Plains GP Holdings, L.P. Q4 FY2025 earnings call

• 2025 was pivotal with challenges like geopolitical unrest and OPEC actions, but Plains transitioned to a pure-play crude company via NGL sale and Cactus III acquisition. • 2026 focus on closing NGL divestiture (pending Canadian approval), integrating Cactus III for synergies, and streamlining for $100 million annual savings by 2027 (50% in 2026). • Sold Mid-Continent lease marketing business in 2025 for ~$50 million, simplifying operations. • Acquired Wild Horse Terminal in Cushing for ~$10 million, adding 4 million barrels of storage. • Increased quarterly distribution by 10%, annualizing to $1.67 per unit with 8.5% yield. • Reduced distribution coverage ratio from 160% to 150% for better alignment with peers. • Achieved best-ever safety performance in 2025.

For the fourth quarter, the crude oil segment reported adjusted EBITDA of $611 million. The NGL segment reported adjusted EBITDA of $122 million, reflecting a seasonal uptick moderated by warm weather and weak frac spreads. The crude oil segment's $611 million includes two months of contribution from the Cactus III acquisition, partially offset by recontracting impacts on long-haul systems. The NGL segment's $122 million was affected by seasonal and weather-related factors.

• 2026 adjusted EBITDA guidance at midpoint $2.75 billion net to Plains, plus or minus $75 million. Oil segment EBITDA midpoint $2.64 billion net to Plains, 13% y-o-y growth. • Expect Permian crude production flat in 2026, resuming growth in 2027. • $350 million growth capital and $165 million maintenance capital net to PAA in 2026. • Expect ~$1.8 billion adjusted free cash flow in 2026, excluding NGL divestiture proceeds. • Special distribution expected to be 15¢ per unit or less after NGL divestiture closing.

• Geopolitical unrest, OPEC actions to increase oil supply, and uncertainty from tariffs. • Impact of Venezuela geopolitical developments on market differentials and potential asset repurposing needs. • Volatility in oil prices and market conditions affecting business performance.

Q: Good morning, guys. I actually wanted to focus a little bit more on the Cactus pipeline and all the synergy benefits you are talking about. Also, I know this is not the right macro, but eventually, the macro will turn. I am trying to understand your ability to expand Cactus III without actually putting more pipe in the ground.

A: Manav, good morning. It is Jeremy. First, on the synergies question, the $50 million of synergies we disclosed, we believe we are 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 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. Those were ramping up now. So we would imagine during the first quarter, we will be substantially there on the run rate for the $50 million, and we should hit that number this year. As to 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 do not require new pipe and that do require new pipe. So we are looking at the most capital-efficient ways to do that. We should finish that during the first half of this year. In parallel, like I said, we are recontracting for term, the rest of the pipeline. Then we will be in a position to discuss expansions with our customers, etcetera. But first, it is to stabilize the base pipeline, and then it is to look at capital-efficient expansions from there. In increments that make sense to grow with the base.

Q: Good morning, everyone. Maybe you could stay on the distribution coverage conversation. I am 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, just exactly there any kind of formulaic way we should be thinking about this? You know, you mentioned some of your peers, but, you know, I could take one peer off the top of my head that, you know, says 1.3 is the right coverage. So just trying to get a little more insight into your thinking on that.

A: Willie, this is Willie, Michael. You know, when you think about how we came up with the one sixty, right, that was in November '22. And it was intended to be a coverage threshold that was conservative, reflecting in our focus on the balance sheet. I would not try to read too much into the delta. Other than at one fifty, it is still a conservative approach to distribution. And for us, it sets a nice balance for us as we look forward on the ability for multiyear 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 is really set there to allow us to feel good about our multiyear distribution growth.

Q: Hi. Good morning. Good morning. Can you hear me? Thanks for the color today. I just wanted to take a step back here, and there have been some geopolitical developments recently, you know, particularly up, you know, what has been happening in Venezuela. And it seems like there could be a domino effect in a lot of different directions of what happened there. So I 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.

A: Hey, Jeremy. Jeremy Goebel. How are you? I was calling I mean, the idea around Venezuela, think of it the initial response 50 million barrels sold into The US Gulf Coast, a significant portion. Do 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-Con and Canada. 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 two to three hundred thousand barrels a day, that might change some buying habits that should not be enough with the commodity prices where they are to change Canadian flows materially. They will have the price to move. So that would probably be a little bit wider Canadian differentials than otherwise would have been. It would take materially more than that to probably repurpose pipelines. But if you look if you added a 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 it is there is 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 is going to take substantial investment and time for repurposing, but we are certainly monitoring and paying attention to it.