Plains All American Pipeline Q4 2025 Plains All American Pipeline LP Earnings Call | AllMind AI Earnings | AllMind AI
Q4 2025 Plains All American Pipeline LP Earnings Call
Speaker #1: Good day, and thank you for standing by. Welcome to the PAA and PAGP. Fourth quarter, 2025 earnings call. At this time, mode. After the speakers' presentation, we'll open up for questions.
Operator: Good day, and thank you for standing by. Welcome to the PAA and PAGP Fourth Quarter 2025 Earnings Call. At this time, all participants are on a listen-only mode. After the speaker's presentation, we'll open up for questions. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's call is being recorded. I would now like to hand it over to your speaker, Blake Fernandez, Vice President of Investor Relations. Please go ahead.
Operator: Good day, and thank you for standing by. Welcome to the PAA and PAGP Fourth Quarter 2025 Earnings Call. At this time, all participants are on a listen-only mode. After the speaker's presentation, we'll open up for questions. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's call is being recorded. I would now like to hand it over to your speaker, Blake Fernandez, Vice President of Investor Relations. Please go ahead.
Speaker #1: To all participants are on a listen-only ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised.
Speaker #1: To withdraw your question, please press star 11 again. Please be advised that today's call is being recorded. I would now like to hand it over to your speaker, Blake Fernandez, Vice President of Investor Relations.
Speaker #1: ahead. Please go
Speaker #2: Thank you, Victor. Good morning
Speaker #2: Thank you, Victor. Good morning
Blake Fernandez: Thank you, Victor. Good morning, and welcome to Plains All American Q4 2025 Earnings Call. Today's slide presentation is posted on the Investor Relations website under the news and events section at ir.plains.com. An audio replay will also be available following today's call. Important disclosures regarding forward-looking statements and non-GAAP financial measures are provided on slide 2. An overview of today's call is provided on slide 3. A condensed consolidating balance sheet for PAGP and other reference materials are in the appendix. Today's call will be hosted by Willie Chiang, Chairman and CEO and President, and Al Swanson, Executive Vice President and CFO, along with other members of the management team. With that, I'll turn the call over to Willie.
Q4 2025 Plains All American Pipeline LP Earnings Call
Blake Fernandez: Thank you, Victor. Good morning, and welcome to Plains All American Q4 2025 Earnings Call. Today's slide presentation is posted on the Investor Relations website under the news and events section at ir.plains.com. An audio replay will also be available following today's call. Important disclosures regarding forward-looking statements and non-GAAP financial measures are provided on slide 2. An overview of today's call is provided on slide 3. A condensed consolidating balance sheet for PAGP and other reference materials are in the appendix. Today's call will be hosted by Willie Chiang, Chairman and CEO and President, and Al Swanson, Executive Vice President and CFO, along with other members of the management team. With that, I'll turn the call over to Willie.
Speaker #2: and welcome to PLAINS ALL AMERICAN, fourth quarter, 2025 earnings call. Today's slide presentation is posted on the Investor Relations website under the News and Events section at audio replay will also be ir.plains.com.
Speaker #2: Available following today's call, important disclosures regarding forward-looking statements and non-GAAP financial measures are provided. 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.
Speaker #2: available following today's call. Important disclosures regarding forward-looking statements and non-GAAP financial measures are provided overview of today's call is provided on slide three. A condensed consolidating balance sheet for PAGP and other reference materials are in the An Today's call will be hosted by Willie Chiang, Chairman and CEO, and President, and Al Swanson, Executive Vice President and CFO, along with other members of the management team.
Speaker #2: With that, I'll turn the call over to Willie.
Speaker #3: Thank you, Blake. Good morning, everyone, and thank you for joining us. Earlier this morning, we reported fourth triple double to PLAINS of $738 million and $2.833 billion, respectively.
Willie Chiang: Thank you, Blake. Good morning, everyone, and thank you for joining us. Earlier this morning, we reported fourth quarter and full-year Adjusted EBITDA attributable to Plains of $738 million and $2.833 billion, respectively. 2025 was a pivotal year for Plains. The market environment presented multiple challenges, including geopolitical unrest, actions from OPEC to increase oil supply, and uncertainty on the economic impact from tariffs. As highlighted on slide 4, despite these transactions or these distractions, we remain focused on transitioning to a pure-play crude company, which also serves as a catalyst to streamline our operations and better position Plains for the future. This transition is accelerated through the sale of our NGL business, along with the recent acquisition of the EPIC pipeline, now renamed Cactus 3.
Willie Chiang: Thank you, Blake. Good morning, everyone, and thank you for joining us. Earlier this morning, we reported fourth quarter and full-year Adjusted EBITDA attributable to Plains of $738 million and $2.833 billion, respectively. 2025 was a pivotal year for Plains. The market environment presented multiple challenges, including geopolitical unrest, actions from OPEC to increase oil supply, and uncertainty on the economic impact from tariffs. As highlighted on slide 4, despite these transactions or these distractions, we remain focused on transitioning to a pure-play crude company, which also serves as a catalyst to streamline our operations and better position Plains for the future. This transition is accelerated through the sale of our NGL business, along with the recent acquisition of the EPIC pipeline, now renamed Cactus 3.
Speaker #3: 2025 was a pivotal year for PLAINS. The market environment presented multiple challenges, including geopolitical unrest, actions from OPEC to increase oil supply, and uncertainty on the economic impact from tariffs.
Speaker #3: As highlighted on slide four, despite these transactions, or on transitioning to a pure play these distractions, we remain focused a catalyst to streamline our crude company.
Speaker #3: operations and better position PLAINS for the future. This transition is accelerated through the sale of our NGO business, along with the recent acquisition of the EPIC pipeline Which also serves as now renamed Cactus 3.
Speaker #3: These transactions enhance the quality and the durability of our cash flow stream, while improving distributable cash flow and positioning us well for future market cycles.
Willie Chiang: These transactions enhance the quality and the durability of our cash flow stream while improving distributable cash flow and positioning us well for future market cycles. 2026 will be a year of execution and self-help, with a focus on three initiatives. First, we remain on schedule to close the NGL divestiture near the end of Q1, pending Canadian Competition Bureau approval. Second, we're integrating the recently acquired Cactus 3 pipeline and expect to drive synergies related to that system to improve EBITDA. And third, we're streamlining the organization with a focus on efficiency and improving our cost structure. Over the past several months, we have advanced our streamlining initiatives and are targeting $100 million of identified annual savings through 2027, with approximately 50% expected to be realized in 2026.
Willie Chiang: These transactions enhance the quality and the durability of our cash flow stream while improving distributable cash flow and positioning us well for future market cycles. 2026 will be a year of execution and self-help, with a focus on three initiatives. First, we remain on schedule to close the NGL divestiture near the end of Q1, pending Canadian Competition Bureau approval. Second, we're integrating the recently acquired Cactus 3 pipeline and expect to drive synergies related to that system to improve EBITDA. And third, we're streamlining the organization with a focus on efficiency and improving our cost structure. Over the past several months, we have advanced our streamlining initiatives and are targeting $100 million of identified annual savings through 2027, with approximately 50% expected to be realized in 2026.
Speaker #3: 2026 will be a year of execution and self-help, with a focus on three initiatives. First, we remain on schedule to close the NGO divestiture near the end of the first quarter, pending Canadian Competition Bureau approval.
Speaker #3: Second, we're integrating the recently acquired Cactus 3 pipeline and expect to drive synergies related to that system to improve EBITDA. And third, we're streamlining the organization with a focus on efficiency and improving our cost structure.
Speaker #3: Over the past several months, we have advanced our streamlining initiatives and are targeting $100 million of identified annual savings through 2027, with approximately 50% expected to be realized in 2026.
Speaker #3: The key drivers of these efficiencies are outlined on slide five, and including reducing G&A and OPEX to reflect a more simplified business, consolidating operations, and exiting or optimizing lower margin illustrates our focus on higher margin businesses is the sale of our mid-continent's lease marketing business in the fourth quarter of 2025 for a total consideration of businesses.
Willie Chiang: The key drivers of these efficiencies are outlined on slide 5, including reducing G&A and OPEX to reflect a more simplified business, consolidating operations, and exiting or optimizing lower-margin businesses. One example that illustrates our focus on higher-margin businesses is the sale of our Mid-Continent's lease marketing business in Q4 2025 for a total consideration of approximately $50 million, with minimal impact to EBITDA. This sale removes working capital needs associated with line fill. It simplifies operations with an improved cost structure while adding long-term contracts to our business. While this transaction is relatively small, it illustrates an opportunity that we have executed on to streamline our business, improve margins, and do more with less.
Willie Chiang: The key drivers of these efficiencies are outlined on slide 5, including reducing G&A and OPEX to reflect a more simplified business, consolidating operations, and exiting or optimizing lower-margin businesses. One example that illustrates our focus on higher-margin businesses is the sale of our Mid-Continent's lease marketing business in Q4 2025 for a total consideration of approximately $50 million, with minimal impact to EBITDA. This sale removes working capital needs associated with line fill. It simplifies operations with an improved cost structure while adding long-term contracts to our business. While this transaction is relatively small, it illustrates an opportunity that we have executed on to streamline our business, improve margins, and do more with less.
Speaker #3: Approximately $50 million, with minimal impact to EBITDA. This is one example where the sale removes working capital needs associated with line fill. It simplifies operations with an improved cost structure, while adding long-term contracts to our business.
Speaker #3: While this transaction is relatively small, it illustrates an opportunity that we have executed on to streamline our business, improve margins, and do more with less.
Speaker #3: On the bolt-on acquisition front, in January, we acquired the Wildhorse Terminal in Cushing, Oklahoma, from Kiera for a net cash consideration of approximately $10 million, which includes an upward purchase price adjustment of approximately $65 million upon the closing of the pending NGO divestiture.
Willie Chiang: On the bolt-on acquisition front, in January, we acquired the Wildhorse Terminal in Cushing, Oklahoma, from Keyera for a net cash consideration of approximately $10 million, which includes an upward purchase price adjustment of approximately $65 million upon the closing of the pending NGL divestiture. This asset adds approximately 4 million barrels of storage adjacent to our existing terminal assets and is expected to generate returns well above our internal thresholds. Looking to 2026, and as highlighted on slide 6, we are providing Adjusted EBITDA guidance of $2.75 billion net to Plains at the midpoint, ±$75 million, with an oil segment EBITDA midpoint of $2.64 billion net to Plains, which implies a 13% growth year-over-year in the crude segment.
Willie Chiang: On the bolt-on acquisition front, in January, we acquired the Wildhorse Terminal in Cushing, Oklahoma, from Keyera for a net cash consideration of approximately $10 million, which includes an upward purchase price adjustment of approximately $65 million upon the closing of the pending NGL divestiture. This asset adds approximately 4 million barrels of storage adjacent to our existing terminal assets and is expected to generate returns well above our internal thresholds. Looking to 2026, and as highlighted on slide 6, we are providing Adjusted EBITDA guidance of $2.75 billion net to Plains at the midpoint, ±$75 million, with an oil segment EBITDA midpoint of $2.64 billion net to Plains, which implies a 13% growth year-over-year in the crude segment.
Speaker #3: This asset adds approximately $4 million of storage, adjacent to our existing terminal assets, and is expected to generate returns well above our internal thresholds.
Speaker #3: Looking to '26, we are 2026, and as highlighted on the slide, providing adjusted EBITDA guidance of $2.75 billion net to PLAINS at the midpoint, plus or minus $75 million.
Speaker #3: With an oil segment EBITDA midpoint of $2.64 billion net to Plains, which implies 13% growth year over year in the crude segment. We expect $100 million of EBITDA from the NGO segment, assuming the divestiture closes at the end of the first quarter, and $10 million of other income.
Willie Chiang: We expect $100 million of EBITDA from the NGL segment, assuming the divestiture closes at the end of Q1, and $10 million of other income. We forecast Permian crude production to be relatively flat year-over-year in 2026, with overall basin volumes remaining about 6.6 million at the end of the year, similar to end of 2025 levels. That said, we expect growth to resume in 2027, underpinned by more constructive oil market fundamentals driven by ongoing global energy demand growth and diminishing OPEC spare capacity. Regarding capital allocation, we recently announced a 10% increase in the quarterly distribution payable on February 13th for both PAA and PAGP. On an annualized basis, the distribution represents a $0.15-per-unit increase from the November level, bringing the annual distribution to $1.67 per unit, representing an 8.5% yield based on the recent equity price for PAA.
Willie Chiang: We expect $100 million of EBITDA from the NGL segment, assuming the divestiture closes at the end of Q1, and $10 million of other income. We forecast Permian crude production to be relatively flat year-over-year in 2026, with overall basin volumes remaining about 6.6 million at the end of the year, similar to end of 2025 levels. That said, we expect growth to resume in 2027, underpinned by more constructive oil market fundamentals driven by ongoing global energy demand growth and diminishing OPEC spare capacity. Regarding capital allocation, we recently announced a 10% increase in the quarterly distribution payable on February 13th for both PAA and PAGP. On an annualized basis, the distribution represents a $0.15-per-unit increase from the November level, bringing the annual distribution to $1.67 per unit, representing an 8.5% yield based on the recent equity price for PAA.
Speaker #3: We forecast Permian crude production to be relatively flat year over year in '26, with overall base and volumes remaining about 6.6 million at the end of the year, similar to end of 2025 levels.
Speaker #3: That said, we expect growth to resume in 2027, underpinned by more constructive oil market fundamentals, driven by ongoing global energy demand growth and diminishing OPEC spare capacity.
Speaker #3: Regarding capital allocation, we recently announced a 10% increase in the quarterly distribution payable on February 13th for both PAA and PAGP. On an annualized basis, the distribution represents a $0.15 per unit increase from the November level, bringing the annual distribution to $1.67 per unit, representing an 8.5% yield based on the recent equity price for PAA.
Speaker #3: With the simplification, with the simplification and streamlining of our business, stable cash flow contributions from the Cactus 3 acquisition, and reduced commodity exposure following the NGO sale, we are modestly reducing our distribution coverage ratio threshold from 160% to 150%.
Willie Chiang: With the simplification and streamlining of our business, stable cash flow contributions from the Cactus 3 acquisition, and reduced commodity exposure following the NGL sale, we are modestly reducing our distribution coverage ratio threshold from 160% to 150%. This reflects improved visibility for our business, better aligns us with peers, and it paves the way for future distribution growth while still maintaining a prudent level of coverage. Our targeted annualized distribution growth remains $0.15 per unit, and the lower distribution coverage gives us more confidence in our ability to deliver increasing returns to our unit holders. Al will cover specific CapEx guidance for the year, but we expect a meaningful reduction in growth spending versus 2025 levels, and maintenance capital will naturally decrease following the NGL divestiture.
Willie Chiang: With the simplification and streamlining of our business, stable cash flow contributions from the Cactus 3 acquisition, and reduced commodity exposure following the NGL sale, we are modestly reducing our distribution coverage ratio threshold from 160% to 150%. This reflects improved visibility for our business, better aligns us with peers, and it paves the way for future distribution growth while still maintaining a prudent level of coverage. Our targeted annualized distribution growth remains $0.15 per unit, and the lower distribution coverage gives us more confidence in our ability to deliver increasing returns to our unit holders. Al will cover specific CapEx guidance for the year, but we expect a meaningful reduction in growth spending versus 2025 levels, and maintenance capital will naturally decrease following the NGL divestiture.
Speaker #3: Reflects improved visibility for our business, better aligns us with peers, and it paves the way for future distribution growth while still maintaining a prudent level of coverage.
Speaker #3: Our targeted annualized distribution growth remains 15 cents per unit, and the lower distribution coverage gives increasing returns to our unit holders. Al will cover specific us more confidence in our ability to deliver CAPEX guidance for the year, but we expect a meaningful reduction in gross spending versus 2025 levels and maintenance capital will naturally decrease following the NGO divestiture.
Speaker #3: We remain committed to our efficient growth strategy, flow, optimizing our asset base, maintaining a flexible balance sheet, and returning cash to unit holders via our disciplined capital allocation framework.
Willie Chiang: We remain committed to our efficient growth strategy, generating significant free cash flow, optimizing our asset base, maintaining a flexible balance sheet, and returning cash to unit holders via our disciplined capital allocation framework. With that, I'll turn the call over to Al to cover our quarterly performance and other financial matters.
Willie Chiang: We remain committed to our efficient growth strategy, generating significant free cash flow, optimizing our asset base, maintaining a flexible balance sheet, and returning cash to unit holders via our disciplined capital allocation framework. With that, I'll turn the call over to Al to cover our quarterly performance and other financial matters.
Speaker #3: With that, I'll turn the call over to Al to cover our quarterly performance and other financial matters.
Speaker #2: Thanks, Willie. Slide seven and eight contain adjusted EBITDA walks that provide additional details on our performance. For the fourth quarter, we reported of $611 million, which includes crude oil segment adjusted EBITDA Cactus 3 acquisition, partially offset by a recontracting on our long-haul system.
Al Swanson: Thanks, Willie. Slides 7 and 8 contain adjusted EBITDA WACCs that provide additional details on our performance. For the fourth quarter, we reported crude oil segment adjusted EBITDA of $611 million, which includes two months of contribution from the Cactus 3 acquisition, partially offset by a full quarter impact of recontracting on our long-haul system. Moving to the NGL segment, we reported an adjusted EBITDA of $122 million, reflecting a seasonal uptick that was moderated somewhat by warm weather impacts on sales volumes and relatively weak frac spreads. A summary of 2026 guidance and key assumptions are on slide 9. We remain focused on making disciplined capital investments and expect to invest approximately $350 million of growth capital and approximately $165 million of maintenance capital net to PAA in 2026.
Al Swanson: Thanks, Willie. Slides 7 and 8 contain adjusted EBITDA WACCs that provide additional details on our performance. For the fourth quarter, we reported crude oil segment adjusted EBITDA of $611 million, which includes two months of contribution from the Cactus 3 acquisition, partially offset by a full quarter impact of recontracting on our long-haul system. Moving to the NGL segment, we reported an adjusted EBITDA of $122 million, reflecting a seasonal uptick that was moderated somewhat by warm weather impacts on sales volumes and relatively weak frac spreads. A summary of 2026 guidance and key assumptions are on slide 9. We remain focused on making disciplined capital investments and expect to invest approximately $350 million of growth capital and approximately $165 million of maintenance capital net to PAA in 2026.
Speaker #2: Moving to the NGL full quarter impact of segment, we reported adjusted EBITDA, reflecting a seasonal uptick that was moderated somewhat by warm weather impacts on sales volumes and relatively weak crack spreads.
Speaker #2: A summary of $122 million, 2026 guidance, and key assumptions are on slide nine. We remain focused on making disciplined capital investments and expect to invest approximately $350 million of growth capital and approximately $165 million of maintenance capital, net to PAA, in 2026.
Speaker #2: Key drivers for EBITDA year over year include full-year contributions from acquisitions, primarily Cactus 3, efficiency and optimization gains, partially offsetting the impact of the NGO sale, and recontracting as provided on slide while headline EBITDA will decline slightly from the divestiture, distributable cash flow is expected to increase approximately 1%, driven by lower corporate taxes and maintenance capital.
Al Swanson: Key drivers for EBITDA year-over-year include full-year contributions from acquisitions, primarily Cactus 3, efficiency and optimization gains, partially offsetting the impact of the NGL sale, and recontracting, as provided on slide 10. Importantly, I would note that while headline EBITDA will decline slightly from the divestiture, distributable cash flow is expected to increase approximately 1%, driven by lower corporate taxes and maintenance capital. As illustrated on slide 11, we remain committed to generating significant free cash flow and returning capital to unit holders while maintaining financial flexibility. For 2026, we expect to generate approximately $1.8 billion of adjusted free cash flow, excluding changes in assets and liabilities, and excluding sales proceeds from the NGL divestiture. With regard to the potential special distribution previously communicated, we expect the Cactus 3 acquisition to mitigate a significant portion of the expected tax liability to unit holders resulting from the NGL sale.
Al Swanson: Key drivers for EBITDA year-over-year include full-year contributions from acquisitions, primarily Cactus 3, efficiency and optimization gains, partially offsetting the impact of the NGL sale, and recontracting, as provided on slide 10. Importantly, I would note that while headline EBITDA will decline slightly from the divestiture, distributable cash flow is expected to increase approximately 1%, driven by lower corporate taxes and maintenance capital. As illustrated on slide 11, we remain committed to generating significant free cash flow and returning capital to unit holders while maintaining financial flexibility. For 2026, we expect to generate approximately $1.8 billion of adjusted free cash flow, excluding changes in assets and liabilities, and excluding sales proceeds from the NGL divestiture. With regard to the potential special distribution previously communicated, we expect the Cactus 3 acquisition to mitigate a significant portion of the expected tax liability to unit holders resulting from the NGL sale.
Speaker #2: As illustrated on slide 11, we remain committed to generating significant free cash flow and returning capital to unit holders. While maintaining financial flexibility, for 2026, we expect to generate approximately $1.8 billion of adjusted free cash flow excluding changes in assets sales proceeds from the NGO divestiture.
Speaker #2: With regard to the and liabilities and excluding potential special distribution previously communicated, we expect the Cactus 3 acquisition to expected tax liability to unit mitigate a significant portion of the holders, resulting from the NGO sale.
Al Swanson: From this perspective, we now expect a special distribution of $0.15 per unit or less after closing and pending board approval. Regarding our balance sheet in November, we issued $750 million of senior unsecured notes, consisting of $300 million due in 2031 at a rate of 4.7% and $450 million in 2036 at a rate of 5.6%. Proceeds were used to partially fund the EPIC acquisition. Additionally, in Q4, we paid off the $1.1 billion EPIC term loan assumed as part of the EPIC acquisition by issuing a $1.1 billion senior unsecured term loan at PAA. As a reminder, since we invested $2.9 billion to acquire Cactus 3, the majority of the proceeds from the NGL sale will be used to reduce debt. Post-closing, we expect our leverage ratio to trend toward the middle of our established target range of 3.25 to 3.75 times.
Al Swanson: From this perspective, we now expect a special distribution of $0.15 per unit or less after closing and pending board approval. Regarding our balance sheet in November, we issued $750 million of senior unsecured notes, consisting of $300 million due in 2031 at a rate of 4.7% and $450 million in 2036 at a rate of 5.6%. Proceeds were used to partially fund the EPIC acquisition. Additionally, in Q4, we paid off the $1.1 billion EPIC term loan assumed as part of the EPIC acquisition by issuing a $1.1 billion senior unsecured term loan at PAA. As a reminder, since we invested $2.9 billion to acquire Cactus 3, the majority of the proceeds from the NGL sale will be used to reduce debt. Post-closing, we expect our leverage ratio to trend toward the middle of our established target range of 3.25 to 3.75 times.
Speaker #2: Now expect a special distribution of $0.15 per unit or less after closing and pending board approval. Regarding our balance sheet, in November, we issued $750 million of senior unsecured notes, consisting of $300 million due in 2031 at a rate of 4.7%, and $450 million due in 2036 at a rate of 5.6%.
Speaker #2: Proceeds were used to partially fund the EPIC acquisition. Additionally, in the fourth quarter, we paid off the $1.1 billion EPIC term loan, assumed as part of the EPIC acquisition, by issuing a unsecured term loan at PAA.
Speaker #2: As a reminder, since we invested $2.9 billion to acquire Cactus 3, the majority of the proceeds from the NGO sale will be used to reduce debt.
Speaker #2: leverage ratio to trend toward the middle Post-closing, we expect our of our established target range of 3.25 to 3.75 times. With that, I'll turn the call back to Willie.
Al Swanson: With that, I'll turn the call back to Willie.
Al Swanson: With that, I'll turn the call back to Willie.
Speaker #1: Thanks, Al. 2025 is a transformational year for PLAINS, and we're taking steps to further strengthen our company for the future. Despite a complex macro backdrop, we proactively executed several major transactions and implemented efficiency initiatives to position PLAINS as the premier North American pure play crude oil midstream company.
Willie Chiang: Thanks, Al. 2025 was a transformational year for PLAINS, and we're taking steps to further strengthen our company for the future. Despite a complex macro backdrop, we proactively executed several major transactions and implemented efficiency initiatives to position PLAINS as the premier North American pure-play crude oil midstream company. 2026 will be a year of execution and self-help as we focus on closing the NGL sale, advancing our efficiency initiatives, and driving synergies on the Cactus 3 system. Collectively, these actions will help position PLAINS more competitively for the future. I also want to take this moment to express thanks to our PLAINS team, whose dedication and professionalism showed through and through, as we also achieved our best-ever safety performance as measured by our best TRIR safety rate, as well as the lowest severity of injuries as measured by total loss workdays.
Willie Chiang: Thanks, Al. 2025 was a transformational year for PLAINS, and we're taking steps to further strengthen our company for the future. Despite a complex macro backdrop, we proactively executed several major transactions and implemented efficiency initiatives to position PLAINS as the premier North American pure-play crude oil midstream company. 2026 will be a year of execution and self-help as we focus on closing the NGL sale, advancing our efficiency initiatives, and driving synergies on the Cactus 3 system. Collectively, these actions will help position PLAINS more competitively for the future. I also want to take this moment to express thanks to our PLAINS team, whose dedication and professionalism showed through and through, as we also achieved our best-ever safety performance as measured by our best TRIR safety rate, as well as the lowest severity of injuries as measured by total loss workdays.
Speaker #1: 2026 will be a year of execution and self-help, as we focus on closing the NGO sale, advancing our efficiency initiatives, and driving synergies on the Cactus 3 system.
Speaker #1: Collectively, these actions will help position PLAINS more competitively for the future. I also want to take this moment to express thanks to our PLAINS team, whose dedication and professionalism showed through and through.
Speaker #1: As we also achieved our best-ever safety performance as measured by our best TRIR safety rate as well as the lowest severity of injuries as measured by total loss workdays.
Speaker #1: In closing, I would like to reiterate that we remain committed to our efficient growth generate significant free cash flow, maintain a flexible balance sheet, and return capital to our unit holders.
Willie Chiang: In closing, I would like to reiterate that we remain committed to our efficient growth strategy, simply stated: generate significant free cash flow, maintain a flexible balance sheet, and return capital to our unit holders. I will now turn the call back over to Blake, that will lead us into Q&A.
Willie Chiang: In closing, I would like to reiterate that we remain committed to our efficient growth strategy, simply stated: generate significant free cash flow, maintain a flexible balance sheet, and return capital to our unit holders. I will now turn the call back over to Blake, that will lead us into Q&A.
Speaker #1: I will now turn the call back
Speaker #1: into Q&A. Thanks, Willie.
Blake Fernandez: Thanks, Willie. 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 any additional questions you may have. Victor, we're ready to open up the call, please.
Blake Fernandez: Thanks, Willie. 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 any additional questions you may have. Victor, we're ready to open up the call, please.
Speaker #3: 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.
Speaker #3: This will allow us to address questions from as many participants as possible and our available time this morning. The IR team will also be available after the call to address any additional questions you may have.
Speaker #3: Victor, we’re ready to open up the call.
Speaker #3: please. Thank you.
Operator: Thank you. To ask a question, you may press star 11 on your telephone and wait for your name to be announced. To address your question, please press star 11 again. Please stand by. We'll compile the Q&A roster. One moment for our first question. Our first question will come from Manav Gupta from UBS. Your line is open.
Operator: Thank you. To ask a question, you may press star 11 on your telephone and wait for your name to be announced. To address your question, please press star 11 again. Please stand by. We'll compile the Q&A roster. One moment for our first question. Our first question will come from Manav Gupta from UBS. Your line is open.
Speaker #4: And to ask a question, you may press star 11 on your telephone. And wait for your name to be announced to withdraw your question.
Speaker #4: Please press star 1-1 again. Please stand by. Roster. One moment for our first—We'll compile the Q&A question. Our first question will come from the line of Manav Gupta from UBS.
Speaker #4: Your line is open.
[Analyst] (UBS): Good morning, guys. I actually wanted to focus a little bit more on the Cactus Pipeline and all the synergy benefits you are talking. Also, I know this is not the right macro, but eventually the macro will turn. I'm trying to understand what's your ability to expand Cactus 3 without actually putting more pipe in the ground, if you could talk about some of those factors. Thank you.
Manav Gupta: Good morning, guys. I actually wanted to focus a little bit more on the Cactus Pipeline and all the synergy benefits you are talking. Also, I know this is not the right macro, but eventually the macro will turn. I'm trying to understand what's your ability to expand Cactus 3 without actually putting more pipe in the ground, if you could talk about some of those factors. Thank you.
Speaker #5: focus a little bit more on Good morning, guys. the Cactus pipeline and all the I actually wanted to synergy benefits you're talking. And also, I know this is not the right macro, but I eventually the macro will turn.
Speaker #5: And I'm trying to understand what's the availability to expand Cactus 3 without actually putting more pipe in the ground. If you could talk about some of those factors.
Speaker #5: Thank
Speaker #5: you. Manav, good morning.
Willie Chiang: Manav, good morning. It's Jeremy. First, on the synergies question, the $50 million of synergies we disclosed, we believe we're already on run rate for that now. Roughly half of that was associated with G&A and OPEX reductions, as well as removing things like insurance and other things that the pipeline had to keep because it was a private equity-backed entity. Those are gone, so half the synergies were achieved in Q4 as we shed those costs. The other 25% are associated with filling the pipeline with supply that we have, doing shorter-term deals just to fill that available capacity, associated with quality management. Those were ramping up now. So we would imagine during Q1 we'll be substantially there on the run rate for the $50 million, and we should hit that number this year.
Jeremy Goebel: Manav, good morning. It's Jeremy. First, on the synergies question, the $50 million of synergies we disclosed, we believe we're already on run rate for that now. Roughly half of that was associated with G&A and OPEX reductions, as well as removing things like insurance and other things that the pipeline had to keep because it was a private equity-backed entity. Those are gone, so half the synergies were achieved in Q4 as we shed those costs. The other 25% are associated with filling the pipeline with supply that we have, doing shorter-term deals just to fill that available capacity, associated with quality management. Those were ramping up now. So we would imagine during Q1 we'll be substantially there on the run rate for the $50 million, and we should hit that number this year.
Speaker #1: It's Jeremy. First, on the synergies question, the $50 million of synergies we disclosed—we believe we're already on run rate for that now. Roughly half of that was associated with G&A and OPEX reductions, as well as removing things like insurance and other things that the pipeline had to keep because it was a private equity-backed entity.
Speaker #1: Those are gone. So half the synergies were achieved in the fourth quarter as we shed those costs. The other 25% are associated with filling the pipeline with supply that we have, doing shorter-term deals, just to fill that available capacity associated with quality management.
Speaker #1: Those were ramping up now. So we would imagine during the first quarter we'll be substantially there on the run rate for the $50 million, and we should hit that number this year.
Speaker #1: As for your second question on the ability to expand the pipeline, our team, as we recontract the base pipeline to add term and improve rates for that uncontracted capacity now, in parallel, Chris's team is taking a look at all the capital-efficient ways to optimize our upstream connectivity, our downstream connectivity, and then for incremental expansions of the pipeline that don't require new pipe and that do require new pipe.
Willie Chiang: As for your second question on the ability to expand the pipeline, our team, as we recontract the base pipeline to add term and improve rates for that uncontracted capacity now, in parallel, Chris's team is taking a look at all the capital-efficient ways to optimize our upstream connectivity, our downstream connectivity, and then for incremental expansions of the pipeline that don't require new pipe and that do require new pipe. So we're looking at the most capital-efficient ways to do that. We should finish that during the first half of this year. And in parallel, like I said, we're recontracting for term the rest of the pipeline, and then we'll be in a position to discuss expansions with our customers, etc. But first, it's stabilize the base pipeline, and then it's look at capital-efficient expansions from there in increments that make sense to grow with the basin.
Jeremy Goebel: As for your second question on the ability to expand the pipeline, our team, as we recontract the base pipeline to add term and improve rates for that uncontracted capacity now, in parallel, Chris's team is taking a look at all the capital-efficient ways to optimize our upstream connectivity, our downstream connectivity, and then for incremental expansions of the pipeline that don't require new pipe and that do require new pipe. So we're looking at the most capital-efficient ways to do that. We should finish that during the first half of this year. And in parallel, like I said, we're recontracting for term the rest of the pipeline, and then we'll be in a position to discuss expansions with our customers, etc. But first, it's stabilize the base pipeline, and then it's look at capital-efficient expansions from there in increments that make sense to grow with the basin.
Speaker #1: So we're looking at the most capital-efficient ways to do that. We should finish that during the first half of this year. And in parallel, like I said, we're recontracting for term the rest of the pipeline, and then we'll be in a position to discuss expansions with our customers, etc.
Speaker #1: But first, it's stabilize the base pipeline, and then it's look at capital-efficient expansions from there. And increments that make sense to grow with the basin.
Speaker #3: Manav, this is Willie. I think one key point that Jeremy highlighted is it's not an expansion at one time. We've got an opportunity to do it in phases and really match capacity to demand that's out in the—
Willie Chiang: Manav, this is Willie. I think one key point that Jeremy highlighted is it's not a binary expansion at one time. We've got an opportunity to do it in phases and really match the capacity to demand that's out in the market.
Willie Chiang: Manav, this is Willie. I think one key point that Jeremy highlighted is it's not a binary expansion at one time. We've got an opportunity to do it in phases and really match the capacity to demand that's out in the market.
Speaker #3: market. Perfect.
[Analyst] (UBS): Perfect. My very quick follow-up is, can you also talk a little bit about the $100 million cost savings through 2027 efficiencies and other initiatives that you are undertaking at the franchise level? Thank you.
Manav Gupta: Perfect. My very quick follow-up is, can you also talk a little bit about the $100 million cost savings through 2027 efficiencies and other initiatives that you are undertaking at the franchise level? Thank you.
Speaker #5: My very quick follow-up is, can you also talk a little bit about the $100 million in cost savings through 2027—efficiencies and other initiatives that you're undertaking at the franchise level?
Speaker #5: Thank you.
Speaker #1: Good morning, Manav. This is Chris Chandler. So, the sale of our NGO business in Canada really creates a unique opportunity for us to rethink how our company is structured and organized.
Chris Chandler: Good morning, Manav. This is Chris Chandler. So the sale of our NGL business in Canada really creates a unique opportunity for us to rethink how our company is structured and organized. So that business, as you might expect, carried a fair amount of operational and commercial complexity that simply won't exist once the assets are sold. So we're taking a fresh look from top to bottom at how we're organized, where we're located, a fresh look at some of the maybe non-core businesses that might be better in somebody else's hands or, for example, outsourced to third parties that could do it more efficiently. So it's really an across-the-board look that you don't get the opportunity to do this very often. As far as the capture rate, it's a $100 million run rate by the end of 2027.
Chris Chandler: Good morning, Manav. This is Chris Chandler. So the sale of our NGL business in Canada really creates a unique opportunity for us to rethink how our company is structured and organized. So that business, as you might expect, carried a fair amount of operational and commercial complexity that simply won't exist once the assets are sold. So we're taking a fresh look from top to bottom at how we're organized, where we're located, a fresh look at some of the maybe non-core businesses that might be better in somebody else's hands or, for example, outsourced to third parties that could do it more efficiently. So it's really an across-the-board look that you don't get the opportunity to do this very often. As far as the capture rate, it's a $100 million run rate by the end of 2027.
Speaker #1: So that business, as you might expect, carried a fair amount of operational and commercial complexity that simply won't exist once the assets are sold.
Speaker #1: So we're taking a fresh look from top to bottom at how we're organized, where we're located, a fresh look at some of the maybe non-core businesses that might be better in somebody else's hands or, for example, outsourced to third parties that could do it more efficiently.
Speaker #1: So it's really an across-the-board look that you don't get the opportunity to do very often. As far as the capture rate, it's a $100 million run rate by the end of 2027.
Speaker #1: So, we expect to achieve $50 million of that in 2026 and another $50 million in
Chris Chandler: So we expect to achieve $50 million of that in 2026 and another $50 million in 2027.
Chris Chandler: So we expect to achieve $50 million of that in 2026 and another $50 million in 2027.
Speaker #5: Thank you so much for taking my 2027. questions. I'll turn it over.
[Analyst] (UBS): Thank you so much for taking my questions. I'll turn it over.
Manav Gupta: Thank you so much for taking my questions. I'll turn it over.
Speaker #1: Thanks, Manav.
Willie Chiang: Thanks, Manav.
Willie Chiang: Thanks, Manav.
Speaker #4: Thank you. One moment for our next question. Our next question will come from the line of Brandon Bingham from Scotiabank. Your line is open.
Operator: Thank you. One moment for our next question. Our next question will come from Brandon Bingham from Scotiabank. Your line is open.
Operator: Thank you. One moment for our next question. Our next question will come from Brandon Bingham from Scotiabank. Your line is open.
Speaker #6: Hey, good morning. Thank you for taking the question. Maybe first, just looking at the Permian Basin Outlook and kind of some of the commentary you just went through, just trying to harmonize it with some of the larger producer commentary from recent earnings calls.
[Analyst] (Scotiabank): Hey, good morning. Thanks for taking the questions. Maybe first, just looking at the Permian Basin outlook and kind of some of the commentary you just went through, just trying to harmonize it with some of the larger producer commentary from recent earnings calls. How is the sentiment among your producer customers, and maybe what are some of the current discussions like assuming that $60, $65 WTI scenario in your guide?
Brandon Bingham: Hey, good morning. Thanks for taking the questions. Maybe first, just looking at the Permian Basin outlook and kind of some of the commentary you just went through, just trying to harmonize it with some of the larger producer commentary from recent earnings calls. How is the sentiment among your producer customers, and maybe what are some of the current discussions like assuming that $60, $65 WTI scenario in your guide?
Speaker #6: How is the sentiment among your producer customers, and maybe what are some of the current discussions like, assuming that $60–$65 WTI scenario in your—
Speaker #6: guide? Good morning, Brandon.
Willie Chiang: Good morning, Brandon. This is Jeremy. First, I would say that 60 to 65 is 10% higher than it was a few weeks ago. So it's a very volatile time period. But what I would say is the larger the producer, the less sensitive they are to the plus or minus $5 swings that we used to incur. So I'd say cautiously optimistic because if you look consistently across the producer landscape, what used to hold the Permian Basin flat was 325 rigs with less production. Now it's 230 rigs. So you can see those efficiencies are working through the system. What I would tell you is that they're working to preserve inventory. They're working to continue to get more efficient how they develop it and improve recoveries. All of those things are good for stabilizing earnings for us.
Jeremy Goebel: Good morning, Brandon. This is Jeremy. First, I would say that 60 to 65 is 10% higher than it was a few weeks ago. So it's a very volatile time period. But what I would say is the larger the producer, the less sensitive they are to the plus or minus $5 swings that we used to incur. So I'd say cautiously optimistic because if you look consistently across the producer landscape, what used to hold the Permian Basin flat was 325 rigs with less production. Now it's 230 rigs. So you can see those efficiencies are working through the system. What I would tell you is that they're working to preserve inventory. They're working to continue to get more efficient how they develop it and improve recoveries. All of those things are good for stabilizing earnings for us.
Speaker #1: This is Jeremy. First, I would say that 60—than it was a few weeks ago—to 65 is 10% higher. So, it's a very volatile time period.
Speaker #1: But what I would say is the larger the producer, the less sensitive they are to the plus or minus $5 swings that we used to incur.
Speaker #1: So, I'd say cautiously optimistic because if you look consistently across the producer landscape, what used to hold the Permian Basin flat was 325 rigs, with less production.
Speaker #1: Now it's 230 rigs. So you can see those efficiencies are working through the system. What I would tell you is that they're working to preserve inventory.
Speaker #1: They're working to continue to get more efficient with how they develop it, and improve recoveries. All of those things are good for stabilizing earnings for us.
Speaker #1: And we remain consistent that, while 2026 may be flattish, we think a more constructive environment for 2027 and beyond for growth. And that's very consistent with taking a pause, getting better at doing things, becoming more efficient, so that continues to be the case for us.
Willie Chiang: And we remain consistent that while 2026 may be flat-ish, we think a more constructive environment for 2027 and beyond for growth. And that's very consistent with taking a pause, getting better at doing things, becoming more efficient. So that continues to be the case for us. So I would say that's consistent with our discussions with producers.
Jeremy Goebel: And we remain consistent that while 2026 may be flat-ish, we think a more constructive environment for 2027 and beyond for growth. And that's very consistent with taking a pause, getting better at doing things, becoming more efficient. So that continues to be the case for us. So I would say that's consistent with our discussions with producers.
Speaker #1: So I would say that's consistent with how we're discussing with producers.
Speaker #3: And Brandon, this is Willie. I think a couple of other things to point basins—it's an exercise in constraint removal. So, one observation is gas has been tight, and there's a number of projects that are there to alleviate that.
Willie Chiang: And Brandon, this is Willie. A couple other things to point out. As we develop these basins, it's an exercise in constraint removal. So one observation is gas has been tight, and there's a number of projects that are there to alleviate that. And when you alleviate the gas constraint, actually, the break-evens for the producers improve, which allows them to be able to be more durable going forward. And I think just to reinforce your point, we've had some consolidation in the upstream section with a couple of the producers recently announced. And for us, we like that because it bolsters the producer environment to develop the basins in a more thoughtful way. And I'm actually very encouraged by some of the technology improvements that some of the majors are focused on, on resource recovery.
Willie Chiang: And Brandon, this is Willie. A couple other things to point out. As we develop these basins, it's an exercise in constraint removal. So one observation is gas has been tight, and there's a number of projects that are there to alleviate that. And when you alleviate the gas constraint, actually, the break-evens for the producers improve, which allows them to be able to be more durable going forward. And I think just to reinforce your point, we've had some consolidation in the upstream section with a couple of the producers recently announced. And for us, we like that because it bolsters the producer environment to develop the basins in a more thoughtful way. And I'm actually very encouraged by some of the technology improvements that some of the majors are focused on, on resource recovery.
Speaker #3: And when you alleviate the gas constraint, actually, the break-evens for the producers improve, which allows them to be able to be more durable going forward.
Speaker #3: And I think, just to reinforce your point, we've had some consolidation in the upstream section with a couple of the producers recently announced. And for us, we like that because it bolsters the producer environment to develop the basins in a more thoughtful way.
Speaker #3: And I'm actually very encouraged by some of the technology improvements that some of the majors are focused on in resource recovery. So when you factor all that in, we're very confident and constructive on the ability for the Permian to be a key part of the incremental supply for the world for quite some time.
Willie Chiang: So when you factor all that in, we're very confident and constructive on the ability for the Permian to be a key part of the incremental supply for the world for quite some time. And then we'd expect growth to come back as fundamentals improve.
Willie Chiang: So when you factor all that in, we're very confident and constructive on the ability for the Permian to be a key part of the incremental supply for the world for quite some time. And then we'd expect growth to come back as fundamentals improve.
Speaker #3: And then would expect growth to come back as fundamentals—
Speaker #3: improve.
Speaker #4: Very helpful. Thank you. And then maybe just
[Analyst] (Scotiabank): Very helpful. Thank you. Then maybe just looking at the capital allocation priorities, would be curious to hear if maybe there's a shift in any of them versus what they have been, and specifically thinking around the payout ratio. Is that 150% level more so to just continue the bolt-on strategy or other priorities, or is there room to maybe further reduce it and maintain that $0.15 per unit distribution growth cadence a little bit longer?
Brandon Bingham: Very helpful. Thank you. Then maybe just looking at the capital allocation priorities, would be curious to hear if maybe there's a shift in any of them versus what they have been, and specifically thinking around the payout ratio. Is that 150% level more so to just continue the bolt-on strategy or other priorities, or is there room to maybe further reduce it and maintain that $0.15 per unit distribution growth cadence a little bit longer?
Speaker #4: looking at the capital allocation priorities would be curious to hear if maybe there's a shift in specifically thinking around the payout ratio? Is that 150% level more so to just continue the bolt-on strategy or other priorities?
Speaker #4: Or is there room to maybe further reduce it and maintain that $0.15 per unit distribution growth cadence a little bit?
Speaker #4: longer? Brandon,
Blake Fernandez: Brandon, this is Al. Our view on capital allocation has not changed. I think I noted in the prepared comments, there are two ways to look at it. We got the net proceeds coming from the divestiture. We've really redeployed that already into Cactus 3. So the proceeds there, I'll go to pay down debt. When you look ahead post that, it's all the same viewpoints that we had before. Our primary way of returning cash to shareholders is going to be through distribution growth. That's part of the 160 to 150. We're comfortable with the 150 level. We think it's actually consistent with a large number of our peers. And so we'll be looking to continue looking at bolt-ons where they make economic sense, distributing cash through distribution growth. Secondly, we do have some preferred securities as well as common unit repurchases.
Al Swanson: Brandon, this is Al. Our view on capital allocation has not changed. I think I noted in the prepared comments, there are two ways to look at it. We got the net proceeds coming from the divestiture. We've really redeployed that already into Cactus 3. So the proceeds there, I'll go to pay down debt. When you look ahead post that, it's all the same viewpoints that we had before. Our primary way of returning cash to shareholders is going to be through distribution growth. That's part of the 160 to 150. We're comfortable with the 150 level. We think it's actually consistent with a large number of our peers. And so we'll be looking to continue looking at bolt-ons where they make economic sense, distributing cash through distribution growth. Secondly, we do have some preferred securities as well as common unit repurchases.
Speaker #3: Our view on capital allocation has not—this is Al—changed. I think I noted in the prepared comments, there are two ways to look at it.
Speaker #3: We got the net proceeds coming from the divestiture. We really redeployed that already into Cactus 3. So the proceeds there, I'll use to pay down debt.
Speaker #3: When you look ahead post that, it's all the same viewpoints that we had before. Our primary way of returning cash to shareholders is going to be through distribution growth.
Speaker #3: That's part of the 160 to 150. We're comfortable with the 150 level. We think it's actually consistent with a large number of our peers.
Speaker #3: And so we'll be looking to continue looking at bolt-ons, where they make economic sense. Distributing cash through distribution growth. Secondly, we do have some preferred securities as well as common unit repurchases.
Speaker #3: Those will be more on an opportunistic basis.
Blake Fernandez: Those will be more on an opportunistic basis.
Al Swanson: Those will be more on an opportunistic basis.
Speaker #4: Very helpful. Thank
[Analyst] (Scotiabank): Very helpful. Thank you.
Brandon Bingham: Very helpful. Thank you.
Speaker #4: you. Thanks,
Willie Chiang: Thanks, Brandon.
Willie Chiang: Thanks, Brandon.
Speaker #4: One moment for our next question. Our next question will come from the line of Michael Blum from Wells Fargo. Your line is open.
Operator: One moment for our next question. Our next question will come from the line of Michael Blum from Wells Fargo. Your line is open.
Operator: One moment for our next question. Our next question will come from the line of Michael Blum from Wells Fargo. Your line is open.
Speaker #6: Thanks. Good morning, everyone. Maybe it could stay on the distribution coverage conversation. I'm really just wanting to get a little more of your thought process on how you landed at 1.5 and not 1.4 or 1.3.
Blake Fernandez: Thanks. Good morning, everyone. Maybe I could stay on the distribution coverage conversation. I really just want to get a little more of your thought process on how you landed at 1.5 and not 1.4, 1.3, just exactly. Is there any kind of formulaic way we should be thinking about this? You mentioned some of your peers, but I could think of one peer off the top of my head that says 1.3 is the right coverage. So just trying to get a little more insight into your thinking on that.
Michael Blum: Thanks. Good morning, everyone. Maybe I could stay on the distribution coverage conversation. I really just want to get a little more of your thought process on how you landed at 1.5 and not 1.4, 1.3, just exactly. Is there any kind of formulaic way we should be thinking about this? You mentioned some of your peers, but I could think of one peer off the top of my head that says 1.3 is the right coverage. So just trying to get a little more insight into your thinking on that.
Speaker #6: Just exactly, is there any kind of formulaic way we should be thinking about this? You mentioned some of your peers, but I could think of one peer off the top of my head that says 1.3 is the right coverage.
Speaker #6: So, just trying to get a little more insight into your thinking on that.
Speaker #6: that. Willie, this is Willie
Willie Chiang: Willie, this is Willie, Michael. When you think about how we came up with the 160, right, that was in November of 2022, and it was intended to be a coverage threshold that was conservative, reflecting our focus on the balance sheet. I wouldn't try to read too much into the delta other than at 150, it's still a conservative approach to distribution. And for us, it sets a nice balance for us as we look forward on the ability for multi-year distribution growth. So I would look at it as kind of a reset to a modest reset consistent with our peers. As we go forward, we think we have a much more durable cash flow stream, and it's really set there to allow us to feel good about our multi-year distribution growth.
Willie Chiang: Willie, this is Willie, Michael. When you think about how we came up with the 160, right, that was in November of 2022, and it was intended to be a coverage threshold that was conservative, reflecting our focus on the balance sheet. I wouldn't try to read too much into the delta other than at 150, it's still a conservative approach to distribution. And for us, it sets a nice balance for us as we look forward on the ability for multi-year distribution growth. So I would look at it as kind of a reset to a modest reset consistent with our peers. As we go forward, we think we have a much more durable cash flow stream, and it's really set there to allow us to feel good about our multi-year distribution growth.
Speaker #1: On Michael, when you think about how we came up with the 160, right, that was in November of '22. And it was intended to be a coverage threshold that was conservative, reflecting our focus on the balance sheet.
Speaker #1: I wouldn't try to read too much into the delta. Other than at $1.50, it's still a conservative approach to distribution. And for us, it sets a nice balance for us as we look forward on the ability to, for multi-year distribution growth.
Speaker #1: So I would look at it as kind of a reset to the modest reset, consistent with our peers. As we go forward, we think we have a much more durable cash flow stream.
Speaker #1: And it's really set there to allow us to feel good about our multi-year distribution growth.
Speaker #6: Got it. Thanks for that. And then just wanted to ask on the growth CapEx of 350 million, I guess twofold. One, can you give us any details about any discrete projects that make that up or just some color around what's in that number?
Blake Fernandez: Got it. Thanks for that. And then just wanted to ask on the growth capex of $350 million, I guess, twofold. One, can you give us any details about any discrete projects that make that up or just some color around what's in that number? And then is this a good way to think about a run rate going forward now that you're really focused in the crude markets? Thanks.
Michael Blum: Got it. Thanks for that. And then just wanted to ask on the growth capex of $350 million, I guess, twofold. One, can you give us any details about any discrete projects that make that up or just some color around what's in that number? And then is this a good way to think about a run rate going forward now that you're really focused in the crude markets? Thanks.
Speaker #6: And then, is this a good way to think about a run rate going forward now that you're really focused in the crude markets?
Speaker #6: Thanks. Good morning, Michael.
Chris Chandler: Good morning, Michael. It's Chris Chandler. So yes, our guide for 2026 is $350 million. That brings us into our more typical $300 to 400 million range, which we do think is a good number going forward, absent any large investments, which we would call out separately. When I think about how we got to 350 and comparing it to prior years, we, of course, finished up the NGL fractionator expansion last year in Canada. We finished up a number of Permian crude oil infrastructure projects, and we finished a project to unload Uinta wax crude in the Mid-Continent. So those obviously all brought the number down on a year-on-year basis. As far as how we build up into the 350, we have a healthy Permian connection program that's ongoing. In 2025, we connected more wells than we connected in 2024.
Chris Chandler: Good morning, Michael. It's Chris Chandler. So yes, our guide for 2026 is $350 million. That brings us into our more typical $300 to 400 million range, which we do think is a good number going forward, absent any large investments, which we would call out separately. When I think about how we got to 350 and comparing it to prior years, we, of course, finished up the NGL fractionator expansion last year in Canada. We finished up a number of Permian crude oil infrastructure projects, and we finished a project to unload Uinta wax crude in the Mid-Continent. So those obviously all brought the number down on a year-on-year basis. As far as how we build up into the 350, we have a healthy Permian connection program that's ongoing. In 2025, we connected more wells than we connected in 2024.
Speaker #1: It's Chris Chandler. So yes, our guide for 2026 is $350 million. That brings us into our more typical $300 to $400 million range, which we do think is a good number going forward, absent any large investments, which we would call out separately.
Speaker #1: When I think about how we got to 350 and comparing it to prior years, we, of course, finished up the NGL fractionator expansion last year in Canada.
Speaker #1: We finished up a number of Permian crude oil infrastructure projects, and we finished a project to unload Uinta wax crude in the Mid-Continent. So those obviously all brought the number down on a year-on-year basis.
Speaker #1: As far as how we build up into the 350, we that's ongoing. In have a healthy Permian connection program 2025, we connected more wells than we connected in 2024.
Speaker #1: 2026 looks to be on a similar pace so far. We're also, of course, doing some modest investment to integrate the Cactus 3 pipeline.
Chris Chandler: And 2026 looks to be on a similar pace so far. We're also, of course, doing some modest investment to integrate the Cactus 3 pipeline to capture synergies, as Jeremy mentioned, with additional connectivity and opportunities for quality optimization and cross-connecting between our other Cactus pipes for energy efficiency. And then we see some good opportunities to potentially invest capital into our Canadian crude oil business. We're pursuing a number of potential contracts that would underwrite expansions there and have assumed some of that moves forward in 2026 as part of our capital spending.
Chris Chandler: And 2026 looks to be on a similar pace so far. We're also, of course, doing some modest investment to integrate the Cactus 3 pipeline to capture synergies, as Jeremy mentioned, with additional connectivity and opportunities for quality optimization and cross-connecting between our other Cactus pipes for energy efficiency. And then we see some good opportunities to potentially invest capital into our Canadian crude oil business. We're pursuing a number of potential contracts that would underwrite expansions there and have assumed some of that moves forward in 2026 as part of our capital spending.
Speaker #1: To capture synergies, as Jerry mentioned, with additional connectivity and opportunities for quality optimization and cross-connecting between our other Cactus pipes for energy efficiency. And then we see some good opportunities to potentially invest capital into our Canadian crude oil business.
Speaker #1: We're pursuing a number of potential contracts that would underwrite expansions there, and have assumed some of that moves forward in 2026 as part of our capital spending.
Speaker #6: Thank you.
Blake Fernandez: Thank you.
Michael Blum: Thank you.
Speaker #1: You're
Willie Chiang: Welcome.
Willie Chiang: Welcome.
Speaker #4: Thank you. One moment for our next question. Our next question will come from the line of Jeremy Tonnette from JP Morgan Securities. Your line is open.
Operator: Thank you. One moment for our next question. Our next question will come from the line of Jeremy Tonet from J.P. Morgan Securities. Your line is open.
Operator: Thank you. One moment for our next question. Our next question will come from the line of Jeremy Tonet from J.P. Morgan Securities. Your line is open.
Speaker #4: open.
Speaker #7: Hi, good morning. Good
[Analyst] (JPMorgan): Hi. Good morning.
Jeremy Tonet: Hi. Good morning.
Speaker #1: morning,
Willie Chiang: Good morning, Jeremy.
Willie Chiang: Good morning, Jeremy.
Speaker #1: Jeremy. Thanks for the color
[Analyst] (JPMorgan): Thanks for the color today. I just want to take a step back here. There's been some geopolitical developments recently, particularly what's been happening in Venezuela. It seems like there could be a domino effect in a lot of different directions of what happens there. I was just wondering if you might be able to share any thoughts on how things could unfold, how could it impact Plains, flows on assets, utilization, or even repurposing of assets.
Jeremy Tonet: Thanks for the color today. I just want to take a step back here. There's been some geopolitical developments recently, particularly what's been happening in Venezuela. It seems like there could be a domino effect in a lot of different directions of what happens there. I was just wondering if you might be able to share any thoughts on how things could unfold, how could it impact Plains, flows on assets, utilization, or even repurposing of assets.
Speaker #7: Today, I just wanted to take a step back here, and there have been some geopolitical developments recently—particularly what's been happening in Venezuela. It seems like there could be a domino effect in a lot of different directions depending on what happens there.
Speaker #7: So I was just wondering if you might be able to share any thoughts on how things could unfold, how could it impact planes, flows, and assets utilization or even repurposing of
Speaker #7: assets? Hey,
Willie Chiang: Hey, Jeremy. Jeremy Goebel, how are you? I was calling. I mean, the idea around Venezuela, think of it, the initial response of 50 million barrels sold to the U.S. Gulf Coast, a significant portion. If you restructure some of the slates and get consistent with what maybe Pascagoula or the St. James refiners or the Houston refiners had run, that immediate impact was widening of Canadian differentials in the Gulf Coast, the other heavy sour differentials, the Mid-Continent, and Canada. That creates more opportunities for quality optimization, cross-border flows, and other movements. Going forward, if you look out a few years and maybe add 200 to 300 thousand barrels a day, that might change some buying habits. That shouldn't be enough with the commodity prices where they are to change Canadian flows materially. They'll have to price to move.
Jeremy Goebel: Hey, Jeremy. Jeremy Goebel, how are you? I was calling. I mean, the idea around Venezuela, think of it, the initial response of 50 million barrels sold to the U.S. Gulf Coast, a significant portion. If you restructure some of the slates and get consistent with what maybe Pascagoula or the St. James refiners or the Houston refiners had run, that immediate impact was widening of Canadian differentials in the Gulf Coast, the other heavy sour differentials, the Mid-Continent, and Canada. That creates more opportunities for quality optimization, cross-border flows, and other movements. Going forward, if you look out a few years and maybe add 200 to 300 thousand barrels a day, that might change some buying habits. That shouldn't be enough with the commodity prices where they are to change Canadian flows materially. They'll have to price to move.
Speaker #1: Jeremy. Jeremy Gobel, how are you? I was calling—I mean, the idea around Venezuela, think of it, the initial response of 50 million barrels sold into the US Gulf Coast is a significant portion.
Speaker #1: You restructure some of the slates and get consistent with what maybe Pascagoula or the St. James refiners or the Houston refiners had run. That immediate impact was widening of Canadian differentials in the Gulf Coast, the other heavy sour differentials, the mid-continent, and Canada.
Speaker #1: That creates opportunities—more opportunities for quality optimization, cross-border flows, and other movements. Going forward, if you look out a few years and maybe add 200,000 to 300,000 barrels a day, that might change some buying habits. That shouldn't be enough, with the commodity prices where they are, to change Canadian flows materially.
Speaker #1: They'll have to price to move, so that would probably be a little bit wider Canadian differentials than otherwise would have been. It probably repurposes pipelines.
Willie Chiang: So that would probably be a little bit lighter Canadian differentials than otherwise would have been. It would take materially more than that to probably repurpose pipelines. But if you added 1 million barrels a day, that does different things, right? That now may push Canadian barrels to the West Coast. That may create other opportunities to repurpose pipes from the Gulf Coast to other markets to feed heavy sours into those. So I think there's no easy answer because first, you need stability in the government. You need substantial reinvestment. Near term, I think it creates some opportunities around quality management and use of our cross-border pipes. Intermediate term, it creates some logistical opportunities for us as well. But longer term, I think it's going to take substantial investment and time for repurposing, but we're certainly monitoring and paying attention to it.
Jeremy Goebel: So that would probably be a little bit lighter Canadian differentials than otherwise would have been. It would take materially more than that to probably repurpose pipelines. But if you added 1 million barrels a day, that does different things, right? That now may push Canadian barrels to the West Coast. That may create other opportunities to repurpose pipes from the Gulf Coast to other markets to feed heavy sours into those. So I think there's no easy answer because first, you need stability in the government. You need substantial reinvestment. Near term, I think it creates some opportunities around quality management and use of our cross-border pipes. Intermediate term, it creates some logistical opportunities for us as well. But longer term, I think it's going to take substantial investment and time for repurposing, but we're certainly monitoring and paying attention to it.
Speaker #1: But if you would take materially more than that to look—if you added a million barrels a day, that does different things, right? That now may push Canadian barrels to the West Coast.
Speaker #1: That may create other opportunities to repurpose pipes from the Gulf Coast to other markets to feed heavy sours into those. So I think there's no easy answer, because first you need stability in the government.
Speaker #1: You need substantial opportunities around quality reinvestment. Near term, I think it creates some management and use of our cross-border pipes. Intermediate term, it creates some logistical opportunities for us as well.
Speaker #1: But longer term, I think it's going to take substantial investment and time for repurposing. But we're certainly monitoring and paying attention to
Speaker #7: Got it. That's very helpful there. And one other high-level question, if I could. Plains has been active in industry consolidation, both on M&A, what have you, over time.
[Analyst] (JPMorgan): Got it. That's very helpful there. And one other high-level question, if I could. Plains has been active in industry consolidation, bolt-on M&A, what have you, over time. And I was just wondering, from your perspective, Willie, where do you think what inning are we in right now for consolidation in the crude oil infrastructure industry, bolt-ons, larger consolidation, what have you?
Jeremy Tonet: Got it. That's very helpful there. And one other high-level question, if I could. Plains has been active in industry consolidation, bolt-on M&A, what have you, over time. And I was just wondering, from your perspective, Willie, where do you think what inning are we in right now for consolidation in the crude oil infrastructure industry, bolt-ons, larger consolidation, what have you?
Speaker #7: And I was just wondering from your perspective, Willie, where do you think what inning are we in right now for consolidation in the crude oil infrastructure industry, both on larger you?
Speaker #1: Well, I would say
Willie Chiang: Well, I would say it's not a perfectly smooth trajectory if you think about consolidation. And specifically for us, we've made a couple of large transactions. Our focus right now is really to execute on those. We look at all kinds of opportunities that are out there. So you can be assured that as we look at things, we'll stay capital disciplined on being able to acquire things. But I do think there will be more opportunities that are out there. And frankly, to your earlier question, when you think about the macro and you look at the North American infrastructure, you asked about Venezuela. Everyone has a different outlook and view of what might happen there. I personally think it's going to be very challenged to get a significant amount of growth out of Venezuela, which leads us to a more constructive crude oil environment going forward.
Jeremy Goebel: Well, I would say it's not a perfectly smooth trajectory if you think about consolidation. And specifically for us, we've made a couple of large transactions. Our focus right now is really to execute on those. We look at all kinds of opportunities that are out there. So you can be assured that as we look at things, we'll stay capital disciplined on being able to acquire things. But I do think there will be more opportunities that are out there. And frankly, to your earlier question, when you think about the macro and you look at the North American infrastructure, you asked about Venezuela. Everyone has a different outlook and view of what might happen there. I personally think it's going to be very challenged to get a significant amount of growth out of Venezuela, which leads us to a more constructive crude oil environment going forward.
Speaker #1: It's not a perfectly smooth consolidation, if you think about consolidation. And specifically for us, we've made a couple of large transactions.
Speaker #1: Our focus right now is really to execute on those. We look at all kinds of opportunities that are out there. So you can be assured that as we look at things, we'll stay capital disciplined on being able to acquire things.
Speaker #1: But I do think there will be more opportunities that are earlier—question, when you think about the out there. And frankly, to your macro, and you look at the North American infrastructure, you asked about Venezuela.
Speaker #1: Everyone has a different outlook and view of what might happen growth out of Venezuela, which challenged to get a significant amount of leads us to a more there.
Speaker #1: constructive crude oil environment going forward. And when you think about the I personally think it's going to be very infrastructure that we have in ground and the ability to repurpose, if it makes sense, there's a lot of neat this on one of the last calls.
Willie Chiang: When you think about the infrastructure that we have in ground and the ability to repurpose, if it makes sense, there's a lot of neat opportunities there. And I mentioned this on one of the last calls. If you think about the basins that you want to be involved in, the Permian Basin, obviously, is key, close to markets, growth, low break-evens. But you also have Western Canada. And everyone's aware of the desire for them to go to the West Coast. And we stay very involved in the potential of bringing more barrels down to the US. So there's a lot of neat opportunities, and you can expect us to stay on track at looking at those with financial discipline.
Jeremy Goebel: When you think about the infrastructure that we have in ground and the ability to repurpose, if it makes sense, there's a lot of neat opportunities there. And I mentioned this on one of the last calls. If you think about the basins that you want to be involved in, the Permian Basin, obviously, is key, close to markets, growth, low break-evens. But you also have Western Canada. And everyone's aware of the desire for them to go to the West Coast. And we stay very involved in the potential of bringing more barrels down to the US. So there's a lot of neat opportunities, and you can expect us to stay on track at looking at those with financial discipline.
Speaker #1: If you think about the basins that you want to be involved in, the Permian Basin, obviously, is key. Close to markets, growth, low breakevens.
Speaker #1: But you also have the desire for them to go to the West Coast. And we stay Western Canada. And everyone's aware, very involved in potential of bringing more barrels down to the—can expect us to stay on track at looking at those with financial discipline.
Speaker #1: But you also have of the desire for them to go to the West Coast. And we stay Western Canada. And everyone's aware very involved in potential of bringing more barrels down to the can expect us to stay on track at looking at those with financial US.
Speaker #1: So, there’s a lot of neat opportunities. And you—
[Analyst] (JPMorgan): Got it. That's helpful. Thank you.
Jeremy Tonet: Got it. That's helpful. Thank you.
Speaker #7: helpful. Thank you.
Speaker #1: Thanks, Jeremy.
Willie Chiang: Thanks, Jeremy.
Willie Chiang: Thanks, Jeremy.
Speaker #4: Thank
Operator: Thank you. One moment for our next question. Next question will come from the line of Keith Stanley from Wolfe Research. Your line is open.
Operator: Thank you. One moment for our next question. Next question will come from the line of Keith Stanley from Wolfe Research. Your line is open.
Speaker #4: you. One moment for our next question. Next question will come from the line of Keith
Speaker #4: open. Hi, good morning.
[Analyst] (Wolfe Research): Hi. Good morning. I wanted to ask on coverage. So the release specifically says that the change in threshold to 150% provides a multi-year runway for $0.15 increases. So I want to confirm, should we interpret that as the plan would be $0.15 increases for at least two more years? And if that's right, it implies a fair amount of growth since you'd have to stay above that 150%. So can you just talk to some of the growth drivers you see in 2027 and 2028 that would support that?
Keith Stanley: Hi. Good morning. I wanted to ask on coverage. So the release specifically says that the change in threshold to 150% provides a multi-year runway for $0.15 increases. So I want to confirm, should we interpret that as the plan would be $0.15 increases for at least two more years? And if that's right, it implies a fair amount of growth since you'd have to stay above that 150%. So can you just talk to some of the growth drivers you see in 2027 and 2028 that would support that?
Speaker #8: I wanted to ask on coverage. So the release specifically says
Speaker #8: That the change in threshold to 150% provides a multi-year runway for $0.15 increases. So I want to confirm, should we interpret that as the plan would be $0.15 increases for at least two more years?
Speaker #8: And if that's right, it implies a fair amount of growth since you'd have to stay above that 150%. So can you just talk to some of the growth drivers you see in the next 27 and 28 that would support
Speaker #1: Yeah, Keith,
Willie Chiang: Yeah, Keith. This is Willie. You're very astute as you did your calculations. The message we wanted to send is we have the ability to continue to grow beyond 2026. So if you think of our EBITDA this year, we've got $100 million of NGL contribution. And as you think about 2027+, we've got self-help that chews up easily half of that. Our comments earlier about additional growth in the Permian gives us confidence in that. And we know we're going to be able to extract additional efficient growth synergies out of our asset base. So we are telegraphing that we think we can grow beyond 2026.
Willie Chiang: Yeah, Keith. This is Willie. You're very astute as you did your calculations. The message we wanted to send is we have the ability to continue to grow beyond 2026. So if you think of our EBITDA this year, we've got $100 million of NGL contribution. And as you think about 2027+, we've got self-help that chews up easily half of that. Our comments earlier about additional growth in the Permian gives us confidence in that. And we know we're going to be able to extract additional efficient growth synergies out of our asset base. So we are telegraphing that we think we can grow beyond 2026.
Speaker #1: This is Willie. You're very astute, as you did your calculations. The message we continue to grow beyond what we wanted to send is: we have the ability to 2026.
Speaker #1: So if you think of our EBITDA this year, we've got $100 million of NGL contribution. And as you think about '27 plus, we've got self-help that chews up easily half of that.
Speaker #1: Our comments earlier about additional growth in the Permian gives us a confidence in that. And we know we're going to be able to synergies out of that.
Speaker #1: So, out of our asset base, we are telegraphing that we think we can grow beyond 2026.
Speaker #8: Okay, great. And then one other coverage one. So you've talked to the rationale for 150% of DCF. When you assess where you want to go from a coverage perspective, do you look at it on a free cash flow basis, too?
[Analyst] (Wolfe Research): Okay. Great. And then one other coverage one. So you've talked to the rationale for 150% of DCF. When you assess where you want to go from a coverage perspective, do you look at it on a free cash flow basis too? Because you have pretty steady $300 to 400 million a year of investment capital. Just how do you look at it, I guess, on a free cash flow perspective as well?
Keith Stanley: Okay. Great. And then one other coverage one. So you've talked to the rationale for 150% of DCF. When you assess where you want to go from a coverage perspective, do you look at it on a free cash flow basis too? Because you have pretty steady $300 to 400 million a year of investment capital. Just how do you look at it, I guess, on a free cash flow perspective as well?
Speaker #8: Because you have pretty steady 300, 400 million a year of investment capital. Just how do you look at it, I guess, on a free cash flow perspective as well?
Speaker #1: Keith, this is Al. We've really said it based on DCF and the view that the DCF coverage of, say, 160 or now 150 would allow us to fund what we would call routine organic capital, the 300 to 400 million kind of range level.
Blake Fernandez: Keith, this is Al. We've really set it based on DCF and the view that the DCF coverage of, say, 160 or now 150 would allow us to fund what we would call routine organic capital, the $300 to 400 million kind of range that we think is more of a normalized level, plus a small bit for bolt-ons. So we think of it more of the coverage funding routine investments. Clearly, if we see investments that are outside of what is routine or larger, we'll use the balance sheet for that. So it's not a precision on free cash flow or a percentage of free cash flow, but we are allowing for that kind of self-funding of what we think is a routine kind of profile of investment capital.
Al Swanson: Keith, this is Al. We've really set it based on DCF and the view that the DCF coverage of, say, 160 or now 150 would allow us to fund what we would call routine organic capital, the $300 to 400 million kind of range that we think is more of a normalized level, plus a small bit for bolt-ons. So we think of it more of the coverage funding routine investments. Clearly, if we see investments that are outside of what is routine or larger, we'll use the balance sheet for that. So it's not a precision on free cash flow or a percentage of free cash flow, but we are allowing for that kind of self-funding of what we think is a routine kind of profile of investment capital.
Speaker #1: Plus a small bit for bolt-ons. So, we think of it more as the coverage funding routine investments. Clearly, if we see investments that are outside of what is routine or larger, then we'll use the balance sheet for that.
Speaker #1: So, it's not a precision on free cash flow—it's really more a percentage of free cash flow. But we are allowing for that kind of self-funding of what we think is a routine kind of profile of investment.
Speaker #1: capital. Thank
[Analyst] (Wolfe Research): Thank you.
Keith Stanley: Thank you.
Speaker #1: Thanks, you. Keith.
Willie Chiang: Thanks, Keith.
Willie Chiang: Thanks, Keith.
Speaker #4: Thank you. One moment for our next question. Next question will come from the line of John McKay from Goldman Sachs. Your line is open.
Operator: Thank you. One moment for our next question. Next question will come from the line of John Mackay from Goldman Sachs. Your line is open.
Operator: Thank you. One moment for our next question. Next question will come from the line of John Mackay from Goldman Sachs. Your line is open.
Speaker #4: open. Hey, guys.
Blake Fernandez: Hey, guys. Thank you for the time. I want to touch on the long-haul Permian volume guidance for a second. It's a little, maybe, if you could just talk a little bit about the year-over-year bridge. I think it's a little stronger than what we were looking for, but maybe the overall margin's intact. It's a little bit of that volume versus margin mix and bridging us to that pretty high 26 number. Thanks.
John Mackay: Hey, guys. Thank you for the time. I want to touch on the long-haul Permian volume guidance for a second. It's a little, maybe, if you could just talk a little bit about the year-over-year bridge. I think it's a little stronger than what we were looking for, but maybe the overall margin's intact. It's a little bit of that volume versus margin mix and bridging us to that pretty high 26 number. Thanks.
Speaker #9: Thank you for the time. I want to touch on the long-haul Permian volume guidance for a second. Maybe if you could just talk a little bit about the year-over-year bridge.
Speaker #9: I think it's a little stronger than what we were looking for, but maybe the overall margins are intact. So, a little bit of that volume versus margin mix.
Speaker #9: And bridging us to that pretty high 26 number.
Speaker #9: Thanks. John, good
Willie Chiang: John, good morning. It's Jeremy. There are three components to it. First, you've got the full-year run rate of the Cactus 3 integration into the system. Second, you've got a significant uptick in contracted capacity on the Basin Pipeline system. And so that would explain some of the lower margins just because the rate from Midland to Cushing is lower than that to the Gulf Coast. And then third, you'd have the BridgeTex pipeline full-year run rate since that was acquired during partially half the year.
Jeremy Goebel: John, good morning. It's Jeremy. There are three components to it. First, you've got the full-year run rate of the Cactus 3 integration into the system. Second, you've got a significant uptick in contracted capacity on the Basin Pipeline system. And so that would explain some of the lower margins just because the rate from Midland to Cushing is lower than that to the Gulf Coast. And then third, you'd have the BridgeTex pipeline full-year run rate since that was acquired during partially half the year.
Speaker #1: morning. It's Jeremy. There's three components to it. First, you've got the full-year run rate of the Cactus III integration into the system. Second, you've got a significant uptick in contracted capacity on the basin pipeline system.
Speaker #1: And so that would explain some of the lower margins, just because the rate from Midland to Cushing is lower than that to the Gulf Coast.
Speaker #1: And then third, you'd have the bridge tax pipeline full-year run rates since that was acquired during the partially half the
Speaker #1: year.
Speaker #8: That's super helpful, Jeremy. I appreciate it.
Blake Fernandez: That's super helpful, Jeremy. I appreciate that. Second one, maybe just looking a little more near term, what did you guys see in terms of storm impacts on volumes across the board? I think that the visibility on the gas side's been clear. But maybe just walk us through kind of what you saw the last week or two and kind of where the recovery stands right now.
John Mackay: That's super helpful, Jeremy. I appreciate that. Second one, maybe just looking a little more near term, what did you guys see in terms of storm impacts on volumes across the board? I think that the visibility on the gas side's been clear. But maybe just walk us through kind of what you saw the last week or two and kind of where the recovery stands right now.
Speaker #8: that. Second one, maybe just looking a little more near-term, what did you guys see in terms of storm impacts on volumes across the board?
Speaker #8: I think that the visibility on the gas side has been clear. But maybe just walk us through kind of what you saw the last week or two and kind of where the recovery stands right now.
Speaker #1: Thanks, John. To start with, the recovery has already happened. So, it was roughly a 7- to 10-day period when you had back-to-back freezes. A lot of that impacted the gas infrastructure and made it difficult.
Willie Chiang: Thanks, John. To start with the recovery, that's already happened. So it was roughly a 7 to 10-day period when you had back-to-back freezes. A lot of that impacted the gas infrastructure, made it difficult. And once gas infrastructure's impacted, it shuts in the crude. So we saw almost like a reverse checkmark type recovery. It went down and slowed to come back. But I would say the basin as a whole probably lost 10 to 12 million barrels of production on the crude side. And NGL is maybe half that over that 7 to 10-day period. But we're out of that trough and have been for a few days.
Jeremy Goebel: Thanks, John. To start with the recovery, that's already happened. So it was roughly a 7 to 10-day period when you had back-to-back freezes. A lot of that impacted the gas infrastructure, made it difficult. And once gas infrastructure's impacted, it shuts in the crude. So we saw almost like a reverse checkmark type recovery. It went down and slowed to come back. But I would say the basin as a whole probably lost 10 to 12 million barrels of production on the crude side. And NGL is maybe half that over that 7 to 10-day period. But we're out of that trough and have been for a few days.
Speaker #1: And once gas infrastructure is impacted, it shuts in the crude. So, we saw almost like a reverse checkmark-type recovery—it went down, and it was slow to come back.
Speaker #1: But we'd say I would say that basin as a whole probably lost 10 to 12 million barrels of production. On the crude side, an NGL is maybe half that.
Speaker #1: Over that 7- to 10-day period. But we're out of that trough and have been for a few.
Speaker #1: days.
Speaker #8: Super interesting. I appreciate the color.
Blake Fernandez: Super interesting. I appreciate the color. Thank you, guys.
John Mackay: Super interesting. I appreciate the color. Thank you, guys.
Speaker #8: Thank you,
Speaker #8: guys.
Speaker #4: Thank you. And that's all been.
[Analyst] (Wolfe Research): Thank you.
Keith Stanley: Thank you.
Willie Chiang: That's all been considered in our guidance. Just for the record there, that impact has been considered.
Jeremy Goebel: That's all been considered in our guidance. Just for the record there, that impact has been considered.
Speaker #1: considered in our guidance. So just for the record there, that impact has been considered.
Speaker #4: Thank you. Our next question will come from the line of Sunil Sabal from Super Global. Your line is open.
Operator: Thank you. Our next question will come from the line of Sunil Sibal from Seaport Global. Your line is open.
Operator: Thank you. Our next question will come from the line of Sunil Sibal from Seaport Global. Your line is open.
Speaker #4: open. Yeah, hi, good morning.
Sunil Sibal: Yeah. Hi. Good morning. Thanks for the time. Most of my questions have been hit, but just a couple of clarifications. So in regards to your loading of distribution coverage to 150%, so obviously, you have more contracted cash flows coming in through Cactus. But I was kind of curious if there is anything else in terms of how you manage your other assets in terms of contracting that we should be thinking about there.
Sunil Sibal: Yeah. Hi. Good morning. Thanks for the time. Most of my questions have been hit, but just a couple of clarifications. So in regards to your loading of distribution coverage to 150%, so obviously, you have more contracted cash flows coming in through Cactus. But I was kind of curious if there is anything else in terms of how you manage your other assets in terms of contracting that we should be thinking about there.
Speaker #10: Thanks for the time. Most of my questions have been head, but just a couple of clarifications. So in regards to your loading of distribution coverage to 150%, so obviously you're in a more contracted cash flows coming in through Cactus.
Speaker #10: But I was kind of curious if there is anything else in terms of how you manage your other assets in terms of contracting that we should be thinking about there?
Speaker #1: Sunil, this is Al. No, I mean, we are comfortable with the 150. We think the crude segment is a stable cash flow stream. Clearly, the EPIC contract—our pipeline—is highly contracted.
Blake Fernandez: Sunil, this is Al. No, I mean, we are comfortable with the 150. We think the crude segment is a stable cash flow stream. Clearly, the EPIC contract or pipeline is highly contracted. But as we look at it, we think the 150 coverage still remains a conservative coverage level relative to our company. And we also think it funds what I described as a routine kind of investment capital going forward.
Al Swanson: Sunil, this is Al. No, I mean, we are comfortable with the 150. We think the crude segment is a stable cash flow stream. Clearly, the EPIC contract or pipeline is highly contracted. But as we look at it, we think the 150 coverage still remains a conservative coverage level relative to our company. And we also think it funds what I described as a routine kind of investment capital going forward.
Speaker #1: But as we look at it, we think the 1.50x coverage actually still remains a conservative coverage level relative to our company, and we also think it funds what I described as a routine kind of investment capital going forward.
Speaker #10: Okay. Thanks for that. And then I think in your prepared remarks, you mentioned about some storage acquisition, the Wild Horse terminal. Could you walk through that a little bit again?
Sunil Sibal: Okay. Thanks for that. Then I think in your prepared remarks, you mentioned about some storage acquisition, the Wildhorse Terminal. Could you walk through that a little bit? Again, I think you said 4 million barrels of storage. But what's the approximate cost for that?
Sunil Sibal: Okay. Thanks for that. Then I think in your prepared remarks, you mentioned about some storage acquisition, the Wildhorse Terminal. Could you walk through that a little bit? Again, I think you said 4 million barrels of storage. But what's the approximate cost for that?
Speaker #10: I think you said 4 million barrels of storage, but what's the approximate cost for
Speaker #10: I think you said 4 million barrels of storage, but what's the approximate cost for that? Sunil, hi,
Willie Chiang: Sunil, hi. This is Jeremy. Good morning. Here's what I would say. So that's 4 to 5 million barrels for functional right now. It's adjacent to our existing facility. Our net cost is anticipated to be $10 million. It may take us some time to integrate the facility. It's got its existing operations today. We feel like we have sufficient demand. Our existing Cushing facility is fully contracted to downstream partners. And we would just think of this as an addition to that business with a low-cost basis for us. We could not build those tanks for $10 million. So we're excited about the opportunity to grow our relationships with our customers.
Jeremy Goebel: Sunil, hi. This is Jeremy. Good morning. Here's what I would say. So that's 4 to 5 million barrels for functional right now. It's adjacent to our existing facility. Our net cost is anticipated to be $10 million. It may take us some time to integrate the facility. It's got its existing operations today. We feel like we have sufficient demand. Our existing Cushing facility is fully contracted to downstream partners. And we would just think of this as an addition to that business with a low-cost basis for us. We could not build those tanks for $10 million. So we're excited about the opportunity to grow our relationships with our customers.
Speaker #1: This is Jeremy. Good morning. Here's what I would say: So that's 4 to 5 million barrels, 4 functional right now. It's adjacent to our existing facility.
Speaker #1: Our net cost is anticipated to be 10 million; it may take us some time to integrate the facility. It's got an existing operations today.
Speaker #1: We feel like we have sufficient demand. Our existing Cushing facility is fully contracted to downstream partners, and we would just think of this as an addition to that business with a low-cost basis for us.
Speaker #1: We could not build those tanks for $10 million, so we're excited about the opportunity to grow our relationships with our customers.
Speaker #10: Okay. Thanks for
Sunil Sibal: Okay. Thanks for that.
Sunil Sibal: Okay. Thanks for that.
Speaker #4: Thank you. One moment for our next question. Our next question will come from the line of AJ O'Donnell from PPH. Your line is open.
Operator: Thank you. One moment for our next question. Our next question will come from the line of AJ O'Donnell from PPH. Your line is open.
Operator: Thank you. One moment for our next question. Our next question will come from the line of AJ O'Donnell from PPH. Your line is open.
Speaker #11: Hey, thanks for your time, everyone. Just one question for me. I'm not sure where the development of Venezuela kind of fit on the timeline of your budget.
AJ O'Donnell: Hey. Thanks for your time, everyone. Just one question for me. Not sure where the developments of Venezuela kind of fit on the timeline of your budget. But just curious, as you sit here today and think about where DIFs are and how quality DIFs have moved, just curious how you think about the market-based opportunities trending above or below kind of that $50 million mark that you outlined in your deck.
AJ O'Donnell: Hey. Thanks for your time, everyone. Just one question for me. Not sure where the developments of Venezuela kind of fit on the timeline of your budget. But just curious, as you sit here today and think about where DIFs are and how quality DIFs have moved, just curious how you think about the market-based opportunities trending above or below kind of that $50 million mark that you outlined in your deck.
Speaker #11: But just curious, as you sit here today and think about where DIFs are and how quality DIFs have moved, just curious how you think about the market-based opportunities trending above or below kind of that $50 million mark that you outlined in your deck.
Speaker #1: AJ, good morning. What I would say is the current market reflects what our budget is. So those happen towards the end of last year, giving us the opportunity to lock in spreads across the board.
Willie Chiang: AJ, good morning. What I would say is the current market reflects what our budget is. So those happened towards the end of last year, giving us the opportunity to lock in spreads across the board. So it significantly de-risked the opportunity for us, and they moved out. So things move all the time. But when you have a movement like this, it gives you the opportunity to lock some things in. So I'd say it firmed up part of our plan.
Willie Chiang: AJ, good morning. What I would say is the current market reflects what our budget is. So those happened towards the end of last year, giving us the opportunity to lock in spreads across the board. So it significantly de-risked the opportunity for us, and they moved out. So things move all the time. But when you have a movement like this, it gives you the opportunity to lock some things in. So I'd say it firmed up part of our plan.
Speaker #1: So, it's significantly de-risked the opportunity for us, and they moved out. So things move all the time, but when you have a movement like this, it gives you the opportunity to lock some things in.
Speaker #1: So I'd say it firmed up part of our
Speaker #1: plan. Okay.
AJ O'Donnell: Okay. Thanks for the color.
AJ O'Donnell: Okay. Thanks for the color.
Speaker #11: Thanks for the
Speaker #11: color. Thank you.
Operator: Thank you. One moment for our next question. Our next question will come from the line of Jeremy Tonet from J.P. Morgan Securities. Your line is open.
Operator: Thank you. One moment for our next question. Our next question will come from the line of Jeremy Tonet from J.P. Morgan Securities. Your line is open.
Speaker #4: One moment for our next question. Our next question will come from the line of Jeremy Tonet from J.P. Morgan Securities. Your line is open.
Speaker #12: Hi there. Thank you for squeezing me back in. Just a couple of quick ones, if I could add. We talked a good amount about the 60% of the business that's the Permian, but just wondering if you could provide maybe a little bit more color on the other 40% of the business and what trends you're seeing there.
[Analyst] (JPMorgan): Hi there. Thank you for squeezing me back in. Just a couple quick ones if I could add. We talked a good amount about 60% of the business at the Permian. But just wondering if you could provide maybe a little bit more color on the other 40% of business and what trends you're seeing there. And I get that there's cross-currents or it's influenced by cost-cut savings you're seeing there, and that'll have some impacts. But just how do you think about volumes and EBITDA for that other 40% of the business kind of trending over time?
Jeremy Tonet: Hi there. Thank you for squeezing me back in. Just a couple quick ones if I could add. We talked a good amount about 60% of the business at the Permian. But just wondering if you could provide maybe a little bit more color on the other 40% of business and what trends you're seeing there. And I get that there's cross-currents or it's influenced by cost-cut savings you're seeing there, and that'll have some impacts. But just how do you think about volumes and EBITDA for that other 40% of the business kind of trending over time?
Speaker #12: And I get that there’s cross-currency, or it’s influenced by cost-cut savings you’re seeing there, and that’ll have some impacts. But just how do you think about volumes and EBITDA for that other 40% of the business kind of trending over time?
Speaker #1: Jeremy, good morning. What I would say is let's start from the north. Excited about Canada as Chris mentioned. Opportunities around our rainbow system to expand our rangeland system seeing more activity.
Willie Chiang: Jeremy, good morning. What I would say is let's start from the north. Excited about Canada, as Chris mentioned, opportunities around our Rainbow System to expand our Rainbow System, seeing more activity. The rest of the business is largely flat in Canada. So if you take our Rockies position, everything north of Cushing and west of Cushing, that's relatively stable and contracted. So flat-ish would be the view of that position. Cushing throughput continues at all-time highs year-over-year for us. So we think that those assets in Cushing and the refinery feed assets, consistent with the refiner's performance, that should perform well this year. The South Texas is really somewhat of an extension of the Permian Basin business. It's a wellhead gathering business with trucking to support it. And so that stepped down from the Cactus contract; it impacted that business as well.
Willie Chiang: Jeremy, good morning. What I would say is let's start from the north. Excited about Canada, as Chris mentioned, opportunities around our Rainbow System to expand our Rainbow System, seeing more activity. The rest of the business is largely flat in Canada. So if you take our Rockies position, everything north of Cushing and west of Cushing, that's relatively stable and contracted. So flat-ish would be the view of that position. Cushing throughput continues at all-time highs year-over-year for us. So we think that those assets in Cushing and the refinery feed assets, consistent with the refiner's performance, that should perform well this year. The South Texas is really somewhat of an extension of the Permian Basin business. It's a wellhead gathering business with trucking to support it. And so that stepped down from the Cactus contract; it impacted that business as well.
Speaker #1: The rest of the business is largely flat in Canada. So if you take our Rockies position, everything north of Cushing and west of Cushing, that's relatively stable and contracted.
Speaker #1: So, flattish would be the view of that position. Cushing throughput continues at all-time highs year over year for us. So, we think those assets in Cushing and the refinery feed assets, consistent with the refiner's performance, should perform well this year.
Speaker #1: The South Texas is really somewhat of an extension of the Permian basin business. It's a wellhead gathering business with trucking to support it. And so that's stepped down from the Cactus contracted impact that business as well.
Speaker #1: But as far as volumes and opportunity set following Ironwood, Cactus III, and the integration with our legacy system, we're excited about what we see in South Texas.
Willie Chiang: But as far as volumes and opportunities set following Ironwood, Cactus 3, and the integration with our legacy system, we're excited about what we see in South Texas. Now, east of Cushing, the Capline system in Liberty and Mississippi, those are assets we're looking to fill longer-term and working on some longer-term contracting. And St. James continues to perform with the expectation of growth in the Uinta Basin over the next 18 months to continue to come through to our St. James facility. So I think we've got exciting things across that platform. It's not as volatile, and it's not as much growth in the other. But you'll see some potential capital investments there as we get contracts to support it.
Willie Chiang: But as far as volumes and opportunities set following Ironwood, Cactus 3, and the integration with our legacy system, we're excited about what we see in South Texas. Now, east of Cushing, the Capline system in Liberty and Mississippi, those are assets we're looking to fill longer-term and working on some longer-term contracting. And St. James continues to perform with the expectation of growth in the Uinta Basin over the next 18 months to continue to come through to our St. James facility. So I think we've got exciting things across that platform. It's not as volatile, and it's not as much growth in the other. But you'll see some potential capital investments there as we get contracts to support it.
Speaker #1: Now, east of Cushing, the Capline system and Liberty in Mississippi—those are assets we're looking to fill longer-term, and we're working on some longer-term contracting.
Speaker #1: In St. James, continues to perform. And with the expectation of growth in the Uinta Basin over the next 18 months to continue to come through to our St.
Speaker #1: James facility. So I think we've got exciting things across that platform. It's not as volatile and there's not as much growth as in the other, but you'll see some potential capital investments there.
Speaker #1: As we get contracts to support
Speaker #1: it. Got it.
[Analyst] (JPMorgan): Got it. That's helpful there. Thanks. And just one last one, if I could. As it relates to the sensitivities for the 100,000 barrels per day change in total Permian production, having a $10 to 15 million impact on the business, just wondering if there's any more color you could provide there, how that sensitivity might change, if volumes grow over time. Is it linear, or could there be an inflection realizing there's an interplay with differentials there? But just any other color, I guess, on how that could fall out.
Jeremy Tonet: Got it. That's helpful there. Thanks. And just one last one, if I could. As it relates to the sensitivities for the 100,000 barrels per day change in total Permian production, having a $10 to 15 million impact on the business, just wondering if there's any more color you could provide there, how that sensitivity might change, if volumes grow over time. Is it linear, or could there be an inflection realizing there's an interplay with differentials there? But just any other color, I guess, on how that could fall out.
Speaker #12: That's helpful there. Thanks. And just one last one, if I could. As it relates to the sensitivities for the 100,000 barrels per day change in total Permian production having a 10 to 15 million impact on the business, just wondering if there's any more color you could provide there, if how that sensitivity might change, if volumes grow over time, is it linear or could there be an inflection realizing there's an interplay with differentials there, but just any other color I guess on how that could fall
Speaker #12: That's helpful there. Thanks. And just one last one, if I could. As it relates to the sensitivities for the 100,000 barrels per day change in total Permian production having a $10 to $15 million impact on the business, just wondering if there's any more color you could provide there—if, or how, that sensitivity might change if volumes grow over time. Is it linear, or could there be an inflection? Realizing there's an interplay with differentials there, but just any other color, I guess, on how that could fall out.
Speaker #1: Jeremy, here's what I would say. I think the business is very large, right? So, when we talk 100,000 barrels a day out of a basin, that's over 6 million barrels a day.
Willie Chiang: Jeremy, here's what I would say. I think the business is very large, right? So when we talk 100,000 barrels a day out of a basin that's over 6 million barrels a day, the impact of the gathering system is going to be relatively modest. So that $10 to 15 million per 100,000 barrels a day probably still applies. The integrated benefit may grow over time. I think that's more of the impacts of the price to go to Midland. And what could change it might be on the margins, some differentials around WTL and WTI. But I think just because of the size of that business, it's probably going to stay in a fairly tight band. The impact might be to the long-haul margin. Since we've been reset to what is the new market, our expectations would be those would widen out over time.
Willie Chiang: Jeremy, here's what I would say. I think the business is very large, right? So when we talk 100,000 barrels a day out of a basin that's over 6 million barrels a day, the impact of the gathering system is going to be relatively modest. So that $10 to 15 million per 100,000 barrels a day probably still applies. The integrated benefit may grow over time. I think that's more of the impacts of the price to go to Midland. And what could change it might be on the margins, some differentials around WTL and WTI. But I think just because of the size of that business, it's probably going to stay in a fairly tight band. The impact might be to the long-haul margin. Since we've been reset to what is the new market, our expectations would be those would widen out over time.
Speaker #1: The impact of the gathering system is going to be relatively modest. So that $10 to $15 million per 100,000 barrels a day probably still applies.
Speaker #1: The integrated benefit may grow over time. I think that's more the impact of the price to go to Midland, and what could change it might be on the margin.
Speaker #1: Some differentials around WTL and WTI, but I think just because of the size of that business, it's probably going to stay in a fairly tight band.
Speaker #1: The impact might be to the long-haul margin, since we've been reset to what is the new market. Our expectations would be those would widen out over time.
Speaker #1: So you might see more of an impact to the long haul.
Willie Chiang: So you might see more of an impact to the long-haul business.
Willie Chiang: So you might see more of an impact to the long-haul business.
Speaker #1: business. Got it.
[Analyst] (JPMorgan): Got it. That's helpful. I'll leave it there. Thanks.
Jeremy Tonet: Got it. That's helpful. I'll leave it there. Thanks.
Speaker #12: That's helpful. I'll leave it there. Thanks.
Speaker #1: We'll see you next time, Jeremy.
Willie Chiang: We'll see you next time, Jeremy.
Willie Chiang: We'll see you next time, Jeremy.
Speaker #4: Thank you. I'm not showing any questions in the queue right now, so I want to turn it back over to management for closing remarks.
Operator: Thank you. I'm not showing any questions in the queue right now. I want to turn it back over to management for closing remarks.
Operator: Thank you. I'm not showing any questions in the queue right now. I want to turn it back over to management for closing remarks.
Speaker #1: Thanks, Victor. And thanks to all of you for dialing in. We look forward to visiting with you on the road and I hope you have a safe weekend.
Willie Chiang: Thanks, Victor. Thanks to all of you for dialing in. We look forward to visiting with you on the road, and I hope you have a safe weekend. Thank you.
Willie Chiang: Thanks, Victor. Thanks to all of you for dialing in. We look forward to visiting with you on the road, and I hope you have a safe weekend. Thank you.
Speaker #1: Thank you.
Speaker #4: Thank you for your
Operator: Thank you for your participation in today's conference. This does conclude the program. You may now disconnect. Everyone, have a great day.
Operator: Thank you for your participation in today's conference. This does conclude the program. You may now disconnect. Everyone, have a great day.
