Plains GP Holdings, L.P. Q2 FY2025 earnings call

• Announced the execution of definitive agreements to sell substantially all of the NGL business to Keyera for approximately USD 3.75 billion, expected to close in the first quarter of 2026, which will result in a streamlined crude oil midstream entity with less commodity exposure and increased financial flexibility. - Bolted on the acquisition of an additional 20% interest in BridgeTex Pipeline Company LLC for an aggregate cash consideration of $100 million net to Plains, bringing the overall interest in the joint venture to 40%. - Year-to-date, 5 bolt-on transactions have been completed, totaling approximately $800 million. - The full year 2025 EBITDA range of $2.8 billion to $2.95 billion remains intact, with both the EBITDA guidance and the Permian growth outlook likely to be in the lower half of their respective ranges. - For 2025, approximately $870 million of adjusted free cash flow is expected, the growth capital guidance has increased to $475 million, and maintenance capital is trending closer to $230 million.

In the second quarter, the Crude Oil segment reported adjusted EBITDA of $580 million. The NGL segment reported adjusted EBITDA of $87 million, and most of the NGL segment has been reclassified as discontinued operations following the NGL announcement.

• The full year 2025 EBITDA range of $2.8 billion to $2.95 billion remains unchanged. - In the prevailing environment, both the EBITDA guidance and the Permian growth outlook of 200,000 to 300,000 barrels per day are likely to be in the lower half of their respective ranges. - Approximately $870 million of adjusted free cash flow is expected for 2025. - The growth capital guidance has been increased to $475 million, and maintenance capital is near $230 million.

• Market volatility which could impact crude oil prices and related operations. - Uncertainties associated with the NGL business sale transaction, such as potential delays or issues in the closing process.

Q: When you think about assets in the Mid-Con and the Permian, how do you factor in basin level growth and which basins are you seeing more growth in over time?

A: Jeremy says they take all into consideration, are a DCF shop looking at discounted cash flow over time and contributions, look at integrated networks, use market fundamentals to drive cash flows, and have to beat return thresholds by 300 to 500 basis points. They don't necessarily specify target areas but consider multiple touch points in each area.

Q: Could you provide some color on real-time demand signals, any sign of slowdown or anything you're seeing on the refining or on the export side?

A: Jeremy says to follow the refiners, they've talked about improving diesel demand and it's strong, haven't seen significant slowdown in demand in the last 6 months and expect it to continue.

Q: Can you talk about how the BridgeTex fits with the rest of your business and the value?

A: Jeremy says they're excited about consolidating the interest, work with ONEOK to optimize the cost structure going forward and consider commercial ways to fill the pipeline from Plains' and ONEOK's gathering systems to strengthen the pipeline's positioning longer term.

Q: On the CapEx increase, is it due to a pickup in producer activity overall relative to what you're expecting or more of just commercial success?

A: Chris says it's a combination of new opportunities not anticipated coming into the year, the bolt-on strategy bringing risk-adjusted returns in line with the bolt-on framework, and they may grow CapEx modestly for good opportunities that meet their return thresholds.

Q: Willie, could you talk about the big picture plan after exiting the NGL business, is the plan to simply execute the growth and capital return strategy or could there be pivoting or diversifying into another area?

A: Willie says going to a pure play wasn't the objective, they want to create value for unitholders, will redeploy proceeds in crude assets, stick to what they know having size and scale in the crude business, and have a robust BD team looking at opportunities around crude assets and other potential areas.

Q: Spiro, about the second half of '25 and why the guidance seems to suggest maybe a similar second half to the first half or lower, and why?

A: Jeremy says there are contract roll-offs of Cactus II, Cactus I and Sunrise in the second half of the year, which have lower contract rates, but they've backfilled some of the roll-off with growth from other pieces.

Q: Spiro, how are you weighing the ability or potential to do something larger than bolt-ons pending the NGL sale proceeds?

A: Willie says they have a robust BD team looking at a lot of opportunities, and the financial flexibility created by the NGL announcement allows them to absorb various opportunities, whether small, medium or large.

Q: Sunil, on BridgeTex, is it part of the Oryx JV?

A: Jeremy says no, it's Plains purchasing an additional interest in the pipeline independently, with Plains and ONEOK buying in proportionate to their interest in the pipeline.

Q: Sunil, on the retained U.S. NGL business, what's the strategy going forward?

A: Jeremy says that retained U.S. NGL business is very minor relative to the entire asset base, retained for tax and operations purposes, and they'll look to monetize those at a later date.

Q: John, on the CapEx piece again, how much of the increase is due to pickup in producer activity or commercial success not pointing to broader macro theme?

A: Chris says it's a combination of all the above, including new opportunities not anticipated, the bolt-on strategy bringing synergy capture and expansion, and they may grow CapEx modestly for good opportunities that meet their investment thresholds.

Q: Brandon, you mentioned the guidance seems to suggest coming in towards the lower end of the EBITDA guide but things have improved vs 1Q chaos, where do you see it moving forward and likelihood of being back towards midpoint?

A: Al says the wording should have been lower half, not the low end, they believe in the lower half, crude oil price is now at the high end of the range mentioned a quarter ago, and there's more time to come, but they're guiding to the lower half.