Plains GP (PAGP) - 2019 Q3 - Quarterly Report

PART I. FINANCIAL INFORMATION Presents the unaudited condensed consolidated financial statements and related disclosures for Plains GP Holdings, L.P. Item 1. UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Presents the unaudited condensed consolidated financial statements for Plains GP Holdings, L.P. and its subsidiaries, including balance sheets, statements of operations, comprehensive income, cash flows, and changes in partners' capital, along with detailed notes Condensed Consolidated Balance Sheets Provides a snapshot of the company's financial position, detailing assets, liabilities, and partners' capital at specific dates | Metric | Sep 30, 2019 (millions) | Dec 31, 2018 (millions) | | :-------------------------------- | :---------------------- | :---------------------- | | Total Assets | $29,690 | $26,830 | | Total Liabilities | $15,267 | $13,511 | | Total Partners' Capital | $14,423 | $13,319 | - Cash and cash equivalents significantly increased from $69 million at December 31, 2018, to $611 million at September 30, 2019[8] - Short-term debt increased substantially from $66 million at December 31, 2018, to $1,084 million at September 30, 2019[8] Condensed Consolidated Statements of Operations Details the company's revenues, operating income, and net income over specific periods, highlighting profitability trends | Metric | 3 Months Ended Sep 30, 2019 (millions) | 3 Months Ended Sep 30, 2018 (millions) | 9 Months Ended Sep 30, 2019 (millions) | 9 Months Ended Sep 30, 2018 (millions) | | :-------------------------------- | :------------------------------------- | :------------------------------------- | :------------------------------------- | :------------------------------------- | | Total Revenues | $7,886 | $8,792 | $24,515 | $25,269 | | Operating Income | $490 | $492 | $1,651 | $958 | | Net Income | $431 | $676 | $1,771 | $1,046 | | Net Income Attributable to PAGP | $70 | $111 | $283 | $154 | | Basic Net Income Per Class A Share | $0.41 | $0.70 | $1.73 | $0.98 | - For the nine months ended September 30, 2019, Net Income attributable to PAGP increased by 83.77% to $283 million from $154 million in the prior year[11] - Basic Net Income Per Class A Share for the nine months ended September 30, 2019, increased by 76.53% to $1.73 compared to $0.98 in the same period of 2018[11] Condensed Consolidated Statements of Comprehensive Income Presents net income and other comprehensive income components, providing a holistic view of changes in equity | Metric | 3 Months Ended Sep 30, 2019 (millions) | 3 Months Ended Sep 30, 2018 (millions) | 9 Months Ended Sep 30, 2019 (millions) | 9 Months Ended Sep 30, 2018 (millions) | | :------------------------------------- | :------------------------------------- | :------------------------------------- | :------------------------------------- | :------------------------------------- | | Net income | $431 | $676 | $1,771 | $1,046 | | Other comprehensive income/(loss) | $(99) | $76 | $10 | $(46) | | Comprehensive income | $332 | $752 | $1,781 | $1,000 | | Comprehensive income attributable to PAGP | $47 | $128 | $285 | $144 | - Comprehensive income attributable to PAGP for the nine months ended September 30, 2019, increased by 97.92% to $285 million, up from $144 million in the same period of 2018[12] Condensed Consolidated Statements of Changes in Accumulated Other Comprehensive Income/(Loss) Tracks changes in accumulated other comprehensive income, including derivative instruments and translation adjustments | Component | Balance at Dec 31, 2018 (millions) | Total Period Activity (9 Months Ended Sep 30, 2019) (millions) | Balance at Sep 30, 2019 (millions) | | :------------------------ | :--------------------------------- | :------------------------------------------------------------- | :--------------------------------- | | Derivative Instruments | $(177) | $(104) | $(281) | | Translation Adjustments | $(853) | $113 | $(740) | | Other | $0 | $1 | $1 | | Total | $(1,030) | $10 | $(1,020) | - Accumulated Other Comprehensive Income/(Loss) improved from a loss of $1,030 million at December 31, 2018, to a loss of $1,020 million at September 30, 2019, primarily due to positive currency translation adjustments[14] Condensed Consolidated Statements of Cash Flows Summarizes cash inflows and outflows from operating, investing, and financing activities, indicating liquidity generation and usage | Cash Flow Activity | 9 Months Ended Sep 30, 2019 (millions) | 9 Months Ended Sep 30, 2018 (millions) | | :-------------------------------- | :------------------------------------- | :------------------------------------- | | Net cash provided by operating activities | $1,774 | $1,292 | | Net cash used in investing activities | $(1,367) | $(184) | | Net cash provided by/(used in) financing activities | $199 | $(1,112) | | Net increase/(decrease) in cash and cash equivalents and restricted cash | $601 | $(7) | | Cash and cash equivalents and restricted cash, end of period | $670 | $33 | - Net cash provided by operating activities increased by 37.31% to $1,774 million for the nine months ended September 30, 2019, compared to $1,292 million in the prior year[16] - Net cash used in investing activities significantly increased to $1,367 million in 2019 from $184 million in 2018, primarily due to higher investments in unconsolidated entities and additions to property and equipment[16] - Financing activities shifted from a net cash outflow of $1,112 million in 2018 to a net cash inflow of $199 million in 2019, driven by proceeds from the issuance of PAA senior notes[16] Condensed Consolidated Statements of Changes in Partners' Capital Illustrates the changes in partners' capital, reflecting net income, distributions, and other equity transactions | Metric | Balance at Dec 31, 2018 (millions) | Net Income (9 Months Ended Sep 30, 2019) (millions) | Distributions (9 Months Ended Sep 30, 2019) (millions) | Balance at Sep 30, 2019 (millions) | | :---------------------- | :--------------------------------- | :---------------------------------------------------- | :----------------------------------------------------- | :--------------------------------- | | Class A Shareholders | $1,846 | $283 | $(165) | $2,155 | | Noncontrolling Interests | $11,473 | $1,488 | $(729) | $12,268 | | Total Partners' Capital | $13,319 | $1,771 | $(894) | $14,423 | - Total Partners' Capital increased by $1,104 million from December 31, 2018, to September 30, 2019, primarily due to net income of $1,771 million, partially offset by distributions of $894 million[18] Note 1—Organization and Basis of Consolidation and Presentation Describes Plains GP Holdings, L.P.'s organizational structure, its relationship with PAA, and the basis for financial statement consolidation - Plains GP Holdings, L.P. (PAGP) is a Delaware limited partnership taxed as a corporation, with its principal cash flow derived from an indirect investment in Plains All American Pipeline, L.P. (PAA)[21] - PAGP owns a 100% managing member interest in GP LLC and an approximate 73% limited partner interest in AAP, which in turn owns a limited partner interest in PAA (approximately 32% of PAA's total outstanding common and preferred units)[22] - PAA operates midstream energy infrastructure and provides logistics services for crude oil, NGL, and natural gas through three segments: Transportation, Facilities, and Supply and Logistics[23] Note 2—Summary of Significant Accounting Policies Outlines the key accounting principles and policies applied in preparing the financial statements, including recent lease accounting changes - PAGP consolidates PAA and AAP, determining them to be Variable Interest Entities (VIEs) where PAGP is the primary beneficiary due to its power to direct activities and absorb significant losses/benefits[34] - Effective January 1, 2019, PAGP adopted ASU 2016-02, Leases (Topic 842), resulting in the recording of approximately $560 million in net lease right-of-use assets and $570 million in lease liabilities, with no material impact on results of operations or cash flows[35] - PAGP elected practical expedients under Topic 842, including carrying forward historical accounting for lease identification, classification, and indirect costs, and for land easements[36] Note 3—Revenues and Accounts Receivable Details revenue recognition by segment and changes in accounts receivable, including remaining performance obligations | Segment | 3 Months Ended Sep 30, 2019 (millions) | 3 Months Ended Sep 30, 2018 (millions) | 9 Months Ended Sep 30, 2019 (millions) | 9 Months Ended Sep 30, 2018 (millions) | | :-------------------------- | :------------------------------------- | :------------------------------------- | :------------------------------------- | :------------------------------------- | | Supply and Logistics | $7,387 | $8,534 | $23,096 | $24,832 | | Transportation | $590 | $496 | $1,685 | $1,416 | | Facilities | $281 | $285 | $843 | $845 | | Total Revenues from Contracts with Customers | $8,258 | $9,315 | $25,624 | $27,093 | - Supply and Logistics segment revenues from contracts with customers decreased by 13.44% for the three months ended September 30, 2019, and by 7.07% for the nine months ended September 30, 2019, primarily due to lower NGL and other transactions[42] - Transportation segment revenues from contracts with customers increased by 18.95% for the three months ended September 30, 2019, and by 18.99% for the nine months ended September 30, 2019, driven by higher crude oil pipeline tariff activities[42] - Remaining performance obligations for pipeline revenues supported by minimum volume commitments and capacity agreements totaled $1,332 million as of September 30, 2019, with $849 million due in 2024 and thereafter[45] Note 4—Net Income Per Class A Share Provides a breakdown of basic and diluted net income per Class A share, including factors affecting dilution | Metric | 3 Months Ended Sep 30, 2019 | 3 Months Ended Sep 30, 2018 | 9 Months Ended Sep 30, 2019 | 9 Months Ended Sep 30, 2018 | | :------------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Net income attributable to PAGP (millions) | $70 | $111 | $283 | $154 | | Basic weighted average Class A shares outstanding (millions) | 168 | 158 | 163 | 157 | | Basic net income per Class A share | $0.41 | $0.70 | $1.73 | $0.98 | | Diluted net income per Class A share | $0.41 | $0.70 | $1.72 | $0.98 | - For the nine months ended September 30, 2019, diluted net income per Class A share increased by 75.51% to $1.72, compared to $0.98 in the same period of 2018[56] - The possible exchange of AAP Management Units had a dilutive effect on basic net income per Class A share for the nine months ended September 30, 2019, but not for the three-month periods[55] Note 5—Inventory, Linefill and Base Gas and Long-term Inventory Details the composition and changes in inventory, linefill, base gas, and long-term inventory balances | Category | Sep 30, 2019 (millions) | Dec 31, 2018 (millions) | | :-------------------- | :---------------------- | :---------------------- | | Inventory subtotal | $816 | $640 | | Linefill and base gas subtotal | $930 | $916 | | Long-term inventory subtotal | $159 | $136 | | Total | $1,905 | $1,692 | - Total inventory increased by $213 million from December 31, 2018, to September 30, 2019, primarily driven by an increase in crude oil inventory volumes and carrying value[57] - Crude oil inventory volumes increased from 9,657 thousand barrels to 11,481 thousand barrels, with the price per unit increasing from $38.00 to $53.65[57] Note 6—Goodwill Reports the carrying value of goodwill by segment and any adjustments, confirming no impairment | Segment | Balance at Dec 31, 2018 (millions) | Foreign Currency Translation Adjustments (millions) | Balance at Sep 30, 2019 (millions) | | :------------------- | :--------------------------------- | :-------------------------------------------------- | :--------------------------------- | | Transportation | $1,040 | $7 | $1,047 | | Facilities | $978 | $2 | $980 | | Supply and Logistics | $503 | $2 | $505 | | Total | $2,521 | $11 | $2,532 | - Total goodwill increased by $11 million to $2,532 million at September 30, 2019, primarily due to foreign currency translation adjustments[58] - A quantitative assessment as of June 30, 2019, determined no impairment of goodwill[58] Note 7—Investments in Unconsolidated Entities Provides details on investments in unconsolidated entities, including ownership interests, balances, and significant transactions like joint venture formations | Entity | Type of Operation | Ownership Interest at Sep 30, 2019 | Investment Balance Sep 30, 2019 (millions) | Investment Balance Dec 31, 2018 (millions) | | :------------------------------------- | :---------------------- | :--------------------------------- | :----------------------------------------- | :----------------------------------------- | | Capline Pipeline Company LLC | Crude Oil Pipeline | 54% | $462 | — | | Cactus II Pipeline LLC | Crude Oil Pipeline | 65% | $666 | $455 | | Wink to Webster Pipeline LLC ("W2W Pipeline") | Crude Oil Pipeline | 16% | $79 | — | | Red Oak Pipeline LLC ("Red Oak") | Crude Oil Pipeline | 50% | $3 | — | | Total investments in unconsolidated entities | | | $3,485 | $2,702 | - Total investments in unconsolidated entities increased by $783 million to $3,485 million at September 30, 2019, from $2,702 million at December 31, 2018[59] - PAGP recognized a non-cash gain of $269 million during the nine months ended September 30, 2019, from the formation of Capline Pipeline Company LLC, where its undivided joint interest was contributed for an equity interest[62] - New joint ventures formed in 2019 include W2W Pipeline (16% ownership, targeted operations in 2021) and Red Oak Pipeline (50% ownership, targeted initial service in 2021), both developing new crude oil pipeline systems[64][65] Note 8—Debt Outlines the company's debt structure, including short-term and long-term obligations, and recent financing activities | Debt Category | Sep 30, 2019 (millions) | Dec 31, 2018 (millions) | | :-------------------- | :---------------------- | :---------------------- | | Short-term debt | $1,084 | $66 | | Long-term debt | $9,173 | $9,143 | | Total debt | $10,257 | $9,209 | - Total debt increased by $1,048 million to $10,257 million at September 30, 2019, from $9,209 million at December 31, 2018, primarily due to an increase in short-term debt[67] - In September 2019, PAA issued $1.0 billion of 3.55% senior notes due December 2029, intending to use proceeds to redeem existing senior notes[72] - PAA extended the maturity dates of its senior unsecured revolving credit facility and senior secured hedged inventory facility by one year to August 2024 and August 2022, respectively[69] Note 9—Partners' Capital and Distributions Details changes in partners' capital, share class outstanding, and distributions declared and paid | Share Class | Outstanding at Dec 31, 2018 | Outstanding at Sep 30, 2019 | | :---------------- | :-------------------------- | :-------------------------- | | Class A Shares | 159,485,588 | 182,006,009 | | Class B Shares | 119,604,338 | 68,559,062 | | Class C Shares | 516,938,280 | 546,897,362 | - Class A shares outstanding increased by 14.12% to 182,006,009 at September 30, 2019, primarily due to Exchange Right exercises by affiliates of EMG and Oxy[73][74] | Distribution Type | Payment Date | Amount (millions) | | :-------------------------- | :----------- | :---------------- | | Class A Shareholders | Nov 14, 2019 | $66 | | PAA Series A Preferred Unitholders | Nov 14, 2019 | $37 | | PAA Series B Preferred Unitholders | Nov 15, 2019 | $24.5 | | PAA Common Unitholders | Nov 14, 2019 | $262 | - PAGP formed a joint venture, Red River LLC, with Delek Logistics Partners, LP in May 2019, receiving $128 million for Delek's 33% interest, which is accounted for as a noncontrolling interest[77] Note 10—Derivatives and Risk Management Activities Explains the use of derivative instruments to manage commodity price, interest rate, and currency risks, and their financial impact - PAGP uses derivative instruments to manage commodity price risk, interest rate risk, and currency exchange rate risk, not for speculation[83] | Derivative Type | 9 Months Ended Sep 30, 2019 (millions) | 9 Months Ended Sep 30, 2018 (millions) | | :------------------------------------- | :------------------------------------- | :------------------------------------- | | Commodity Derivatives (gain/(loss)) | $395 | $(443) | | Foreign Currency Derivatives (gain/(loss)) | $6 | $(7) | | Preferred Distribution Rate Reset Option (gain/(loss)) | $16 | $3 | | Interest Rate Derivatives (gain/(loss)) | $(7) | $(3) | | Total gain/(loss) on derivatives recognized in net income | $410 | $(450) | - The net impact of derivatives recognized in net income for the nine months ended September 30, 2019, was a gain of $410 million, a significant improvement from a loss of $450 million in the prior year, primarily driven by commodity derivatives[95] | Derivative Type | Fair Value as of Sep 30, 2019 (millions) | Fair Value as of Dec 31, 2018 (millions) | | :-------------------------- | :--------------------------------------- | :--------------------------------------- | | Commodity derivatives | $337 | $270 | | Interest rate derivatives | $(64) | $(7) | | Foreign currency derivatives | $(1) | $(9) | | Preferred Distribution Rate Reset Option | $(19) | $(36) | | Total net derivative asset/(liability) | $253 | $218 | Note 11—Leases Details the company's lease accounting under Topic 842, including right-of-use assets, lease liabilities, and lease costs - PAGP recognizes right-of-use assets and lease liabilities for noncancelable operating and finance leases with terms greater than 12 months, primarily for railcars, office space, land, vehicles, and storage tanks[113] Lease Cost Components | Lease Cost Component | 3 Months Ended Sep 30, 2019 (millions) | 9 Months Ended Sep 30, 2019 (millions) | | :--------------------- | :------------------------------------- | :------------------------------------- | | Operating lease cost | $32 | $95 | | Short-term lease cost | $11 | $32 | | Total lease cost | $42 | $127 | Lease Metrics | Lease Metric | Sep 30, 2019 | | :------------------------------------- | :----------- | | Weighted-average remaining lease term (Operating leases) | 10.2 years | | Weighted-average discount rate (Operating leases) | 4.5% | | Total lease right-of-use assets (millions) | $538 | | Total lease liabilities (millions) | $507 | - As a lessor, PAGP's Facilities and Transportation segments enter into operating lease agreements for storage and transportation services, with expected undiscounted cash flows of $226 million thereafter 2023[122][123] Note 12—Related Party Transactions Discloses transactions and balances with related parties, including PAA and other affiliates - PAA owned 546,897,362 Class C shares as of September 30, 2019, representing a non-economic limited partner interest that provides pass-through voting rights to PAA's common and Series A preferred unitholders[125] - During the nine months ended September 30, 2019, revenues from related parties totaled $661 million, and purchases and related costs from related parties totaled $93 million[128] Related Party Balances | Metric | Sep 30, 2019 (millions) | Dec 31, 2018 (millions) | | :------------------------------------------------- | :---------------------- | :---------------------- | | Trade accounts receivable and other receivables, net from related parties | $165 | $144 | | Trade accounts payable to related parties | $105 | $121 | Note 13—Commitments and Contingencies Addresses various commitments and contingencies, including environmental liabilities and legal proceedings - PAGP accrues undiscounted liabilities for probable and reasonably estimable losses, including environmental liabilities and legal fees[131] Environmental Liability | Environmental Liability | Sep 30, 2019 (millions) | Dec 31, 2018 (millions) | | :-------------------------------- | :---------------------- | :---------------------- | | Estimated undiscounted reserve | $135 | $135 | | Short-term portion | $62 | $43 | | Long-term portion | $73 | $92 | | Recorded receivables for probable recovery | $62 | $61 | - For the Line 901 incident, PAGP estimates aggregate total costs of approximately $380 million, with a remaining undiscounted gross liability of $79 million as of September 30, 2019[153][154] - PAGP has collected $200 million out of an approximate $255 million of release costs believed probable of recovery from insurance carriers for the Line 901 incident, with a remaining receivable of $55 million[154] Note 14—Operating Segments Provides financial information and performance metrics for the Transportation, Facilities, and Supply and Logistics operating segments - PAGP manages operations through three segments: Transportation, Facilities, and Supply and Logistics, with performance evaluated based on Segment Adjusted EBITDA and maintenance capital investment[156][157] Segment Adjusted EBITDA | Segment | 3 Months Ended Sep 30, 2019 (millions) | 3 Months Ended Sep 30, 2018 (millions) | 9 Months Ended Sep 30, 2019 (millions) | 9 Months Ended Sep 30, 2018 (millions) | | :------------------- | :------------------------------------- | :------------------------------------- | :------------------------------------- | :------------------------------------- | | Transportation | $462 | $388 | $1,271 | $1,083 | | Facilities | $173 | $173 | $529 | $530 | | Supply and Logistics | $92 | $75 | $571 | $120 | | Total Segment Adjusted EBITDA | $727 | $636 | $2,371 | $1,733 | - Total Segment Adjusted EBITDA increased by 14.31% for the three months and 36.81% for the nine months ended September 30, 2019, compared to the prior year, driven by strong performance in Transportation and Supply and Logistics[159] Segment Performance | Metric | 9 Months Ended Sep 30, 2019 (millions) | 9 Months Ended Sep 30, 2018 (millions) | | :------------------------------------- | :------------------------------------- | :------------------------------------- | | Segment Adjusted EBITDA | $2,371 | $1,733 | | Net income attributable to PAGP | $283 | $154 | Note 15—Income Taxes Discusses significant income tax events, including changes in deferred tax liabilities and assets - During the second quarter of 2019, PAGP recognized a $60 million reduction in deferred income tax liability due to a decrease in the Alberta provincial corporate income tax rate from 12% to 8%[164] - PAGP recognized a deferred tax asset during the nine months ended September 30, 2019, as a result of Exchange Right exercises by EMG and Oxy, impacting partners' capital[165] Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Provides a detailed discussion and analysis of Plains GP Holdings, L.P.'s financial condition, results of operations, acquisitions, capital projects, liquidity, and capital resources Executive Summary Provides an overview of key financial performance, capital investments, and strategic initiatives for the reporting period - Net income for the first nine months of 2019 increased to $1.771 billion from $1.046 billion in 2018, driven by favorable Supply and Logistics results, higher Transportation segment volumes, and a non-cash gain on investment in Capline pipeline[171] - PAGP invested $988 million in midstream infrastructure projects during the first nine months of 2019, with full-year expansion capital expected to be approximately $1.35 billion, primarily in the Permian Basin[172] - PAA completed its Leverage Reduction Plan in April 2019, lowering its targeted long-term debt to Adjusted EBITDA leverage ratio to 3.0x to 3.5x and adopting an annual cycle for common unit distribution levels[175] Acquisitions and Capital Projects Details capital expenditures for acquisitions, expansion, and maintenance, along with projected investments in infrastructure projects Capital Expenditures | Capital Type | 9 Months Ended Sep 30, 2019 (millions) | 9 Months Ended Sep 30, 2018 (millions) | | :----------------- | :------------------------------------- | :------------------------------------- | | Acquisition capital | $47 | $0 | | Expansion capital | $988 | $1,370 | | Maintenance capital | $204 | $186 | | Total | $1,239 | $1,556 | - Total capital expenditures decreased by $317 million for the nine months ended September 30, 2019, primarily due to lower expansion capital[178] Projected 2019 Expansion Capital Expenditures | Project Category | Projected 2019 Expansion Capital Expenditures (millions) | | :-------------------------------- | :------------------------------------------------------- | | Permian Basin Takeaway Pipeline Projects | $500 | | Complementary Permian Basin Projects | $485 | | Other Long-Haul Pipeline Projects | $100 | | Selected Facilities | $100 | | Other Projects | $165 | | Total Projected 2019 Expansion Capital Expenditures | $1,350 | Results of Operations Analyzes the company's financial performance, including segment-adjusted EBITDA, net income, and diluted earnings per share Key Financial Metrics | Metric | 3 Months Ended Sep 30, 2019 (millions) | 3 Months Ended Sep 30, 2018 (millions) | 9 Months Ended Sep 30, 2019 (millions) | 9 Months Ended Sep 30, 2018 (millions) | | :-------------------------------- | :------------------------------------- | :------------------------------------- | :------------------------------------- | :------------------------------------- | | Transportation Segment Adjusted EBITDA | $462 | $388 | $1,271 | $1,083 | | Facilities Segment Adjusted EBITDA | $173 | $173 | $529 | $530 | | Supply and Logistics Segment Adjusted EBITDA | $92 | $75 | $571 | $120 | | Net income attributable to PAGP | $70 | $111 | $283 | $154 | | Diluted net income per Class A share | $0.41 | $0.70 | $1.72 | $0.98 | - Net income attributable to PAGP for the nine months ended September 30, 2019, increased by 84% to $283 million, while diluted net income per Class A share increased by 76% to $1.72[181] Consolidated Financial Performance | Metric | 3 Months Ended Sep 30, 2019 (millions) | 3 Months Ended Sep 30, 2018 (millions) | 9 Months Ended Sep 30, 2019 (millions) | 9 Months Ended Sep 30, 2018 (millions) | | :-------------------------------- | :------------------------------------- | :------------------------------------- | :------------------------------------- | :------------------------------------- | | Net income | $431 | $676 | $1,771 | $1,046 | | Adjusted EBITDA | $730 | $635 | $2,373 | $1,732 | - Adjusted EBITDA increased by 15% for the three months and 37% for the nine months ended September 30, 2019, reflecting improved core operating performance[187] Analysis of Operating Segments Provides a detailed review of the financial performance and key drivers for each of the company's operating segments Transportation Segment The Transportation segment's operating results improved significantly, driven by higher volumes in the Permian Basin due to increased production and new capital expansion projects | Metric | 3 Months Ended Sep 30, 2019 (millions) | 3 Months Ended Sep 30, 2018 (millions) | 9 Months Ended Sep 30, 2019 (millions) | 9 Months Ended Sep 30, 2018 (millions) | | :-------------------------- | :------------------------------------- | :------------------------------------- | :------------------------------------- | :------------------------------------- | | Revenues | $597 | $498 | $1,712 | $1,427 | | Segment Adjusted EBITDA | $462 | $388 | $1,271 | $1,083 | | Maintenance capital | $42 | $41 | $110 | $102 | | Segment Adjusted EBITDA per barrel | $0.71 | $0.70 | $0.69 | $0.69 | - Transportation Segment Adjusted EBITDA increased by 19% for the three months and 17% for the nine months ended September 30, 2019, primarily due to higher volumes in the Permian Basin[195][200] Average Daily Volumes | Region | 3 Months Ended Sep 30, 2019 (Avg Daily Volumes in thousands of barrels per day) | 3 Months Ended Sep 30, 2018 (Avg Daily Volumes in thousands of barrels per day) | 9 Months Ended Sep 30, 2019 (Avg Daily Volumes in thousands of barrels per day) | 9 Months Ended Sep 30, 2018 (Avg Daily Volumes in thousands of barrels per day) | | :-------------------- | :------------------------------------------------------------------------------ | :------------------------------------------------------------------------------ | :------------------------------------------------------------------------------ | :------------------------------------------------------------------------------ | | Permian Basin | 4,852 | 3,880 | 4,568 | 3,621 | | Crude oil pipelines | 6,807 | 5,746 | 6,512 | 5,448 | | Transportation segment total volumes | 7,081 | 6,015 | 6,793 | 5,716 | - Permian Basin crude oil pipeline volumes increased by 25% (3 months) and 26% (9 months) year-over-year, driven by increased production and new pipelines like Sunrise II and Cactus II[196][200] Facilities Segment The Facilities segment maintained stable Segment Adjusted EBITDA, with increased revenues from crude oil storage and rail terminals, offset by a decrease in NGL operations | Metric | 3 Months Ended Sep 30, 2019 (millions) | 3 Months Ended Sep 30, 2018 (millions) | 9 Months Ended Sep 30, 2019 (millions) | 9 Months Ended Sep 30, 2018 (millions) | | :-------------------------- | :------------------------------------- | :------------------------------------- | :------------------------------------- | :------------------------------------- | | Revenues | $291 | $289 | $880 | $866 | | Segment Adjusted EBITDA | $173 | $173 | $529 | $530 | | Maintenance capital | $28 | $33 | $74 | $74 | | Segment Adjusted EBITDA per barrel | $0.46 | $0.47 | $0.47 | $0.48 | - Facilities Segment Adjusted EBITDA remained flat for the three months and slightly decreased by $1 million for the nine months ended September 30, 2019[210] - Crude oil storage revenues increased by $12 million for the nine months ended September 30, 2019, due to increased activity at terminals and additional storage capacity at Midland[213] - NGL operations revenues decreased by $13 million for the nine months ended September 30, 2019, primarily due to an $11 million unfavorable foreign exchange impact and the sale of a natural gas processing facility[214] Supply and Logistics Segment The Supply and Logistics segment experienced a significant increase in Segment Adjusted EBITDA, driven by more favorable crude oil differentials and improved NGL margins | Metric | 3 Months Ended Sep 30, 2019 (millions) | 3 Months Ended Sep 30, 2018 (millions) | 9 Months Ended Sep 30, 2019 (millions) | 9 Months Ended Sep 30, 2018 (millions) | | :-------------------------- | :------------------------------------- | :------------------------------------- | :------------------------------------- | :------------------------------------- | | Revenues | $7,542 | $8,483 | $23,480 | $24,376 | | Segment Adjusted EBITDA | $92 | $75 | $571 | $120 | | Maintenance capital | $15 | $4 | $20 | $10 | | Segment Adjusted EBITDA per barrel | $0.79 | $0.66 | $1.57 | $0.35 | - Supply and Logistics Segment Adjusted EBITDA increased by 23% for the three months and 376% for the nine months ended September 30, 2019, primarily due to favorable crude oil differentials and NGL margins[218][224] Average Daily Volumes | Volume Type | 3 Months Ended Sep 30, 2019 (Avg Daily Volumes in thousands of barrels per day) | 3 Months Ended Sep 30, 2018 (Avg Daily Volumes in thousands of barrels per day) | 9 Months Ended Sep 30, 2019 (Avg Daily Volumes in thousands of barrels per day) | 9 Months Ended Sep 30, 2018 (Avg Daily Volumes in thousands of barrels per day) | | :-------------------------- | :------------------------------------------------------------------------------ | :------------------------------------------------------------------------------ | :------------------------------------------------------------------------------ | :------------------------------------------------------------------------------ | | Crude oil lease gathering purchases | 1,146 | 1,042 | 1,126 | 1,034 | | NGL sales | 124 | 195 | 202 | 243 | | Supply and Logistics segment total volumes | 1,270 | 1,237 | 1,328 | 1,277 | - NGL sales volumes decreased by 36% (3 months) and 17% (9 months) year-over-year, but net revenues from NGL operations increased for the nine-month period due to streamlining activities and favorable regional differentials[220][224][225] Other Income and Expenses Examines changes in non-operating income and expenses, including depreciation, gains on investments, interest, and income taxes - Depreciation and amortization expense increased for both the three and nine months ended September 30, 2019, due to completed capital expansion projects and adjustments to asset useful lives[227] - A non-cash gain of $269 million was recognized on investment in unconsolidated entities for the nine months ended September 30, 2019, related to the Capline pipeline system formation[229] - Interest expense decreased for both periods due to a lower weighted average debt balance and higher capitalized interest in 2019[230] - Income tax expense increased for both periods, driven by higher deferred income tax expense from derivative mark-to-market valuations in Canadian operations and higher taxable earnings, partially offset by a $60 million deferred tax benefit from an Alberta provincial tax rate reduction[232][233] Liquidity and Capital Resources Discusses the company's financial liquidity, cash flow generation, capital expenditure plans, and financing strategies - As of September 30, 2019, PAGP had approximately $3.5 billion of liquidity, including $1.462 billion from PAA's senior unsecured revolving credit facility and $1.389 billion from its senior secured hedged inventory facility, plus $611 million in cash and cash equivalents[235] - Net cash provided by operating activities increased to $1.774 billion for the first nine months of 2019, up from $1.292 billion in 2018, positively impacted by proceeds from inventory sales[238][239] - PAGP invested $988 million in midstream infrastructure projects during the nine months ended September 30, 2019, and expects to fund its 2019 capital program with retained cash flow, asset divestiture proceeds, or debt[243] - In September 2019, PAA issued $1.0 billion in senior notes to repay existing debt and for general partnership purposes, and intends to redeem $1.0 billion of senior notes due December 2019 and January 2020[255][256] Contractual Obligations | Contractual Obligation | Remainder of 2019 (millions) | 2020 (millions) | 2021 (millions) | 2022 (millions) | 2023 (millions) | 2024 and Thereafter (millions) | Total (millions) | | :-------------------------------- | :--------------------------- | :-------------- | :-------------- | :-------------- | :-------------- | :----------------------------- | :--------------- | | Long-term debt and related interest payments | $1,114 | $412 | $985 | $1,115 | $1,636 | $9,807 | $15,069 | | Leases | $36 | $131 | $102 | $88 | $61 | $257 | $675 | | Other obligations | $279 | $1,065 | $675 | $301 | $279 | $1,373 | $3,972 | | Crude oil, NGL and other purchases | $3,822 | $9,417 | $8,806 | $8,444 | $7,487 | $19,676 | $57,652 | | Total | $5,251 | $11,025 | $10,568 | $9,948 | $9,463 | $31,113 | $77,368 | Off-Balance Sheet Arrangements Confirms the absence of off-balance sheet arrangements as defined by SEC regulations - PAGP has no off-balance sheet arrangements as defined by Item 303 of Regulation S-K[269] Recent Accounting Pronouncements Summarizes the adoption of new accounting standards and the evaluation of upcoming pronouncements - PAGP adopted ASU 2016-02, Leases (Topic 842), effective January 1, 2019, which resulted in recording approximately $560 million in net lease right-of-use assets and $570 million in lease liabilities[35] - PAGP is evaluating the effect of ASU 2019-05 and ASU 2019-04, related to financial instruments and credit losses, which are expected to be adopted on January 1, 2020[39][40] Critical Accounting Policies and Estimates Refers to the company's annual report for a discussion of significant accounting policies and estimates - PAGP's critical accounting policies and estimates are discussed in Item 7 of its 2018 Annual Report on Form 10-K[271] Forward-Looking Statements Provides a cautionary note regarding forward-looking statements and the inherent risks and uncertainties - The report contains forward-looking statements regarding business strategy, plans, and objectives, which are subject to various factors that could cause actual results to differ materially[273] - Key risk factors include declines in crude oil and NGL volumes, competition, market distortions, environmental liabilities, and fluctuations in financial markets[274] Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Details Plains GP Holdings, L.P.'s exposure to market risks, including commodity price, interest rate, and currency exchange rate risks, and outlines management strategies - PAGP is exposed to commodity price risk (crude oil, natural gas, NGL), interest rate risk (variable rate debt), and currency exchange rate risk (USD-to-CAD fluctuations)[277][278][280][281] Commodity Fair Value and Price Sensitivity | Commodity | Fair Value (millions) | Effect of 10% Price Increase (millions) | Effect of 10% Price Decrease (millions) | | :---------------- | :-------------------- | :-------------------------------------- | :-------------------------------------- | | Crude oil | $166 | $(35) | $46 | | Natural gas | $1 | $8 | $(8) | | NGL and other | $170 | $(26) | $26 | | Total fair value | $337 | | | - The fair value of interest rate derivatives was a liability of $64 million as of September 30, 2019; a 10% increase in the forward LIBOR curve would increase this liability by $8 million[280] - The Preferred Distribution Rate Reset Option, an embedded derivative in PAA's Series A preferred units, had a fair value liability of $19 million as of September 30, 2019[282] Item 4. CONTROLS AND PROCEDURES Confirms the effectiveness of Plains GP Holdings, L.P.'s disclosure controls and procedures and reports no material changes in internal control over financial reporting - Management, including the CEO and CFO, concluded that PAGP's disclosure controls and procedures (DCP) were effective as of September 30, 2019[284] - There were no material changes in internal control over financial reporting during the third quarter of 2019[285] PART II. OTHER INFORMATION Presents additional information not included in the financial statements, covering legal proceedings, risk factors, equity sales, and exhibits Item 1. LEGAL PROCEEDINGS Refers to Note 13 of the Condensed Consolidated Financial Statements for details on legal proceedings, including ongoing environmental contingencies - Information on legal proceedings is incorporated by reference from Note 13 to the Condensed Consolidated Financial Statements[288] Item 1A. RISK FACTORS Directs readers to Item 1A of the 2018 Annual Report on Form 10-K for a comprehensive discussion of risk factors - Risk factors are discussed in Item 1A of the 2018 Annual Report on Form 10-K, and these risks could adversely affect the business, financial condition, and results of operations[289] Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS Details the issuance of Class A shares through Exchange Right exercises, which were exempt from registration requirements and not dilutive - During the three months ended September 30, 2019, 15,173,490 Class A shares were issued due to Exchange Right exercises by Legacy Owners or permitted transferees[290] - These issuances were exempt from registration requirements under Section 4(a)(2) of the Securities Act of 1933 and were not dilutive, as PAGP received equivalent AAP units and general partner units[290] Item 3. DEFAULTS UPON SENIOR SECURITIES States that there were no defaults upon senior securities during the reporting period - There were no defaults upon senior securities[291] Item 4. MINE SAFETY DISCLOSURES Indicates that mine safety disclosures are not applicable to Plains GP Holdings, L.P. - Mine safety disclosures are not applicable[292] Item 5. OTHER INFORMATION States that there is no other information to report under this item - No other information is reported under this item[293] Item 6. EXHIBITS Lists all exhibits filed with the Form 10-Q, including organizational documents, indentures for senior notes, and certifications - The exhibits include various organizational documents, such as the Certificate of Limited Partnership and Amended and Restated Agreements for PAGP, PAA GP Holdings LLC, Plains All American Pipeline, L.P., and Plains AAP, L.P.[295][296][297] - Numerous supplemental indentures for PAA's senior notes, detailing various interest rates and maturity dates, are listed as exhibits[295][296][297] - Certifications from the Principal Executive Officer and Principal Financial Officer, as well as XBRL instance and taxonomy documents, are filed or furnished with the report[297][299] SIGNATURES Contains the required signatures for the Form 10-Q from the Chief Executive Officer, Chief Financial Officer, and Chief Accounting Officer - The report is signed by Willie Chiang (Chief Executive Officer), Al Swanson (Executive Vice President and Chief Financial Officer), and Chris Herbold (Senior Vice President and Chief Accounting Officer) of PAA GP Holdings LLC[304]