes in the first quarter was driven by lower movements to refineries. That's all taking us so that part of the business is very.
John Mackey: Healthy on the export side that changes month to month, and even within one week periods and given months you've seen.
John Mackey: Some slowdown on movements internationally, but the price of the barrels have to move so they get priced to move by part like I said, the Permian is $60 $80 commodity and thats kind of pushed to the water thats going to price. It can be sold so I'd say, we're seeing healthy margins globally for refining.
John Mackey: That's the thing to pay attention to on a forward basis that demand appears to be healthy.
Speaker Change: I appreciate that thanks, and maybe just going back to I.
Speaker Change: I think it was Gabe question and will you come to a little bit more here, but just on capital allocation.
Speaker Change: And I think now at the end of the quarter Youre still at the bottom end of the leverage range. Just curious how you guys are thinking about kind of managing within that range.
Speaker Change: Given the potential for the backdrop on the macro side to get a lot softer or is that changing your.
The view at all on where you want to be in that specifically.
Speaker Change: John I'll start out and certainly add but we've been very clear about our capital allocation plan. One we're going to we're committed to returning cash to the unitholders and we've got our targeted increase.
Speaker Change: Until coverage limit that we've announced years ago, and we're going to execute on that we are also very optimistic and continue to work on the bolt ons and we think that opportunity set is out there and that is really the primary focus on the highest return options for cash so.
Speaker Change: Those two are going to drive it our leverage is.
Speaker Change: Is that the lower end if there were some transactions that made sense, we've always said that.
Speaker Change: We would we would allow the leverage to go up with the with the understanding that the planning that it doesn't stay up so we're using that.
Speaker Change: Leverage range really to our benefit as we think about what we might might be able to do as far as growing in a capital disciplined way.
Speaker Change: Or anything that.
Speaker Change: The only thing I would add is.
Speaker Change: It is a range the leverage range.
Speaker Change: We don't have the stated desire to be at the bottom end or below.
Speaker Change: On a sustained basis, so that we do look at the ability to use some of that capacity for strategic quality investments.
Speaker Change: As we look go ahead.
Speaker Change: We just recently.
Speaker Change: In the last year got Triple B rated at all three agencies, we do not view and have no interest in putting.
Speaker Change: Leverage at a point that would jeopardize any of those rating.
Speaker Change: I appreciate the color. Thank you.
Speaker Change: Thank you and one moment for our next question.
Speaker Change: Our next question comes from the line of Theresa Chen with Barclays. Your line is open. Please go ahead.
Speaker Change: Good morning, I wanted to go back to the comment about M&A opportunities in the volatile landscape and effectively creating.
Speaker Change: More opportunities.
Speaker Change: As part of our capital allocation strategy.
Speaker Change: Are you seeing more sellers come to market at this juncture or do you expect this to happen as the year unfolds, depending on where pricing does.
Speaker Change: And if there are more sellers coming to market, but you expected more rapid pace of acquisitions, just given the state of your elaboration on your balance sheet and only have a short window to execute how do you view that.
Willy: Hey, Theresa its Willy.
Speaker Change: The answer to your question is.
Speaker Change: I think it is.
Speaker Change: Pretty broad range of opportunities I mean, if you looked at the list of things that we've done I would argue that some of those transactions were done because of where perhaps a refiner wasn't the cycle and wanting to monetize and we've had similar discussions with upstream folks on where do they want to deploy capital and how do they monetize.
Speaker Change: So this truly is kind of a back and forth with our partners on an everyday basis on.
Speaker Change: How do you win and how do we get to something in the the thing I would point out is and I think you understand our system well because of the network that we have.
Speaker Change: And the relationships, we have with a lot of these partners we can create value in many different ways. So lots of times, it's not just simply a bid ask on the asset. It's a bid ask on the asset, but we have more opportunities to create value I think create win win situations. So I know, it's a little bit general, but hopefully it gives you the dynamics.
Speaker Change: Of all the different things that we look at.
Speaker Change: Thank you so much.
Speaker Change: Thanks, Teresa and thank you and I'm showing no further questions at this time and I would like to hand, the conference back over to Willie Chiang for closing remarks.
Willie Chiang: Thanks, Michelle well, thanks to everyone for dialing in.
Willie Chiang: Strong start to the quarter, we look forward to seeing you on the road in and giving you more updates have a great day.
Willie Chiang: This concludes today's conference call. Thank you for participating you may now disconnect.
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Speaker Change: Good day, and thank you for standing by welcome to the PAA and PAGP first quarter 2025 earnings conference call. At this time all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question. During the session you will need to press star one on your telephone.
Speaker Change: You will then hear an automated message advising you. Your hand is raised to withdraw your question. Please press star. One again, please be advised that today's conference is being recorded I would now like to hand, the conference over to your speaker today, Blake Fernandez, Vice President of Investor Relations. Please go ahead.
Blake Fernandez: Thank you Michele good morning, and welcome to Plains, All American first quarter 2025 earnings call. Today's slide presentation is posted on the Investor Relations website under the news and events section at IR Dot planes Dot com an audio replay.
Speaker Change: Play will also be available following today's call.
Speaker Change: Important disclosures regarding forward looking statements and non-GAAP financial measures are provided on slide two.
Speaker Change: An overview of today's call is provided on slide three a condensed consolidating balance sheet for PAGP and other reference materials are in the appendix today's call will be hosted by Willie Chiang Chairman and CEO Al Swanson Executive Vice President and CFO, along with other members of the management team with that I will turn the call over to Willy. Thank.
Speaker Change: Thank you Blake good morning, everyone and thank you for joining US. This morning, we reported solid first quarter performance with an adjusted EBITDA attributable plains of a $754 million, which al will cover in more detail.
Speaker Change: Before providing an update on our efficient growth initiatives I'd like to offer some thoughts on the current market and policy environment. The ongoing uncertainty on trade tariffs is weighing on economic forecasts and creating significant volatility.
Speaker Change: Additionally, the dissension among OPEC members and the prospects of incremental supply coming to market has resulted in a lower price commodity than anticipated at the beginning of the year. Nevertheless.
Speaker Change: We believe a lower price environment will ultimately reinforced the cyclical nature of the commodity markets, leading to a constructive medium to long term outlook.
Speaker Change: Slide four outlines several supply and demand dynamics that we believe will contribute to a supportive backdrop over time.
Speaker Change: Despite the given the current market volatility our business remains resilient, assuming a $60 to $65 WT environment persists for the remainder of the year. We would expect both our 2025 EBITDA guidance and Permian growth outlook could be in the lower half of the respective ranges.
Speaker Change: Our NGL segment remains largely insulated from lower commodity prices with approximately 80% of our estimated C. III plus spec products sales hedged for 2025.
Speaker Change: In this environment, we believe it is important more important than ever to remain focused on what we can control as a result, we continue to execute on our efficient growth strategy generating significant free cash flow, maintaining a highly flexible balance sheet or our leverage ratio remains towards the low end of our target range and.
Speaker Change: Returning capital to our unit holders.
Speaker Change: Turning to a few highlights in our NGL segment are transitioned to more fee based earnings continues with our 30000 barrel a day fractionation bottleneck project at Fort SaaS, having been placed into service during the second quarter, along with other expansions of our NGL and condensate gathering systems being completed throughout the year.
Speaker Change: These projects are supported by long term customer commitments and enhance our integrated NGL value chain.
Speaker Change: In our crude segment, we had two small strategic transactions, we acquired the remaining 50% equity in the Cheyenne pipeline in the Rockies. This asset serves as a vital connection between Guernsey and downstream crude oil pipelines saddle horn and white cliffs, which plains owns an equity interest in it.
Speaker Change: In May we acquired Black Knight midstream at Midland Basin crude gathering system for approximately $55 million.
Speaker Change: Both transactions complement our existing asset base and build upon our track record of successful bolt on transactions.
Speaker Change: As shown on slide five over the last several years, we have successfully deployed approximately $1 3 billion into bolt on acquisitions. We continue to believe these opportunities present attractive risk adjusted returns and our balance sheet flexibility provides financial capacity to continue to progressing the opportunity set.
Speaker Change: Before turning the call over to Al I do want to say, thank you and acknowledge our colleague Erik <unk>, our president and co founder of the company Ares played an integral part in building planes since its inception decades ago, we're very thankful for his relentless focus on developing lasting relationships customer service and.
Speaker Change: <unk> excellence together with an unwavering commitment to integrity accountability and teamwork, we wish her the very very best in his retirement with that I'll turn the call over to you well. Thanks.
Al Swanson: Thanks, Lily we reported first quarter crude oil segment, adjusted EBITDA of $559 million, which was impacted by winter weather and higher than expected refinery downtime. These events drove volumes below expectations in the quarter.
Al Swanson: However, we have seen a recovery in April and May with the healthy ramp in our gathering volumes across our system moving.
Al Swanson: Moving to our NGL segment, we reported segment adjusted EBITDA of $189 million.
Al Swanson: Which benefited benefited from higher Frac spreads and say NGL sales volumes driven by stronger border flows slide six and seven in today's presentation contains segment adjusted EBITDA walk that provide additional details on our first quarter performance.
With regard with regard to trade tariff I would like to provide an update since our last earnings call currently the energy product imported into the United States.
Al Swanson: From our Canadian operations are exempt under the U S MCA limiting the direct impact of tariff on our business.
Al Swanson: While there is a fair amount of uncertainty in the markets. Today, you will see on slide eight we left our key assumptions unchanged for the year, including a $75.
Al Swanson: Per barrel <unk> price and a 200 to 300000 barrels per day of year over year Permian growth key sensitivities are provided within the slide allowing investors to analyze various scenarios as illustrated on slide nine we expect to generate strong cash flow this year with adjusted.
Al Swanson: Free cash flow of about $1 1 billion, which excludes changes in assets and liabilities and is reduced by approximately $635 million for acquisitions with that I'll turn the call back to Willy.
Speaker Change: Thank you al.
Speaker Change: We're off to a solid start for the year, albeit in a more volatile and uncertain market as shown on slide 10, we continue to make progress on our key financial objectives and are well positioned to execute our strategy in a highly volatile environment in summary, our strong balance sheet offers financial capacity and flexibility.
Speaker Change: We continue to demonstrate capital discipline, while executing on our mission growth strategy, including our focus on bolt on acquisitions.
Speaker Change: And we remain committed to returning cash to our unitholders before we hand back to Blake Gary would you like to make a few comments.
Blake Gary: Yes. Thank you.
Speaker Change: I appreciate that and this before we go to Q&A first I'd like to thank Willi or its kind remarks, and his leadership I've enjoyed working with them over the last 10 years, yes.
Speaker Change: He has a great team, but I can tell you the team is as strong as it's ever been.
Blake Gary: I'd also like to thank all of you for.
Blake Gary: For joining us on our quarterly earnings call and your continued interest in plains.
Blake Fernandez: With that I'll turn it over to Blake at lease.
Speaker Change: Cindy Q&A, thanks area and again, congrats as we enter the Q&A session. Please limit yourself to two questions for those with additional questions. Please feel free to return to the queue. This will allow us to address questions from as many participants as possible in our available time this morning.
Our team will also be available after the call to address additional questions.
Speaker Change: Michelle I think we are ready to go to the Q&A session. Please.
Speaker Change: Thank you as a reminder to ask a question. Please press star one on your telephone and wait for your name to be announced to withdraw. Your question. Please press star one again, one moment for our first question.
Speaker Change: Our first question is going to come from the line of Gabriel Moreen with Mizuho. Your line is open. Please go ahead.
Gabriel Moreen: Hey, good morning, everyone and congrats to hurry on all of the retirement of an excellent current planes.
Gabriel Moreen: I wanted to ask first about capital allocation in the current environment. It seems like Youre still committed to the distribution growth in 2026 with given volatility in the unit price and the way I was wondering if theres any thoughts from the shift shifting the mindset to maybe spend more on buybacks versus distribution growth again, given all the volatility.
Gabriel Moreen: Out there.
Al Swanson: Gabe This is al I'll take a shot at it.
Gabriel Moreen: No really change in our in our view.
Gabriel Moreen: With regard focus will be continue to be on distribution growth is the primary method for returning cash to shareholders.
Gabriel Moreen: Unit repurchases are a component of our.
Our capital allocation no change there opportunistic and market dislocation.
Gabriel Moreen: We did buy a small.
Gabriel Moreen: In April just as we're going into blackout, it was only about $7 $5 million.
Gabriel Moreen: I think it was about 475000 units, it's a component, but I want to say there has been no change in our thinking around opportunistic in market dislocation. So we'll see what the future brands.
Gabriel Moreen: Got it thanks, I appreciate that and then.
Speaker Change: Maybe if I could ask sort of on the M&A landscape, you've clearly been have continued success here with these tuck in deals.
Gabriel Moreen: Just with all the volatility out there.
Gabriel Moreen: The latest you're seeing in terms of whether that volatility is kind of a catalyst to do more deals or do you think it's kind of been an impediment to price discovery in the current environment.
Willie Chiang: Yes, Gabe this is Willie I'll take that one.
Willie Chiang: Clearly, but more volatile markets create a little more questions and what I would tell you is that good deals always take time to get to win win and I think we're positioned very well to be able to do that because of the nature of what we sit in the value chain. We think we still have a pretty ample supply of opportunities out there and we continue to Jason.
Willie Chiang: And.
Willie Chiang: Maybe the only other thing the dimension is in an environment like this capital discipline is absolutely critical and we've taken a real hard look at risk adjusted returns, but we expect to be able to get to more win win deals throughout the year.
Willie Chiang: I appreciate it thanks a lot.
Speaker Change: Thank you one moment, Brian next question.
Speaker Change: Our next question will come from the line of Manav Gupta with UBS. Your line is open. Please go ahead.
Manav Gupta: Good morning looks like you were able to pick up their fractionation complex in Canada. So help us understand the cadence of earnings in Canada now that this plant is up and running.
Speaker Change: Okay.
Chris Chandler: Manav, it's Chris Chandler so.
Speaker Change: Yes.
Speaker Change: We're excited to bring up the expanded capacity of 30000 barrels a day in our PFS.
Speaker Change: Facility in Edmonton, Alberta.
Speaker Change: We brought it up just ahead of our new commercial contracts taking effect.
Speaker Change: <unk> ramped to full volume immediately although ramp over the remainder of this year and a little into next year.
Speaker Change: This is also part of a multi project effort, where we're doing some additional connectivity.
Speaker Change: And.
Speaker Change: Gathering investments along that value chain that will also come online throughout 2025, so so I think youll see that gradually.
Speaker Change: <unk> throughout the year.
Speaker Change: Kind of full run rate basis, starting in 2026.
Speaker Change: Okay.
Speaker Change: Can we get a few more details about the black Knight Midstream Permian basin, the dilutive of about $55 million at the benefits of the deal and why you decided to go ahead with that Glenn. Thank you.
Speaker Change: Sure.
Speaker Change: It's right in the middle of our northern Midland Basin gathering footprint.
Speaker Change: <unk> that we operate on behalf of the.
Speaker Change: The producer and their affiliates.
Speaker Change: We negotiated the transaction with them that's got some long term capital synergies, helping us to get to other physicians that are on the other side of that is in the absolute core of the northern Midland Basin.
Speaker Change: The producer on the system at one of their top assets. So we feel very comfortable and thereafter resource inventory.
Speaker Change: School, The Rock, The Resource, The Inventory, The Purchasing Multiple That We Did, and it's a good, as well as you said, a win-win, it's a good win for our private equity partner that developed the assets, and it's a great win for playing longer term-tones assets.
Thanks, Hey, good morning, everyone I Wonder if you can give us your latest.
Speaker Change: Latest thoughts on conversations with producers, what they're telling you and just your latest outlook on Permian volumes I realize you kept the guidance at 203 300000 barrels but.
Speaker Change: Where do you think that sort of really trend and also for 26.
Speaker Change: Sure Michael I'll take the 25, but what I can tell you as you have already grown over 100000 barrels a day from the end of last year to now so the 200000 barrels a day without seeing very herculean growth expectation for this I would say by and large.
Speaker Change: The producers are very in a very similar situation, it's a bit of wait and see the volatility just started a month ago and so you don't make two or three year plans based on one month of activity and you've seen some write downs and so I think in.
Speaker Change: And the next three months, it's a function of time and that's a function of flat price until it's a short period of time at this price if it's sustained for a longer period of time here you will see some flattening out.
Speaker Change: If it goes below this fit below $55 barely heard from the producer community you can start to go to flat and maybe even decline against above $65 for an extended period of time, you'll see it go the other way you will see it back to growth. So from our standpoint, there is a bit of a wait and see at this point Youre right in this position where you shouldnt see much.
Speaker Change: And activity for the next three to six months six plus months you might see some deferral of completions and maybe some rigs go down but it is very consistent what you've heard from the upstream community, that's what they're telling us as well so like I said.
Speaker Change: Our guidance here is just predicated on what could happen in that price range, but the volatility literally started months ago. So it's a function of time and price.
Willie Chiang: And Michael This is Willie I think.
Willie Chiang: The key point on this is when you think about 25%.
Willie Chiang: With the sensitivities that we've given the impacts to us are very modest.
Willie Chiang: Could be very modest.
Willie Chiang: And really the broader thing is to stay engaged and understand what's going on in the rest of the world just because theres going to be at 26 plus.
Willie Chiang: Issue if it if it becomes an issue, but as we outlined on our slide deck I actually think we.
Willie Chiang: This just just going to reinforce their cyclicality.
Willie Chiang: The cycle ability and the cycles of commodities and as prices go lower tend to tend to bring more activity and prices go higher it's the other way around.
Willie Chiang: Great I understood I appreciate that and then some.
Speaker Change: Second question I, just wanted to ask how should we think about the acquisition multiples you paid for the two bolt on deals this quarter. Thanks.
Speaker Change: Glenn take that so as opposed to multiple.
Speaker Change: Both hit our return thresholds or higher.
Speaker Change: And capital discipline.
Speaker Change: The first was <unk>.
Speaker Change: A reduction in future Mdc's in exchange for taking ownership of the asset from a partner and we priced in a range of return there and we've done as well or better filling the pipeline. After the fact that the so that's the first one the gathering transaction once again, our goal is to earn our base return.
Speaker Change: With limited synergy allocation into compressed that multiple with synergies. So I'd say both of them fit the model of the previous 12 acquisition.
Speaker Change: Thanks.
Speaker Change: Thank you one moment our next question.
Speaker Change: Our next question is going to come from the line of Jeremy Tonet with Jpmorgan. Your line is open. Please go ahead.
Robin Ready: Hey, Good morning. This is robin ready on for Jeremy the materials highlighted expectations for $300 million to $400 million of annual growth Capex.
Robin Ready: Maybe just wondering how you think about capex spend at this point and how much might be locked in for two.
Robin Ready: 2026.
Robin Ready: Hi, Robin This is Chris Chandler, we left our investment capital guidance for 2025 unchanged at $400 million net to planes. We just wrapped up the expansion project at Ford SaaS that we mentioned and we have some related NGL supply and connectivity projects that will happen later this year.
Robin Ready: On the Permian side, where the rest of our capital is largely allocated that connection capital and gathering spend is designed to pace our producers.
Robin Ready: But we do typically schedule of that work six to 12 months out so were nearly in the 2026 on that segment, but if we were to see a large change in activity from the producers.
Robin Ready: Could adjust our capital would obviously do so in response to anything that happens in that area.
Robin Ready: As for 2026, we haven't and won't provide guidance yet, but we are.
Robin Ready: Feel uncomfortable that.
Robin Ready: That capital spend will be in our long term capital guidance range of 300 to 400 million that the planes.
Robin Ready: Okay.
Got it. Thank you and then on the Frac spread for the hedging it looks like it stepped up to 80% in just.
Robin Ready: I'm just wondering if we get your latest thoughts on the hedging philosophy this year and moving forward.
Jeremy Tonet: Jeremy Yes.
Jeremy Tonet: And we take a fundamental view, we recognize the need to.
Jeremy Tonet: Maintain steady cash flow set targets and we continue to execute so we're opportunistic around hedging.
Because of the backward dated market, where more hedged than the front end and the back end, but thats been consistent with the last several years I don't think anything's changed in the last several years in this strategy.
Jeremy Tonet: Thank you.
Speaker Change: Thank you and one moment for our next question.
Speaker Change: Our next question is going to come from the line of Sunil Sibal with Seaport Global Your line is open. Please go ahead.
Sunil Sibal: Yes, hi, good morning, everybody and congrats to caveat it successfully.
Speaker Change: <unk>.
Speaker Change: Well.
Speaker Change: The question was related to the sensitivity.
Speaker Change: What I did.
Speaker Change: Permian production.
Speaker Change: I was curious if.
Speaker Change: Is the underlying assumption there that the marginal battle.
Speaker Change: Moving to a particular market.
Speaker Change: Michigan.
Speaker Change: Austin, Houston, and Thats kind of primary driver of that sensitivity.
Speaker Change: Yes.
Speaker Change: Sensitivity based on full year volumes obviously.
Speaker Change: Almost four months plus of.
Speaker Change: According to already have fiber already in so we should think about that sensitivity.
Speaker Change: Our volumes are more like eight months volumes.
Jeremy Tonet: Sunil This is Jeremy that guidance was for the full year and like I had said earlier.
Jeremy Tonet: <unk> already grown over 100000 barrels a day. So the view of 200 to 300 still stands for exit to exit 'twenty four 'twenty five.
Jeremy Tonet: The Permian basin that supplies most of the market has got a price for the marginal barrel go. So we don't necessarily have assumptions upfront that prices will dictate that but as a supply push market and they have a $60 to $80 commodity theyre moving that last 50 is just going to be dictated by the consumer not necessarily the producer.
Jeremy Tonet: Yes.
Jeremy Tonet: Okay. Thanks for that and then one clarification so fully.
Jeremy Tonet: 25, Youre guiding in the NGL segment 45000 Boes per day off spec.
Jeremy Tonet: Sales.
Jeremy Tonet: Assume there is it fair pertussis amantadine that so how much of that data in Q1.
Speaker Change: So Neil I think Thats a follow up question for the IR team, but the seasonality we use our 8 million barrels of storage to optimize when we sell to the market tells us when to sell the commodities that we produce the spec sales.
Speaker Change: Condensate is sold Ratably butane and propane are the two that are sold seasonally but thats a function of price and timing.
Speaker Change: Maximizing value, but that's probably a better follow up question from the IR team and.
Speaker Change: And so Neil this is Willie Youll remember the typical sale that we have.
Speaker Change: Older months, obviously more propane typically sold so again, our IR team can follow up with you on that.
Speaker Change: Thanks for that.
Speaker Change: Thank you thank.
Speaker Change: Thank you one moment for our next question.
Speaker Change: Our next question will be from the line of a J O'donnell with Tpa. Your line is open. Please go ahead.
Speaker Change: Good morning, everyone.
Speaker Change: I was just wondering if I could start on.
Speaker Change: Some of the prepared comments about the volume recovery in April and May.
Speaker Change: Just wondering if you could provide some additional details around that where youre seeing that are longer system, and maybe how that could translate into.
Speaker Change: Higher long haul throughput for the remainder of the year.
Jeremy Tonet: Hi, This is Jeremy thanks for the question some of that recovery was you had a strong fourth quarter and then you had weather events in January and February which kept production down. So some of that was just.
Jeremy Tonet: Production coming back online also as deferral of completions just to get around the weather. So it's very typical you have the best the best weather periods here in the spring and the fall and so you'll see a lot of inflation. So that surge of completions. So as we said earlier the impact of prices, we really haven't seen any impact of prices so far with Goldman.
Jeremy Tonet: Effective for the next month or two so I think Alex you, stating that while volumes were a little bit down in the first quarter that was really a function of.
Jeremy Tonet: Intra basin, which is the lowest margin part of our value chain and that's really feeding some of the long haul and that the long held down there was driven by downstream demand.
Jeremy Tonet: Get to your question on long haul as you get to the summer driving season, our refineries ramp back up youre going to see a pickup in those we're finding markets and their demand for cruise Youll see more crude Jonathan interrelated question.
Jeremy Tonet: Sure.
Jeremy Tonet: Okay I appreciate the detail there.
Jeremy Tonet: And then maybe just one more kind of the longer term outlook.
Jeremy Tonet: All right granted.
Jeremy Tonet: We're all kind of theorizing about what's going to happen over the next.
Jeremy Tonet: Six to 12 months here with all the backdrop with volatility.
Jeremy Tonet: Curious if you guys could provide maybe some updated views about how youre thinking around total Permian long haul utilization filling up I know there were some materials provided in our previous investor deck, where you're talking about the 80% threshold in pipe cutting them out.
Jeremy Tonet: Yes, just any comments about how youre thinking about the forward market there.
Speaker Change: A J, that's really a function of production.
Speaker Change: So I think everybody has their own views of production I think Willie said at the beginning which is.
Speaker Change: Probably not a pause is not to stop of growth you hear different views on that but our view is the world's going to need as crude oil for a period of time. There is a great resource is very well capitalized producers. They are saying paused. The 55 to 60 range and you've seen prices pause, which means as you think see things recover on the demand side and you get.
Speaker Change: More certainty around the investment in decisions associated with the tariffs and all that settles out you see demand recovery to the need for more crude oil recover. This is all related so we're not going to make long term statements utilization of the pipeline as it related to <unk>.
Speaker Change: Volumes, but longer term our longer term growth profile and expectations for the Permian Hasnt changed so I don't think thats changed materially.
Speaker Change: It just might be a timing thing.
Speaker Change: A J just to reinforce that it's.
Speaker Change: When you think about the current volatility you've got the tariffs tariffs and OPEC alright. Those are the two things that are in the.
Speaker Change: The catalyst for more volatility and I <unk>.
Speaker Change: Think a lot of our business plan and everyone else's business plan is going to really rest on when that when that ultimately gets resolved and no. One no one knows the answer to that so we'll just have to keep volume.
Speaker Change: Thank you very much.
Speaker Change: Thank you. Thank you and one moment for our next question. Our next question is going to be from the line of John Mackey with Goldman Sachs. Your line is open. Please go ahead.
John Mackey: Tim Thanks for the time.
John Mackey: Talked a lot about the upstream side, but you guys are also really tied in on the demand side as well I would just be curious if you have any any read on kind of real time demand signals and any sign of slowdown specifically youre seeing either on the refining side or on the export side. Thanks.
John Mackey: So those are two different questions I'd say the.
John Mackey: It very healthy the global refining markets.
John Mackey: And candidly you havent seen gasoline prices move much but you've seen crude prices go down to crack spreads are very strong and we're seeing all the refineries come out of turnaround and run very strong. So I'd say, that's a part of the reason for lower volumes in the first quarter was driven by lower movements tube refineries. That's all picking up so that part of the business is very.
John Mackey: Healthy on the export side that changes month to month, and even within one week periods and given months <unk> seen.
John Mackey: Some slowdown on the movements internationally, but the price of the barrels have to move so to get price to move but the part like I said, the Permian is $60 $80 commodity and thats kind of pushed to the water and the price to be sold so I'd say, we're seeing healthy margins globally for refining. So that's that's the thing to pay it.
John Mackey: Pension too on a forward basis that demand appears to be healthy.
John Mackey: I appreciate that thanks, and maybe just going back to.
John Mackey: I think it was Gabe question and will you come to a little bit more here, but just on capital allocation.
John Mackey: And I think now at the end of the quarter Youre still at the bottom end of the leverage range. Just curious how you guys are thinking about kind of managing within that range.
John Mackey: Given the potential for the backdrop on the macro side to go all soft or is that changing your.
John Mackey: We view at all on where you want to be in that specifically.
John Mackey: John I'll start out and certainly add.
Speaker Change: But we've been very clear about our capital allocation plan, one we're going to we're committed to returning cash to the unitholders and we've got our targeted increase.
Speaker Change: Until coverage limit that we've announced years ago, and we're going to execute on that we are also very optimistic and continue to work on the bolt ons and we think that opportunity set is out there and that is really the primary focus on the highest return options for cash so.
Speaker Change: <unk>.
Speaker Change: Those two are going to drive it our leverage is at the lower end. If there were some transactions that made sense, we've always said that.
Speaker Change: We would we would allow the leverage to go up with the with the understanding that the planning that it doesn't stay up so.
Speaker Change: Using that leverage range and really to our benefit as we think about what we might might be able to do as far as growing in a capital disciplined way Alan anything that the only thing I would add is it is the range the leverage range.
Speaker Change: We don't have the stated desire to be at the bottom end or below on a sustained basis. So so we do look at the ability to use some of that capacity for strategic quality investments.
As we look go ahead.
Speaker Change: We just recently.
Speaker Change: In the last year got Triple B rated at all three agencies, we do not view and have no interest in putting.
Speaker Change: Leverage at a point that would jeopardize any of those rating.
Speaker Change: I appreciate the color. Thank you.
Speaker Change: Thank you and one moment our next question.
Speaker Change: Our next question is going to come from the line of Theresa Chen with Barclays. Your line is open. Please go ahead.
Theresa Chen: Good morning, I wanted to go back to the comment about M&A opportunities in the volatile landscape and effectively creating.
Theresa Chen: More opportunities.
Theresa Chen: This part of our capital allocation strategy.
Theresa Chen: Are you seeing more sellers come to market at this juncture or do you expect this to happen as the year unfolds, depending on where pricing goes and if there are more sellers coming to market, but you expected more rapid pace of acquisitions, just given the state of your elaboration on your back.
Theresa Chen: Alan sheet, and only have a short window to execute how do you view that.
Willie Chiang: Hey, Theresa its Willy.
Theresa Chen: The answer to your question is.
Theresa Chen: I think it's a pretty broad range of opportunities I mean, if you looked at the list of things that we've done I would argue that some of those transactions were done because of where perhaps a refiner wasn't the cycle and wanting to monetize and we've had similar discussions with upstream folks on where do they want to deploy capital.
Theresa Chen: And how do they monetize so this truly is kind of a back and forth with our partners on an everyday basis on how do you win and how do we get to something in the thing I would point out is and I think you understand our system well because of the network that we have.
Theresa Chen: And the relationships, we have with a lot of these partners we can create value in many different ways. So lots of times, it's not just simply a bid ask on the asset. It is a bid ask on the asset, but we have more opportunities to create value there.
Theresa Chen: Win win situations. So I know, it's a little bit general, but hopefully it gives you the dynamics of all the different things that we look at.
Theresa Chen: Thank you so much.
Speaker Change: Thanks, Teresa and thank you and I'm showing no further questions at this time and I would like to hand, the conference back over to Willie Chiang for closing remarks.
Willie Chiang: Thanks, Michelle well, thanks, everyone for dialing in.
Willie Chiang: Strong start to the quarter, we look forward to seeing you on the road in and giving you more updates have a great day.
This concludes today's conference call. Thank you for participating you may now disconnect.