• 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 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: Moody's upgraded to Baa2 with a stable outlook.

• Warning! GuruFocus has detected 8 Warning Signs with PAA.

Release Date: November 08, 2024

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

Positive Points

• Plains All American Pipeline LP (NASDAQ:PAA) expects to reach the top end of its 2024 adjusted EBITDA guidance range of $2.725 billion to $2.775 billion.
• The company is on track to complete the Fort Saskatchewan Fractionation expansion project on schedule and on budget in the first half of 2025.
• PAA continues to pursue bolt-on acquisitions, recently acquiring the Fivestones Permian gathering system, enhancing its growth strategy.
• Moody's upgraded PAA to a Baa2 rating with a stable outlook, achieving the company's target of a mid BBB rating across all three credit rating agencies.
• The company reported strong third-quarter adjusted EBITDA of $659 million, driven by higher Permian volumes, providing momentum for its crude oil segment.

Negative Points

• PAA booked a $120 million charge related to settlements from the 2015 oil spill in California, impacting its financials.
• The company faces geopolitical unrest and potential OPEC supply changes, which could affect its operations and market conditions.
• There is uncertainty around China's economic activity, which could impact global energy demand and PAA's business.
• Despite achieving lower leverage, PAA does not intend to lower its leverage range, potentially limiting capital return options.
• The company faces challenges in maintaining its competitive edge in the Canadian market, focusing on optimizing existing assets rather than expanding aggressively.

Q & A Highlights

Q: Can you explain the strong Permian gathering volumes this quarter and the impact of acquisitions versus organic growth? A: Jeremy Goebel, Executive Vice President, Chief Commercial Officer, stated that the substantial growth was primarily driven by organic factors, with modest contributions from acquisitions. The organic growth was largely due to 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, mentioned that they do not plan to lower the leverage range. The focus will be on maximizing free cash flow, optimizing assets, and pursuing bolt-on acquisitions. They aim to return capital to shareholders while maintaining financial flexibility.

Q: How are early discussions with producers shaping up for 2025 volumes? A: Wilfred Chiang indicated that while specific guidance will be provided in February, they expect similar growth ranges as 2024, with producer forecasts aligning with their initial dialogues.

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 asset base.

Q: How is the Canadian platform positioned for growth, and are there more opportunities for bolt-ons or organic growth? A: Wilfred Chiang explained that the focus is on completing the Fort Saskatchewan expansion, which will enhance fee-based cash flow. They are open to opportunities that offer integration benefits and synergies.

Q: How are crude flows changing with less heavy oil coming to the Gulf Coast, and what impact does this have on your assets? A: Jeremy Goebel stated that while there has been a reduction in heavy oil exports, their facilities and refinery-focused assets have not been significantly impacted. Basin flows have improved due to increased Permian production and reduced DJ and Rockies flows.

Q: Can you provide more details on the Fivestones gathering system acquisition? A: Jeremy Goebel described it as a strategic fit, integrating barrels into their system and enhancing connectivity with existing operations. It aligns with their strategy of bolt-on acquisitions to optimize their asset base.

Q: How does producer efficiency in the Permian affect your capital efficiency and gathering CapEx? A: Jeremy Goebel highlighted that producer efficiencies, such as larger development pads and fewer connection points, have improved capital efficiency. This trend is expected to continue, allowing for more cost-effective operations.

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