PAGP - Earnings call 2 2023 | Plains GP Holdings, L.P.

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Operator

Good morning, and thank you for standing by. Welcome to the PAA and PAGP Second Quarter 2023 Earnings Call. [Operator Instructions] Please be advised that today's conference is being recorded.

I would now like to hand the conference over to your speaker today, Blake Fernandez, Vice President of Investor Relations. Please go ahead.

Blake Fernandez

Michelle. you, Thank welcome Earnings and All Second American's Good to 'XX Call. Quarter morning, Plains

appendix. presentation the where Today's under posted forward-looking following is slide on disclosures Important and will be regarding PAGP on section located and today's replay call. Slide consolidating condensed the X, Investor Events provided Highlights and reference the are Slide for at materials other audio financial plains.com, an the non-GAAP statements are also quarter from available in a balance X. News website Relations measures are on sheet provided

Today's Chairman team. Vice management call Al other will President be CEO; Executive our hosted of by as Willie Swanson, well members and Chiang, and as CFO, and

I now With call that, over will the turn to Willie.

Wilfred Chiang

and update release In joining strong acquisition announcements everyone, thanks closing we we on progress 'XX segment with These Saskatchewan. announced full bolt-on goals. our Thank for an July targets earlier optimization quarter and morning, a Fort year and on you, XX, reflect our executing our on results, along of second at the Good us. NGL this provided gathering Blake. towards meaningful Permian morning, efforts

our bolt a of bolt-on $X.XX XXXX. billion -- year-to-date adjusted range performance a billion result EBITDA at the year-to-date expect for acquisition, performance end as and to now of our As our we be result, high and the to $X.XX

prices and will updated in on high-level impacts located outlook slightly A additional 'XX and driven weather-related Our lower lower-than-expected the some portion contemplates X, of Al is also commodity occurred production, Slide guidance revised our call. his and detail in Permian that of overview July. share June by

million JV cash remaining negotiated to acquired Plains' $XXX which free Permian our or funded the interest X, $XXX was flow. interest, via a transaction Slide on Energy Diamondback excess in JV approximately XX% million with the net from non-operated for summarized As OMOG

of our business our is efficient capital footprint. Basin regard of X. This on us summary core of Midland our a the provided are existing with the aligns announcements consistent NGL growth, further complementing optimization, in objective and With discipline updates today's Slide on with Diamondback to and

a XX,XXX Train expansion. Sask Fort and sanctioned barrel a we X summary, In day debottleneck

our Sask contract also complex, our pipeline to gathering years which tenor We both XX further connectivity fractionation projects our pipeline. expands Fort our system. capacity Fort wide-grade integrates in and to Co-Ed the entered increasing commitments Sask fractionation commercial We average weighted and added across our NGL substantially Co-Ed into

the generate year approximately our average excess expectations returns This the Overall, NGL rate multiyear capital. we capital spend $XXX to coming to on investment investment million $XXX a million unlevered million fits of of -- capital projects net growth for in expect PAA our within years. annual $XXX total hurdle to over of communicated previously

XXXX, that in gallon agreement EBITDA reduces supply barrels day. the frac third-party have Co-Ed of neutral offsetting supply our end a the be the expiry $X.XX we to The with in projects a associated XXXX the approximately frac agreement. contributions of XX,XXX exposed Fort per spread spread expansion, pipeline to overall of beyond and $X.XX Lastly, in from these which NGL a connectivity Sask at is expires expected environment, agreements announcements volumes combinations by the

and the contracts. long-term durable our fee-based by end is more a result predictable NGL in underpinned Importantly, segment level earnings of

the a we're thresholds. cost facility higher required X Additionally, of Sask meet our a as it longer exploring and Fort did at expansion no Train return not joint venture

messages. you the with call want I X to turning leave back Al, over Before to

range. targets we've and our of full First, to our at end be expect exceeded through the we guidance midyear, EBITDA high year

durability which Permian acquisition several bolt-on segment, quality third, the will efficient, strategic actions our of closed time. we that an stream cash over footprint long-term further an our in flow we announced And NGL our the improves in disciplined and help Second, Permian improve attractive manner.

reducing our increasing these multiyear call with actions capital goals our over disciplined, flow, cash free of generating turn that, align to returns remaining and Al. unitholders. of the With leverage of I'll All capital to

Al Swanson

reported benefits second attributable EBITDA crude $XXX of oil quarter to adjusted volumes Willy. our Thanks, increased our This million. from segment. in PAA a We systems across includes

quarter last of As and which located mentioned on planned updated on XX weaker Slide sales contains XXXX our walks, NGL today's our guidance volumes lower and our Slides result provide call, detail segment the on a in XX seasonally turnaround appendix of performance. An experienced second overview is X. as more demand.

the OMOG of oil and $X.XX at a As of and we crude billion. high partial billion adjusted the result the expect both our segments of year guidance now end $X.XX be in to our NGL acquisition, of year-to-date, EBITDA benefit full performance business to

We expect segment, year-over-year our driven by tariff volume growth Permian continue to oil increases. crude in

on For reducing NGL not financial lower continued allocation, and Shifting to Slide flexibility. to: three, remain the of we from impact and or remain and frac wildfires. returns one, the a material segment, holders, increasing highly illustrated to capital hedged we discipline; X, debt do capital our significant two, equity expect committed capital Canadian as spreads

in debt expect of $X.X year-end operations, leverage cash XXXX, for available of billion million resulting flow For we distributions X.Xx. free cash to generate reduction, after cash $X.X flow, below net with flow free billion from $XXX in

guidance that, related $XXX PAA, We with With is million to and capital the maintenance back of announcements. to Willie. the today's includes which $XXX I'll to net and turn self-fund XXXX anticipated call NGL will continue and previous consistent million investment capital

Wilfred Chiang

continues initiatives. another both in goals results remain execution Macro Al. on and quarter very we uncertainty Thanks, of confident and crude NGL to volatility markets. ability the reflect in drive our our strong delivering to Today's and continue

took our and steps a our crude into hedges business, of this to the business. mitigate along by entering combination previously short-term proactively NGL crude contracts substantial we in risk position However, long-haul in hedge with

well Over the North critical positioned global remains will supply to be growing long to American as continue term, Plains meeting demand.

growth. continuing unitholders to increase meaningfully of focused As remain to capital on distribution previously in targeted capital our we multiyear allocation outlined returns framework, through

yield, we to conference forward strength flow balance your cash to a providing and sheet I'll over call appreciate further free generation in have updates shown look X.X% call and significant Q&A. as With into our November. to Slide Blake on earnings will on We the support, lead that, turn X. We interest us continued distribution and

Blake Fernandez

the will [Operator questions. Instructions] to ready to we're be for any Additionally, have. now Willie. IR address the available you team call Thanks, questions additional Michelle, may open

Operator

[Operator Citi. Spiro Instructions] The with from first Dounis question comes

Spiro Dounis

all start guidance. were First before of what the with question, the maybe acquisition. probably bolt-on the even I trending, upper tell, towards could to you range half From this

sounds the maybe year. takes of some So much maybe to I'm speak legacy bolt-on. outlook could upgraded and be like the there end how It that of can into is puts you operations curious, versus the

Wilfred Chiang

smaller characterize Yes, I piece the bolt-on Spiro, would is here of way is the transaction to is The math. -- it yet. close really -- a expected the hasn't it closed

X overperformance So has it's it's going -- be the to months, or predominantly but so closed, business. in it actually,

Spiro Dounis

Willie. That's helpful. Great. Thanks,

Second NGL one, segment. just to going the

So pursuing dynamics here? been Train X and around didn't else what's that just maybe optimization could there maybe meet And anything can through the announced in to bring of Curious, hurdle the you then project still what go some burner the you're Canada, beyond today there? on rates. back

Wilfred Chiang

touch with the parts thing we around When of project. for is on option high-return about on Jeremy the one going -- whole Jeremy? think But about all but there's always a capital think as this. this optimization to you moving we options. that, to comment I'm things to Yes, I discipline, about let drive want open lot think the these

Jeremy Goebel

X comment through his -- we able and looking team have I doing the it our The Sarnia, lower offer that. about at alternatives. to were system. capacity some think that the Chris our a field able of is, Spiro, to Train Sure. were way we're existing have cost ground to in around needs and think package identified that we between some meet we opportunities East

the more So problem. to efficient partner place. us that we capital partnership the better versus our solve a arrangement and to way commercial a a to decided found a And same way substantially was get

Spiro Dounis

is sort in potentially are background? of and else kind Understood. anything the of more of of different in in -- And Canada terms Or terms still you then now? optimization, it

Wilfred Chiang

Chris?

Chris Chandler

This is Chris Chandler.

We find to across our pretty some opportunities system. continue compelling

in extraction unutilized Of NGL our course, Hat. we have outside Medicine mentioned, of opportunities also facility. about we fractionation our Sarnia, the But Jeremy capacity Empress talked Edmonton at some have at the we as at Sask facility. plants And just Fort Ontario

all those to look those we're small investments optimize targeted at to areas. further of all ways we and in So making our business grow

and I So excited there pursue think to there's to be continues them. -- opportunities we're

Wilfred Chiang

these work typically Spiro, you the finding of out, up these as opportunities. things additional you some optimization end things way build And

kind a through So as things. go we of process it's continuing

Operator

UBS. next question comes Reynolds Brian with from The

Brian Reynolds

took that intra-basin seeing shifts your as kind place just forward, whether of back just volume or given a just XQ the follow-up Maybe expectations? pure the any guidance half the acquisition around to volumes going Permian in fundamental in you're update, questions

Jeremy Goebel

Okay.

volumes, On I So impact acquisition. think intra-basin those. This the Basin there. was a was Midland acquisition there two questions doesn't

So There's operate, something gross volumes to flow intra-basin straight we Midland. basically, no into so it's it. already component

The overall -- is last first the Permian. was As far have The question would months think few to expectations largely bit little point, far but at has get year I'd below capacity is in this say bit. there. been exceeding year, the your the I for activity second so of still say as What a been it's productive behind trending I part we're expectations. a this line,

year. timing of completions a the be half to going the it's of through So of function second

Wilfred Chiang

[ very of hot that and July. flat we of in Spiro aware and plant (sic) not were with the ], have weather issues June some price disciplined was half Brian to you're really up weather. It been There And a flare. in ended we Also, gas some period time. that had producers back lower the problems weather-related,

probably So to try much as incentive there's to produce. not

have behind been with through more a constructive we're that. little today it. by think Oil we decisions So support highlighted OPEC prices the more

-- of our guidance we the of have year, to high actually end guidance. we're outlook think our this we at as going think We the of a the the incorporated little Permian XXX. below that, into But be bit still guidance all So about just volume we've with range. on even rest

Brian Reynolds

you all in about should Will worked worked And through? be could look ahead fully think maybe early on Great. as those as follow-up, color. numbers? that an minimum we XXXX? the we then a into about can that be tailwind a commitments are how I us And appreciate through think volume being that give update And XXXX just we that as XXXX?

Jeremy Goebel

look it I two accruing to still period accruing I the pipelines pipelines. that The those they're deficiencies, that through would time work the way say is there's are deficiencies. on would at some

going I So take it few as to work something through. a view to that's would years

next or to barrel last committed, that's credits the then Just as shipped because -- the first, pipeline, is any the spot ship commitments the barrels deficiency that at look it have -- the and are on other you of barrels deficiency. using

a capacity couple to from deficiency that do through So the probably that. years space get time on available it. It a so will through basis, takes barrels a standpoint, working to take of

Wilfred Chiang

We Brian, our shrinks expect production. outlook spreads with as changed. And still to hasn't the capacity increasing strengthen

As contracts you on sales the made predominantly probably we've essentially 'XX. we've Permian Coast, -- that of takeaway know, kind the year next protect the for about capacity and for on chatted Gulf this and to

expect transportation So would the Coast costs. expand we gives to little ultimately a the that should Gulf and between us incremental out rates bit Permian buffer, and of that

Operator

The next question Gabriel Moreen Mizuho. comes from with

Gabriel Moreen

year can to speak bit maybe outlook was CapEx the little light to for Permian of if tweaking this a you I outlook. the your of wondering in

annualize guidance, your You're it. of running late, a bit if guess, you, think, little I I

So wondering, range given lower is you that the I'm CapEx of end volume the coming a outlook? Permian just there possibility to

Wilfred Chiang

Chris discipline through capital keep the that There's go company. across that. a of we work Chandler cover will to Gabe. lot Chris?

Chris Chandler

optimize spend to XXXX. Gabe, Yes. continue our do for we

and Permian. we for gathering the as period that kind color year. On buckets, regions mentioned pacing second adverse production in of investment in weather schedules. the half And pick some of timing to growth to our with we with the prices, Permian projects, Speaking of leaving do our of up different complete infrastructure in investments, the needed expect system projects expected Willie match our there customer we're some a lower

that NGL then just our net project we're fund Fort at appropriately. And the So $XXX Sask XXXX. project be of portion to within to we remember, guidance XXXX Plains to existing try for million new of going to able announced and a time that we

but guidance our moving some there, for are reiterating there the we're So current year. parts

Gabriel Moreen

do you gathering M&A and are Understood. in bit kind may a the land done, acquisition the is, of terms And And of you're this that when what either realize sensitive I deal or be commitments? looking getting to more maybe you commercially downstream of a what kind on One question deals a extending it's these then ask. then of within lay just like? X-parter. of to gathering little renewing extent these further JV,

Jeremy Goebel

at if had generally, or partners there's then converted being we're shipper Sure. I with it for bit in contractual producer, we something owner us being the a the producer. relationship. We but way business more an look appropriate buying The was is from them, being to it us as a the and improvement partners one and not being that the

-- to that is were a strengthened there terms the So reflect relationship.

great with have forward relationship this with We and a them to Diamondback look in growing area.

Operator

comes Michael next Fargo. The question Wells from with Blum

Michael Blum

that I the to tuck-in get couple we over Or of here your whether be acquisition So as to there's potential just of a you should just thoughts one-off this years? opportunity? other kind this is here see of to and wanted on next tuck-in stay think going expect do deals on kind

Wilfred Chiang

I the the look we that franchise North America, these disciplined Willie. way we this. synergies approach can across to got But is we're this be as extract a anyone this And if it going [ at remain particularly around should Michael, very us. mean, very, great in we've ] So there's is Permian. opportunities,

of And do, acquisitions, bolt-on we lot what these so it's like sense when bite-size that make bolt-on things think about acquisitions to might us. you a

with So that that there And at a and But things, anything are there. rates I are the a returns, to to are continue our to we up we opportunities to this? them. we got we Jeremy, projects and of to end look would return if are consider strong meet on going stay going and few. strategic of lot we've look hurdle add at expect disciplined

Jeremy Goebel

No. I purchased consistent II say West just with transaction, the interest -- in would year one. Michael, it's that the Cactus Advantage and Western last the this

We're fit it's got Willie to to disciplined. trend, be this So for going got to said, like us. work a It's something it's them. is very but for

got the As we to potential compete we uses. capital a look for said, at our with but of lot, it's rest

Michael Blum

Okay. helps. you're that then Great. announcement investment -- in going be on to just And the Canada That of light the making. today's

Just your kind spend wanted confirm unchanged. of rates that annual to are long-term capital

Wilfred Chiang

one. I'll take Absolutely. that

We we be We've projects, range $XXX said stay to in range expect could a forward. million within stay because expect $XXX million the years. us the as around lumpiness the but to go average that number for some some to can timing between of there you of

Operator

Wolfe question comes The Research. next from Keith with Stanley

Keith Stanley

I the frac stay wanted expansion on to project.

to I the of money in from that more existing why color EBITDA give itself you clarify, some is project neutral on so, Could dynamics want in be just offset? and in there is XXXX have or would And the just assume contract EBITDA beyond the because contract the on project the favorable off. you the rolling way. existing

Jeremy Goebel

This Keith. Sure, Jeremy. is

have into and in the years ago, So unit. that contract entered counterparty changing about was that so relationship we XX we're that with

it have it $X.XX, is. is would million be a depends at -- where for wouldn't projects. facilities. the you view uniqueness At gave sense on It's is. It's be. $X.XX, of it this how At $XXX as money. a is of look the small in But The I view between We So commodity a to exposure just your portion. expansion. frac connectivity brownfield of the projects. the series gathering expansion That's so you

diverse a projects with very term. is series long this So customer bases of for

flow cash predictability. and durability the So excited about the we're of

a process. So this durable exposure contractual as frac we are it's basically this it spread cash the servicing taking we have nature X/X part customer changing and of converting our but of that to flow,

Wilfred Chiang

it. we fee-based go cash the It at when one that back portion a and seasonality but goes add we we increase reinforces This it, and flatten system Keith, the our thing. the trying talk to about And really you of saddle of to should flow to saddle integrated our forward. maybe to look just it have, side as

So more we we long about as predictable, units. far that durable should help think valuation our term as for think earnings

Keith Stanley

it. Got

my now. how pricing? second year, turnarounds open propane QX, then in stick XXXX And relatedly, NGLs a seem on on these NGLs oil coming to came all a you big although at are have impact stand comment with Obviously, $XX in Can of I'm spreads you back million XXXX, looking just is in like kind at frac this where exposure? QX. to they going lot you pretty sorry, for And down question. with And

assume should So be looking would we that turnaround reverse impact and forward? about should a in Or XXXX how benefit think that? we

Jeremy Goebel

Sure. There's there. questions two

And we think for On for this don't projected turnaround turnaround, I next any think impact have the I year. the year. was that don't quite material big

yes, standpoint, it them. think the don't standpoint, But view from million. I $XX capital into capital flow some a would have the But capital a so won't maintenance goes of I -- neighborhood So that additional is there's have you'll in maintenance and substantial from the you impact production. cash

you Your other that? question repeat can

Wilfred Chiang

and we we're Really, to going exposure, Keith, on spread do exposure. don't frac spread frac I'll take this. disclose what

hedge You're is we spread XXXX. go the And forward the as right, forward. we for but thoughtful of exposure try And They're XXXX, time into environment the more off -- frac at look would significantly. what we'll far -- come definitely to tell spread high. frac do is at end be how I back. you we probably as as share share improving coming market They've the about were very year, we'll we and

Operator

The next question with Dingmann Truist comes Neal from Securities.

Neal Dingmann

about Can around detail. capital expand one then you twofold, more on that CapEx, on the just X.Xx a little allocation target? And just 'XX talk secondly,

Wilfred Chiang

on question first was The Neal? capital. Al?

Neal Dingmann

'XX. For

Wilfred Chiang

question? there? second for ask going would stick years. second is -- -- Neal, are still we're one, your And with could next of $XXX million For 'XX? to number I $XXX you your what you million the to

Neal Dingmann

one off got I'm just sorry, second. for I cut

Wilfred Chiang

million, our CapEx? on target 'XX could on years. And consistent $XXX Did then you with you ask across $XXX question CapEx allocation? be 'XX comment million your second the will to capital hear my

Neal Dingmann

Yes, the you've just on I know X.Xx got -- target.

you you for Or sort taking have we think about you do -- that So I'm Would free what you how taking versus keep cash keep wondering, below payout load? that? flow, below? just would it of if can get you debt

Al Swanson

Yes. is little half a can it function year-end. our we back the a be be working at At Clearly, is will capital what a little the this that below that expect guidance X.Xx that in year point in the this year, bit. of requirements of our move to

X.XX% to over still stated for we've below near we remains Our And quarters, to operate that intend the last range few X.XX%. the articulated as term.

really, And other we expect of moving If get reduce can that that do dynamic we lined bolt-on we'll debt bit. successful extra little out. back so still another there's really in the the flow, part. is capital below. the no cash a be the half. we're change But Clearly, if or X.Xx But little to a allocation acquisition, with rest at

Wilfred Chiang

Neal, that your answer does question?

Operator

Neel with America. from comes of Bank next The question Mitra

Indraneel Mitra

Willie, intra-basin issues to some that the just I some I if think to and that intra-basin. could with you second gathering were of Permian issues in speak quarter. And in in growth of second slides just quarter alluded the was your the with the you seeing wondering and faced

I think wanted just now to but this, your what of understand production underpinned that issues alluded some the are peers some of to resolved?

Wilfred Chiang

it that probably very earlier wanting disciplined you my an to have lower harder. remained really gas issues In any price incentive people hot lot to weather also of Neel, didn't to And give processing. around had what flare and not was the we've push affected producers is comments, seen environment try that a Yes. a

of have I I July. know discipline And kind really there's of anything it there's that were producers don't know. do the it's improved. more was and And Jeremy, looking you So add? then, had. since back to capital you for, don't if June half and

Jeremy Goebel

a would producers led lot completing wells I to environment. Yes. that of into not say that

wells So August had, that intending period. they're throttle they the going forward not they produce the so into pushed and what that that wells to, to complete time maybe they had, they completions all were

Indraneel Mitra

competitor looking my you if the out coming how ahead then possibly And with look you're open Cactus it that affects I a for that to recontracting at know at wanted Perfect. has curve of when with, maybe how question, or Okay. an second forward season I II, improved. understand recontracting. extends

So just long-haul type recontracting. your the general thoughts on

Jeremy Goebel

end. say dialogue as would customers. to prospective as volatile rates we Neel, with the what back continue of constructive hasn't Sure, The of nearly have the I end been view is our front

pipeline So II extend There's options discussions Cactus attractive customers. for rates continue. to the on our those at

provides with pretty say us So and model clear. I'd is customers us integrated base our others, that for for and advantages one I long business Cactus time. and of periods our unique asset aligns

timing expect when that. function It's we'll we So you have update and guys when and we to a fully more information. of do

Operator

The Seaport question with Global. Sunil next Sibal comes from

Sunil Sibal

understand I a better bolt-on So acquisition. wanted to little about just bit

that get volumes could gathering those like seems part on bolt-on will kind you as economics acquisition. kind about And return if on it reported and your talk So are those? of already this better of volumes just of

Wilfred Chiang

Jeremy?

Jeremy Goebel

Sure.

Because change. You're and operated interest asset wouldn't the gathering volumes we correct. consolidated asset gross impact over and that long-haul intra-basin. XX% or had doesn't That the was specific

it before, we in feel and operators. think to aligns comfortable wells relationship further said as drill with -- very they want us us with the They with it be I it. just

its acquire So however to that wants sense into to that use it recycle for makes position. And capital. can Diamondback it us

Sunil Sibal

bit question broader Okay. then little a second capital allocation. on is And

in maturity take in of of able second that. And you want half, like seems XXXX, it like have to where higher terms metrics. you bond you it will in you the leverage So should the end coming the target up to seems up still than care be

in longer is geared of -- So of of longer-term a kind taking over leverage Or perhaps terms of of the time? just perhaps goal out X.XX? to X.XX of what creating thought this -- I'm are kind process that for capacity kind period curious, of more towards

Wilfred Chiang

Willie. my certainly then Al add on to this and thoughts can is give I'll Sunil, allocation, it. you capital

primary free about to we two think we capital drive allocation, One, need there's As cash flow. things.

but we cash discipline You one don't the particularly on -- you flow. really is everything And can't do, not free do you're around around CapEx. anything second driving if

protect how commitment what the want think we we we and our capital to laid as the allocation So order this capital forward, going -- return allocate out We to unitholders. to we one, framework. of

list. going probably to efficiently us further to And the and down high-return we list because opportunistic to grow the makes high the that's balance financial sense be on then help we flexibility we that will and strong that buybacks, business, sheet. bolt-on the So are go want projects to maintain strategic press consider a

what it, think we back the forth. the of that's that's priority see you of way the So kind juggle Al? kind I and as and But about way that the order.

Al Swanson

would No, exited up million that with coming Willie. accurate, have Yes. We we in is I the $XXX note October, of add, $XXX million. June yes, cash.

the is So sheet to and that. a to due capacity below. the would that. We with be point at would capacity. to. Ultimately, taking be in the good And do at we that. we need address things we've of to the should to that over hopefully, using able plan that end be the as this would earlier we repaid downs some future, be valuation. at time, to X.XX common it our but use there's time weather balance some as believe be those be through near-term intend out to some that left commented press, we And that partially will expect But don't of no will equity able have out an or to I as on low our fund to well operate of target question, on as the industry ups to X.XX and at leverage Again, same look

Operator

like no company the to the call time. would I to further questions show at this I remarks. now for closing back turn

Wilfred Chiang

to weekend. and nice thanks Well, in a for us soon, time you your Thanks. this everyone, We listen, see joining have hope morning.

Operator

call. you conference for This concludes today's participating. Thank

may disconnect. You now

Plains GP (PAGP) 4 Aug 232023 Q2 Earnings call transcript