• Adjusted EBITDA: $659 million for the third quarter.
• 2024 Adjusted EBITDA Guidance: Expected to be towards the top end of $2.725 billion to $2.775 billion range.
• Permian Volume Growth: On track with a forecast of 200,000 to 300,000 barrels a day for 2024.
• Adjusted Free Cash Flow: Approximately $1.45 billion expected for 2024, excluding changes in assets and liabilities.
• Common and Preferred Distributions: Approximately $1.15 billion allocated for 2024.
• Legal Settlement Charge: $120 million booked for Line 901 oil spill contingencies.
• Credit Rating Upgrade: Upgraded to Baa2 by Moody's with a stable outlook.

• Warning! GuruFocus has detected 5 Warning Signs with PAGP.

Release Date: November 08, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Plains GP Holdings LP (NASDAQ:PAGP) delivered a solid operational quarter, expecting to reach the top end of their 2024 adjusted EBITDA guidance range of $2.725 billion to $2.775 billion.
• Permian volume growth remains on track with the original forecast of 200,000 to 300,000 barrels a day for 2024, driven primarily by organic growth.
• The company is on schedule and on budget to complete the Fort Saskatchewan Fractionation expansion project in the first half of 2025.
• Plains GP Holdings LP (NASDAQ:PAGP) recently acquired the Fivestones Permian gathering system, enhancing their portfolio and creating incremental growth opportunities.
• Moody's upgraded Plains GP Holdings LP (NASDAQ:PAGP) to Baa2 with a stable outlook, achieving their target of a mid BBB rating at all three credit rating agencies.

Negative Points

• Plains GP Holdings LP (NASDAQ:PAGP) booked a charge of $120 million related to settlements from the 2015 oil spill in California.
• The company faces geopolitical unrest, potential OPEC supply changes, and uncertainty around China, which could impact their operations.
• Despite strong performance, the company does not intend to lower their leverage range, which remains at 3.25x to 3.75x.
• The company has deferred spending for several projects, impacting their capital expenditure guidance for 2024.
• New Mexico gas evacuation remains a constraint, although industry efforts are underway to address bottlenecks.

Q & A Highlights

Q: Can you provide insights into the strong Permian gathering volumes this quarter? Are they driven more by organic growth or acquisitions? A: Jeremy Goebel, Executive Vice President, Chief Commercial Officer, explained that the substantial growth was primarily organic, with modest contributions from acquisitions. The main driver was organic growth from completions across the system.

Q: With leverage now below your target range, what are your plans for capital allocation? A: Wilfred Chiang, Chairman and CEO, stated that they do not intend to lower the leverage range. The focus is on maximizing free cash flow, optimizing assets, and pursuing bolt-on acquisitions. If bolt-on opportunities are limited, they may consider other options like reoptimizing the balance sheet.

Q: How are early discussions with producers shaping up for 2025 volumes? A: Wilfred Chiang mentioned that while specific guidance will be provided in February, they expect similar growth ranges as this year, with 200,000 to 300,000 barrels a day in the Permian. Jeremy Goebel added that initial producer forecasts align with this range.

Q: What is your perspective on the water disposal business in the Permian? A: Wilfred Chiang noted that while they do not currently have exposure to the water business, they would consider it if there were synergies with their existing operations. However, their current focus is on optimizing their existing asset base.

Q: Can you elaborate on the Fivestones gathering system acquisition and its benefits? A: Jeremy Goebel described the acquisition as a strategic fit, integrating barrels into their system and enhancing connectivity with Rattler Midstream. It aligns with their strategy of bolt-on acquisitions that complement their existing operations.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.