Core Viewpoint - Plains All American Pipeline has announced a definitive agreement to acquire a 55% non-operated interest in EPIC Crude Holdings for approximately $1.57 billion, which includes about $600 million of debt, with the transaction expected to enhance cash flow and provide synergistic opportunities [1][4][5] Transaction Details - The acquisition includes a potential earnout payment of $193 million if the pipeline expansion to a capacity of at least 900,000 barrels per day is sanctioned by the end of 2027 [1] - The transaction is anticipated to be immediately accretive to distributable cash flow, with expected mid-teens unlevered returns [1][7] Asset Overview - The EPIC Pipeline provides long-haul crude oil takeaway from the Permian and Eagle Ford basins to the Gulf Coast market at Corpus Christi, with approximately 800 miles of pipelines and an operating capacity of over 600,000 barrels per day [2][6] - EPIC Crude Holdings has around 7 million barrels of operational storage and over 200,000 barrels per day of export capacity [6] Strategic Benefits - The acquisition strengthens Plains' position as a premier crude oil midstream provider and enhances its asset footprint, improving customer connectivity and flexibility [4][5] - The combined assets will allow for additional service offerings and value creation through expanded scale and integration [5][7] Financial Position - Plains plans to finance the acquisition using its balance sheet while maintaining a pro-forma leverage ratio within its established target range [5][7] - The transaction is expected to support additional return of capital opportunities for unit holders [5][7] Completion Timeline - The transaction is expected to be completed by early 2026, pending customary closing conditions, including regulatory clearance [8]

Core Viewpoint - The midstream segment of the petroleum value chain, particularly Plains All American Pipeline (PAA), presents investment opportunities despite challenges faced by upstream and downstream operators in the energy sector [2][4]. Industry Overview - The energy sector has seen a 0.85% loss, making it the second-worst performer among the S&P 500 sectors this year, largely due to poor performances from oil majors [1]. - Global oil supply is expected to exceed demand by approximately 600,000 barrels per day in 2025, exacerbated by OPEC output increases, which may keep prices under pressure [2]. - West Texas Intermediate crude is trading at $63.35 per barrel, down 45% from its 2022 peak, while Brent crude is at $66.38, marking a 44% drop from its high [3]. Company Performance - Plains All American Pipeline has a dividend yield of 8.68% and an annual dividend of $1.52 per share, with a payout ratio of 172.73% [6]. - The company reported a 3.12% year-to-date gain, with earnings per share (EPS) of 36 cents, surpassing the consensus estimate of 33 cents [8]. - Quarterly revenue decreased by 16.6% year-over-year, and adjusted free cash flow (FCF) fell by 16% year-over-year, but the long-term growth trajectory remains strong [8][10]. Financial Highlights - Management confirmed full-year guidance of $2.8 billion to $2.9 billion EBITDA, with net income increasing by 129.92% from a loss of $2.58 billion in 2020 to a gain of $772 million in 2024 [9][10]. - Net cash from operating activities rose by 6% year-over-year, from $653 million to $694 million [12]. - The company is exiting its NGL segment in Canada for $3.75 billion, with proceeds expected to support M&A activities [11]. Market Outlook - Analysts have set an average 12-month price target of $20.75 for PAA, indicating a potential upside of 16.18% from the current price, not including the dividend yield [13].

Company Overview - Plains All American Pipeline, L.P. (NYSE: PAA) is a midstream Master Limited Partnership (MLP) with a market capitalization exceeding $12 billion and offers a high single-digit dividend yield [2]. Performance Analysis - The company has underperformed the market in recent times, indicating potential challenges in its operational or market strategy [2]. Investment Strategy - The Value Portfolio focuses on constructing retirement portfolios through a fact-based research strategy, which includes thorough analysis of 10Ks, analyst commentary, market reports, and investor presentations [2].

Industry Overview - The Zacks Oil and Gas - Pipeline MLP industry consists of master limited partnerships (MLPs) that primarily transport oil, natural gas, refined petroleum products, and natural gas liquids (NGL) in North America, providing midstream services and generating stable fee-based revenues [3] - The industry is capital-intensive, with a debt-to-capitalization ratio of 55%, which can limit financial flexibility for midstream energy companies [4] Current Challenges - The outlook for the industry remains uncertain due to conservative capital spending by upstream players, which may lead to lower utilization of midstream assets [1][6] - A significant debt burden continues to hinder midstream energy companies' ability to fund new projects and withstand economic downturns [1][4] - There is a gradual shift from fossil fuels to renewable energy, which may reduce demand for pipeline and storage networks for oil and natural gas [5] Competitive Position - Pipeline players are in a stronger position compared to upstream and downstream firms, benefiting from steady, fee-based income through long-term contracts with shippers [2] - Leading companies in the sector include Enterprise Products Partners LP (EPD), Energy Transfer LP (ET), and Plains All American Pipeline LP (PAA) [2] Industry Performance - The Zacks Oil and Gas - Pipeline MLP industry has outperformed the broader Zacks Oil - Energy sector, with an 11.9% increase over the past year, compared to a 3% gain for the sector and a 21.6% improvement for the S&P 500 [10] Valuation Metrics - The industry is currently trading at an EV/EBITDA ratio of 10.97X, lower than the S&P 500's 17.45X but significantly above the sector's 4.76X [14] - Over the past five years, the industry has traded between 7.48X and 12.57X, with a median of 10.11X [14] Notable Companies - Enterprise Products Partners LP (EPD) has a diversified asset portfolio with over 50,000 miles of pipelines and a storage capacity of 300 million barrels, generating stable fee-based revenues [17] - Energy Transfer LP (ET) operates a vast pipeline network across 125,000 miles, with a projected earnings growth of 9.4% for the year [21][22] - Plains All American Pipeline (PAA) relies on its oil and natural gas pipeline network and is expected to see marginal top-line growth of 1% in 2025 [25]

Group 1 - Samuel Smith has extensive experience in dividend stock research and investment, having served as lead analyst and Vice President at notable firms [1] - He is a Professional Engineer and Project Management Professional, holding degrees in Civil Engineering & Mathematics and a Masters in Engineering with a focus on applied mathematics and machine learning [1] - Samuel leads the High Yield Investor investing group, collaborating with Jussi Askola and Paul R. Drake to balance safety, growth, yield, and value in investment strategies [2] Group 2 - High Yield Investor provides real-money core, retirement, and international portfolios, along with regular trade alerts and educational content [2] - The service includes an active chat room for investors to share insights and strategies [2]

Core Insights - The article focuses on Plains All American Pipeline, L.P. (PAA, PAGP) and its Master Limited Partnership (MLP) structure, which is favored by income-focused investors [1] - The author emphasizes a strategy of identifying undervalued companies with strong fundamentals and cash flows, particularly in the Oil & Gas sector [1] - Energy Transfer is highlighted as a company that has been overlooked but shows potential for substantial returns [1] Group 1 - The article discusses the appeal of MLPs to income-focused investors, particularly in the context of Plains All American Pipeline [1] - The author expresses a preference for long-term value investing while also exploring deal arbitrage opportunities in various sectors [1] - There is a noted skepticism towards investments in high-tech businesses and cryptocurrencies, indicating a focus on more traditional sectors [1]

Core Insights - Plains All American Pipeline (PAA) reported a revenue of $10.64 billion for the quarter ended June 2025, reflecting a year-over-year decline of 17.7% [1] - The earnings per share (EPS) for the same period was $0.36, an increase from $0.31 a year ago, resulting in an EPS surprise of +20% against the consensus estimate of $0.30 [1] - The reported revenue fell short of the Zacks Consensus Estimate of $12.05 billion by -11.68% [1] Financial Performance Metrics - Total crude oil pipeline tariff volumes were reported at 9,659 thousand barrels, compared to the estimated 10,382.16 thousand barrels by analysts [4] - Revenues from NGL (Natural Gas Liquids) were $26 million, significantly lower than the average estimate of $139.11 million, marking a year-over-year decline of -91.1% [4] - Segment Adjusted EBITDA for NGL was reported at $87 million, exceeding the average estimate of $68.82 million [4] - Segment Adjusted EBITDA for crude oil was $580 million, slightly below the average estimate of $598.78 million [4] Stock Performance - Shares of Plains All American have returned -4.7% over the past month, contrasting with the Zacks S&P 500 composite's +1.9% change [3] - The stock currently holds a Zacks Rank 4 (Sell), indicating potential underperformance relative to the broader market in the near term [3]

PART I. FINANCIAL INFORMATION [Item 1. Unaudited Condensed Consolidated Financial Statements](index=3&type=section&id=Item%201.%20UNAUDITED%20CONDENSED%20CONSOLIDATED%20FINANCIAL%20STATEMENTS) The unaudited interim financial statements highlight the reclassification of the Canadian NGL business as discontinued operations [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Balance Sheet Highlights (in millions) | Balance Sheet Highlights (in millions) | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total current assets | $4,688 | $4,802 | | Property and equipment, net | $14,177 | $13,446 | | **Total assets** | **$27,155** | **$26,562** | | Total current liabilities | $4,679 | $4,950 | | Senior notes, net | $8,133 | $7,141 | | **Total liabilities** | **$14,206** | **$13,466** | | **Total partners' capital** | **$12,949** | **$13,096** | [Condensed Consolidated Statements of Operations](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Income Statement Highlights (in millions, except per unit data) | Income Statement Highlights (in millions, except per unit data) | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :--- | :--- | :--- | :--- | :--- | | Total revenues | $10,642 | $12,757 | $22,119 | $24,396 | | Operating Income | $239 | $332 | $594 | $688 | | Income from Continuing Operations | $227 | $298 | $607 | $639 | | Income from Discontinued Operations | $70 | $32 | $206 | $42 | | **Net Income Attributable to PAA** | **$210** | **$250** | **$653** | **$515** | | **Basic and diluted net income per common unit** | **$0.21** | **$0.26** | **$0.70** | **$0.55** | [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Cash Flow Highlights (in millions) | Cash Flow Highlights (in millions) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $1,333 | $1,072 | | Net cash used in investing activities | ($1,423) | ($418) | | Net cash provided by/(used in) financing activities | $182 | ($545) | | **Net increase in cash and cash equivalents** | **$111** | **$103** | [Notes to the Condensed Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20the%20Condensed%20Consolidated%20Financial%20Statements) Detailed disclosures cover the pending CAD$5.15 billion sale of the Canadian NGL business, recent acquisitions, and increased debt levels - On June 17, 2025, PAA entered into a definitive agreement to sell its Canadian NGL Business to Keyera Corp for approximately **CAD$5.15 billion** (about $3.75 billion)[31](index=31&type=chunk)[32](index=32&type=chunk) - Income from discontinued operations for the six months ended June 30, 2025, was **$206 million**, a significant increase from $42 million in the same period of 2024[40](index=40&type=chunk) - Total debt increased to **$8.68 billion** from $7.62 billion at year-end 2024, primarily due to a new **$1.0 billion senior notes offering** in January 2025[57](index=57&type=chunk)[58](index=58&type=chunk) - On January 31, 2025, the company repurchased approximately 12.7 million of its Series A preferred units for about **$333 million**[62](index=62&type=chunk) - The company entered into a forward currency instrument to hedge the proceeds from the Canadian NGL sale, recognizing a **$49 million loss** in Q2 2025[80](index=80&type=chunk) - The estimated aggregate total cost for the May 2015 Line 901 incident is approximately **$870 million**[100](index=100&type=chunk) - During the first half of 2025, the company completed several acquisitions, including Ironwood Midstream for approximately **$481 million** and Medallion Midstream for **$163 million**[117](index=117&type=chunk)[121](index=121&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=41&type=section&id=Item%202.%20MANAGEMENT'S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) Management discusses financial performance, the strategic sale of the Canadian NGL business, and the company's strong liquidity position [Results of Operations](index=42&type=section&id=Results%20of%20Operations) - Net income attributable to PAA for the six months ended June 30, 2025, was **$653 million**, compared to $515 million for the same period in 2024[129](index=129&type=chunk)[131](index=131&type=chunk) - The decrease in product sales revenues for H1 2025 compared to H1 2024 was primarily due to **lower commodity prices**, partially offset by higher crude oil sales volumes[134](index=134&type=chunk) - Crude Oil Segment Adjusted EBITDA for H1 2025 was stable compared to H1 2024, as the benefit from **higher tariff volumes** and acquisitions was largely offset by fewer market-based opportunities and higher operating expenses[160](index=160&type=chunk) Non-GAAP Performance (in millions) | Non-GAAP Performance (in millions) | H1 2025 | H1 2024 | Variance % | | :--- | :--- | :--- | :--- | | Adjusted EBITDA | $1,693 | $1,654 | 2% | | Adjusted EBITDA attributable to PAA | $1,426 | $1,391 | 3% | | Implied DCF | $1,043 | $1,001 | 4% | [Liquidity and Capital Resources](index=54&type=section&id=Liquidity%20and%20Capital%20Resources) - As of June 30, 2025, the company had approximately **$2.7 billion of available liquidity**, including cash and available capacity under its credit facilities[172](index=172&type=chunk) - Net cash from operating activities increased to **$1.33 billion** in H1 2025 from $1.07 billion in H1 2024[175](index=175&type=chunk) - Projected capital expenditures for the full year 2025 include approximately **$580 million** for investment capital and **$250 million** for maintenance capital[180](index=180&type=chunk) - In January 2025, the company issued **$1.0 billion of 5.95% senior notes** due 2035, using the proceeds to fund acquisitions, repurchase preferred units, and repay other borrowings[188](index=188&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=62&type=section&id=Item%203.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) The company manages commodity, interest rate, and currency risks using derivatives, with significant exposure to USD/CAD exchange rate fluctuations - The company uses derivative instruments to manage exposure to commodity price risk (crude oil, power), interest rate risk, and currency exchange rate risk[206](index=206&type=chunk) - A **10% change in crude oil prices** would result in a **$6-7 million change** in the fair value of the company's crude oil derivatives[208](index=208&type=chunk) - A **10% change in the USD-to-CAD exchange rate** would result in a **$334 million change** in the fair value of the company's foreign currency derivatives, highlighting the significance of the hedge on the pending Canadian NGL business sale[211](index=211&type=chunk) [Item 4. Controls and Procedures](index=63&type=section&id=Item%204.%20CONTROLS%20AND%20PROCEDURES) Management concluded that disclosure controls and procedures were effective, with no material changes to internal controls during the quarter - The Chief Executive Officer and Chief Financial Officer concluded that the company's **disclosure controls and procedures were effective** as of June 30, 2025[213](index=213&type=chunk) - There were **no material changes** in internal control over financial reporting during the second quarter of 2025[214](index=214&type=chunk) PART II. OTHER INFORMATION [Item 1. Legal Proceedings](index=64&type=section&id=Item%201.%20LEGAL%20PROCEEDINGS) This section incorporates by reference the detailed discussion of legal matters from Note 10 of the financial statements - Information regarding legal proceedings is incorporated by reference from Note 10 to the Condensed Consolidated Financial Statements[217](index=217&type=chunk) [Item 1A. Risk Factors](index=64&type=section&id=Item%201A.%20RISK%20FACTORS) This section refers to the comprehensive risk factor discussion in the 2024 Annual Report, noting no material changes - A full discussion of risk factors is available in Item 1A of the company's 2024 Annual Report on Form 10-K[218](index=218&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=64&type=section&id=Item%202.%20UNREGISTERED%20SALES%20OF%20EQUITY%20SECURITIES%20AND%20USE%20OF%20PROCEEDS) The company repurchased approximately $8 million of its common units under its existing equity repurchase program during the quarter Common Unit Repurchases | Period | Total Units Purchased | Average Price Paid | Value of Remaining Authorization | | :--- | :--- | :--- | :--- | | April 1-30, 2025 | 476,695 | $15.74 | $190,043,261 | [Other Items (3, 4, 5)](index=64&type=section&id=Other%20Items%20(3,%204,%205)) The report confirms no defaults on senior securities, no mine safety disclosures, and no new insider trading arrangements - There were no defaults on senior securities, no mine safety disclosures to report, and no new Rule 10b5-1 trading arrangements for directors or officers during the quarter ended June 30, 2025[221](index=221&type=chunk)[222](index=222&type=chunk)[223](index=223&type=chunk) [Item 6. Exhibits](index=65&type=section&id=Item%206.%20EXHIBITS) This section lists filed exhibits, including the Share Purchase Agreement for the sale of the Canadian NGL business - A key exhibit filed with this report is the Share Purchase Agreement dated June 17, 2025, for the sale of the Canadian NGL business to Keyera Corp[224](index=224&type=chunk)

Financial Data and Key Metrics Changes - The company reported adjusted EBITDA attributable to Plains of $672 million for Q2 2025, with a full-year EBITDA guidance range of $2.8 billion to $2.95 billion remaining intact [4][10] - The crude oil segment adjusted EBITDA was $580 million, benefiting from Permian volume growth and higher throughput from refiner customers [9] - The NGL segment reported adjusted EBITDA of $87 million, which decreased sequentially due to normal seasonality and lower frac spreads [9] Business Line Data and Key Metrics Changes - The company executed a definitive agreement to sell substantially all of its NGL business to Keyera for approximately $3.75 billion, expected to close in 2026, which will streamline operations and reduce commodity exposure [5][12] - Year-to-date, the company completed five bolt-on transactions totaling approximately $800 million, indicating a strong focus on expanding its crude oil portfolio [6] Market Data and Key Metrics Changes - The company anticipates that new OPEC+ supply will be absorbed, reducing spare capacity, and that limited long-lead project additions will increase reliance on North American onshore production [13] - Management noted improving diesel demand from refiners, with no signs of slowdown in demand, indicating a positive outlook for the refining sector [20][21] Company Strategy and Development Direction - The divestiture of the NGL business marks a significant strategic shift towards focusing on crude oil operations, enhancing financial flexibility and operational efficiency [12][13] - The company aims to redeploy approximately $3 billion from the NGL sale into bolt-on acquisitions and optimizing its capital structure, including potential unit buybacks [5][36] Management Comments on Operating Environment and Future Outlook - Management expressed confidence in navigating current market dynamics, expecting fundamentals to improve in the long term due to population and economic growth driving energy demand [13][22] - The company remains committed to being a vital infrastructure provider for reliable energy across global markets, despite short-term volatility [13] Other Important Information - The company expects to generate approximately $870 million of adjusted free cash flow for 2025, with growth capital guidance increased to $475 million [10][11] - Maintenance capital is trending closer to $230 million, which is $10 million below the initial forecast [11] Q&A Session Summary Question: How does the company factor in sensitivity to basin-level growth in its bolt-on strategies? - Management considers all factors, focusing on discounted cash flow and integrated networks, while evaluating opportunities across different basins [16][17] Question: Can you provide insights on real-time demand signals and any signs of slowdown? - Management noted strong diesel demand and no expected slowdown, with a positive outlook for refining demand continuing [20][22] Question: Can you discuss the BridgeTex deal and its fit within the business? - The company is consolidating its interest in BridgeTex with ONEOK, focusing on optimizing cost structures and filling the pipeline [27][28] Question: What is the outlook for growth CapEx and its relation to producer activity? - The increase in growth CapEx reflects new opportunities and capturing business not previously anticipated, with a focus on synergy capture [29][54] Question: Is there a shift in messaging regarding distribution growth? - Management clarified that there is no intended shift; the goal remains to grow distributions sustainably over multiple years [39][40] Question: What is the guidance for the second half of the year? - Management indicated that contract roll-offs will impact the second half, but growing production and other factors will help backfill those losses [44] Question: How will the company approach potential larger acquisitions with the proceeds from the NGL sale? - The company is positioned to explore various opportunities, maintaining financial flexibility to execute on small, medium, or large acquisitions as they arise [46]

Core Insights - Plains All American Pipeline, L.P. (PAA) reported second-quarter 2025 adjusted earnings of 36 cents per unit, exceeding the Zacks Consensus Estimate of 30 cents by 20% and up from 31 cents in the same quarter last year [1][8] PAA's Total Revenues - Net sales for the quarter were $10.64 billion, missing the Zacks Consensus Estimate of $12.05 billion by 11.7% and down 16.6% from $12.76 billion in the year-ago quarter [2] Highlights of PAA's Earnings Release - Total costs and expenses were $10.4 billion, a decrease of 16.3% year over year, attributed to lower purchases and related costs [3] - Net interest expenses rose to $133 million, an increase of 19.8% from the prior-year quarter [3] - The company agreed to divest substantially all of its NGL business for approximately $3.75 billion, with expected closing in Q1 2026, pending regulatory approval [3] PAA's Segmental Performance - The Crude Oil segment's adjusted EBITDA was $580 million, up 0.7% from the year-ago quarter, driven by higher tariff volumes and contributions from recent acquisitions, though offset by fewer market opportunities and lower commodity prices [4] Financial Update - As of June 30, 2025, cash and cash equivalents were $459 million, up from $348 million as of December 31, 2024 [6] - Long-term debt increased to $8.21 billion from $7.21 billion as of December 31, 2024, with long-term debt-to-total book capitalization rising to 46% from 42% [6] PAA's 2025 Guidance - For 2025, PAA expects adjusted EBITDA to be in the range of $2.80-$2.95 billion and adjusted free cash flow anticipated at $870 million, excluding changes in assets and liabilities [7][9]