Plains GP (PAGP) - 2025 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION This section provides the unaudited condensed consolidated financial statements, management's discussion and analysis, and disclosures on market risks and controls Item 1. UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS This section presents the unaudited condensed consolidated financial statements and detailed notes for Plains GP Holdings, L.P. Condensed Consolidated Balance Sheets This section provides a snapshot of the company's financial position at June 30, 2025, and December 31, 2024 Condensed Consolidated Balance Sheets | ASSETS (in millions) | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :------------ | :---------------- | | Cash and cash equivalents | $460 | $349 | | Total current assets | $4,658 | $4,776 | | Property and equipment, net | $14,177 | $13,446 | | Total assets | $28,300 | $27,756 | | LIABILITIES AND PARTNERS' CAPITAL (in millions) | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :------------ | :---------------- | | Total current liabilities | $4,648 | $4,924 | | Senior notes, net | $8,133 | $7,141 | | Total long-term liabilities | $9,527 | $8,516 | | Total partners' capital | $14,125 | $14,316 | | Total liabilities and partners' capital | $28,300 | $27,756 | - Total assets increased by $544 million from December 31, 2024, to June 30, 2025, primarily driven by an increase in property and equipment, net, and cash and cash equivalents[10] - Total liabilities increased by $715 million, mainly due to a $992 million increase in senior notes, net, partially offset by a decrease in total current liabilities[10] Condensed Consolidated Statements of Operations This section details the company's financial performance, including revenues, expenses, and net income for the reported periods Condensed Consolidated Statements of Operations | (in millions, except per share data) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Total revenues | $10,642 | $12,757 | $22,119 | $24,396 | | Total costs and expenses | $10,405 | $12,427 | $21,528 | $23,711 | | Operating income | $237 | $330 | $591 | $685 | | Income from continuing operations, net of tax | $213 | $284 | $569 | $611 | | Income from discontinued operations, net of tax | $70 | $32 | $206 | $42 | | NET INCOME | $283 | $316 | $775 | $653 | | Net income attributable to PAGP | $30 | $39 | $114 | $81 | | Basic net income per Class A share | $0.15 | $0.20 | $0.58 | $0.41 | | Diluted net income per Class A share | $0.15 | $0.19 | $0.57 | $0.41 | - Net income attributable to PAGP for the six months ended June 30, 2025, increased by $33 million (41%) to $114 million compared to $81 million in the prior year, primarily driven by a significant increase in income from discontinued operations[13] - Basic net income per Class A share for the six months ended June 30, 2025, increased to $0.58 from $0.41 in the prior year, with discontinued operations contributing $0.29 per share (up from $0.06)[13] Condensed Consolidated Statements of Comprehensive Income This section presents the company's comprehensive income, including net income and other comprehensive income or loss components Condensed Consolidated Statements of Comprehensive Income | (in millions) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income | $283 | $316 | $775 | $653 | | Other comprehensive income/(loss) | $187 | $(33) | $192 | $(104) | | Comprehensive income | $470 | $283 | $967 | $549 | | Comprehensive income attributable to PAGP | $83 | $30 | $168 | $52 | - Comprehensive income attributable to PAGP significantly increased to $168 million for the six months ended June 30, 2025, from $52 million in the prior year, largely due to a positive shift in other comprehensive income[14] Condensed Consolidated Statements of Changes in Accumulated Other Comprehensive Income/(Loss) This section outlines changes in accumulated other comprehensive income or loss, primarily from derivative instruments and translation adjustments Condensed Consolidated Statements of Changes in Accumulated Other Comprehensive Income/(Loss) | (in millions) | Balance at December 31, 2024 | Total Period Activity (6 months ended June 30, 2025) | Balance at June 30, 2025 | | :------------------------------------ | :--------------------------- | :----------------------------------- | :----------------------- | | Derivative Instruments | $(44) | $8 | $(36) | | Translation Adjustments | $(1,039) | $183 | $(856) | | Other | $0 | $1 | $1 | | Total | $(1,083) | $192 | $(891) | - Accumulated other comprehensive income/(loss) improved from a loss of $1,083 million at December 31, 2024, to a loss of $891 million at June 30, 2025, primarily driven by positive currency translation adjustments of $183 million[16] Condensed Consolidated Statements of Cash Flows This section reports the cash inflows and outflows from operating, investing, and financing activities for the reported periods Condensed Consolidated Statements of Cash Flows | (in millions) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------ | :----------------------------- | :----------------------------- | | Net cash provided by operating activities | $1,330 | $1,070 | | Net cash used in investing activities | $(1,093) | $(418) | | Net cash used in financing activities | $(145) | $(543) | | Net increase in cash and cash equivalents and restricted cash | $111 | $103 | | Cash and cash equivalents and restricted cash, end of period | $460 | $556 | - Net cash provided by operating activities increased by $260 million to $1,330 million for the six months ended June 30, 2025, compared to $1,070 million in the prior year[18] - Net cash used in investing activities significantly increased to $1,093 million in 2025 from $418 million in 2024, primarily due to higher cash paid in connection with acquisitions ($681 million in 2025 vs. $111 million in 2024) and additions to property and equipment[18] Condensed Consolidated Statements of Changes in Partners' Capital This section details the changes in partners' capital, including net income, distributions, and unit repurchases Condensed Consolidated Statements of Changes in Partners' Capital | (in millions) | Balance at December 31, 2024 | Net Income | Distributions | Other Comprehensive Income | Repurchase of Units | Contributions from Noncontrolling Interests | Other | Balance at June 30, 2025 | | :-------------------- | :--------------------------- | :--------- | :------------ | :------------------------- | :------------------ | :---------------------------------------- | :---- | :----------------------- | | Class A Shareholders | $1,351 | $114 | $(150) | $54 | $(11) | $0 | $(4) | $1,354 | | Noncontrolling Interests | $12,965 | $661 | $(724) | $138 | $(310) | $29 | $12 | $12,771 | | Total Partners' Capital | $14,316 | $775 | $(874) | $192 | $(321) | $29 | $8 | $14,125 | - Total partners' capital decreased from $14,316 million at December 31, 2024, to $14,125 million at June 30, 2025, primarily due to distributions and repurchases of units, partially offset by net income and other comprehensive income[19] Note 1—Organization and Basis of Consolidation and Presentation This note describes the company's structure, consolidation principles, and the strategic reclassification of the Canadian NGL Business as discontinued operations - PAGP is a Delaware limited partnership, taxed as a corporation, whose sole cash flow source is an indirect investment in Plains All American Pipeline, L.P. (PAA)[20] - PAGP owns an approximate 85% limited partner interest in AAP and a 100% managing member interest in Plains All American GP LLC (GP LLC). AAP, in turn, owns approximately 31% of PAA's total outstanding common and Series A preferred units and is the sole member of PAA GP LLC, which holds the non-economic general partner interest in PAA[21] - PAA is a major crude oil midstream service provider in North America, operating extensive pipeline, terminalling, storage, and gathering assets primarily focused on Crude Oil and Natural Gas Liquids (NGL) segments[22] - On June 17, 2025, PAGP entered into an agreement to sell its Canadian NGL Business for approximately CAD$5.15 billion ($3.75 billion), expected to close in Q1 2026. This sale is classified as a discontinued operation, representing a strategic shift to focus on core midstream crude oil operations and reduce commodity price exposure[29][30] Note 2— Discontinued Operations This note provides financial details and classification of the Canadian NGL Business as discontinued operations held for sale - The Canadian NGL Business is classified as held for sale and presented as discontinued operations, with its assets and liabilities recorded at historical carrying value as fair value exceeds it. Depreciation and amortization ceased upon classification[38] Note 2— Discontinued Operations | (in millions) | June 30, 2025 | December 31, 2024 | | :------------------------------------ | :------------ | :---------------- | | Total current assets of discontinued operations | $385 | $415 | | Total long-term assets of discontinued operations | $2,482 | $2,349 | | Total current liabilities of discontinued operations | $313 | $350 | | Total long-term liabilities of discontinued operations | $598 | $576 | Note 2— Discontinued Operations | (in millions) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Total revenues | $211 | $176 | $745 | $532 | | Total costs and expenses | $115 | $134 | $470 | $476 | | Income from discontinued operations before tax | $96 | $42 | $275 | $56 | | Income from discontinued operations, net of tax | $70 | $32 | $206 | $42 | - Income from discontinued operations, net of tax, significantly increased for the six months ended June 30, 2025, to $206 million, up from $42 million in the prior year, driven by higher product sales revenues and lower costs and expenses[40] Note 3—Revenues and Accounts Receivable This note details revenue recognition policies and segment-specific revenues from contracts with customers Note 3—Revenues and Accounts Receivable | Revenues from contracts with customers (in millions) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Crude Oil segment revenues | $10,655 | $12,717 | $22,063 | $24,295 | | NGL segment revenues | $26 | $25 | $67 | $86 | | Total revenues (consolidated) | $10,642 | $12,757 | $22,119 | $24,396 | - Crude Oil segment revenues from contracts with customers decreased by 9% for the six months ended June 30, 2025, compared to the prior year, while NGL segment revenues also saw a decline of 22%[41][46] - The company recognizes sales revenues when product title transfers, transportation revenues over time as services are rendered, and terminalling/storage revenues ratably over contract terms or as services are performed[42][43][44] Note 3—Revenues and Accounts Receivable | Remaining Performance Obligations (in millions) | Remainder of 2025 | 2026 | 2027 | 2028 | 2029 | 2030 and Thereafter | | :---------------------------------------------- | :---------------- | :--- | :--- | :--- | :--- | :------------------ | | Pipeline revenues supported by minimum volume commitments and capacity agreements | $174 | $254 | $213 | $171 | $96 | $414 | | Terminalling, storage and other agreement revenues | $115 | $222 | $194 | $143 | $101 | $488 | | Total | $289 | $476 | $407 | $314 | $197 | $902 | Note 4—Net Income Per Class A Share This note explains the calculation of basic and diluted net income per Class A share, including contributions from discontinued operations - Basic net income per Class A share is calculated by dividing net income attributable to PAGP (from continuing and discontinued operations) by the weighted average Class A shares outstanding[50] - Diluted net income per Class A share considers the impact of possible future exchanges of AAP units and associated Class B shares into Class A shares, as well as potentially dilutive awards under the PAGP Long-Term Incentive Plan (LTIP)[51] Note 4—Net Income Per Class A Share | Basic Net Income per Class A Share | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Continuing operations | $0.05 | $0.15 | $0.29 | $0.35 | | Discontinued operations | $0.10 | $0.05 | $0.29 | $0.06 | | Total Basic EPS | $0.15 | $0.20 | $0.58 | $0.41 | | Diluted Net Income per Class A Share | | | | | | Continuing operations | $0.05 | $0.15 | $0.29 | $0.35 | | Discontinued operations | $0.10 | $0.04 | $0.28 | $0.06 | | Total Diluted EPS | $0.15 | $0.19 | $0.57 | $0.41 | - For the six months ended June 30, 2025, basic and diluted EPS from discontinued operations significantly increased to $0.29 and $0.28, respectively, compared to $0.06 in the prior year, contributing substantially to the overall EPS growth[56] Note 5—Inventory, Linefill and Long-term Inventory This note provides details on the company's inventory, linefill, and long-term inventory balances, primarily crude oil and NGL Note 5—Inventory, Linefill and Long-term Inventory | (in millions, except barrels in thousands) | June 30, 2025 | December 31, 2024 | | :----------------------------------------- | :------------ | :---------------- | | Inventory (Crude oil, NGL, Other) | $151 | $261 | | Linefill (Crude oil, NGL) | $940 | $904 | | Long-term inventory (Crude oil, NGL) | $234 | $242 | | Total | $1,325 | $1,407 | - Total inventory, linefill, and long-term inventory decreased by $82 million to $1,325 million at June 30, 2025, from $1,407 million at December 31, 2024, primarily due to a reduction in crude oil inventory[57] - Crude oil inventory volumes decreased from 3,321 thousand barrels to 1,640 thousand barrels, with the carrying value dropping from $221 million to $102 million[57] Note 6—Debt This note outlines the company's short-term and long-term debt, including recent senior notes issuances and outstanding letters of credit Note 6—Debt | (in millions) | June 30, 2025 | December 31, 2024 | | :-------------------- | :------------ | :---------------- | | Total short-term debt | $475 | $407 | | Total long-term debt | $8,204 | $7,211 | | Total debt | $8,679 | $7,618 | - Total debt increased by $1,061 million to $8,679 million at June 30, 2025, from $7,618 million at December 31, 2024, primarily driven by an increase in PAA senior notes[58] - In January 2025, PAA issued $1.0 billion of 5.95% senior notes due June 2035[60] - Outstanding letters of credit decreased from $90 million at December 31, 2024, to $81 million at June 30, 2025[62] Note 7—Partners' Capital and Distributions This note details changes in partners' capital, share classes outstanding, and distributions to Class A shareholders and noncontrolling interests Note 7—Partners' Capital and Distributions | Shares Outstanding | December 31, 2024 | June 30, 2025 | | :----------------- | :---------------- | :------------ | | Class A Shares | 197,465,699 | 197,743,624 | | Class B Shares | 35,390,231 | 35,112,306 | | Class C Shares | 542,004,838 | 528,860,430 | - Class A shares outstanding increased by 277,925 due to Exchange Right exercises, while Class B and C shares decreased due to exchanges and repurchases of Series A preferred units and common units[64] Note 7—Partners' Capital and Distributions | Distributions to Class A Shareholders (in millions) | Quarter Ended June 30, 2025 | Quarter Ended March 31, 2025 | Quarter Ended December 31, 2024 | | :------------------------------------------------ | :-------------------------- | :--------------------------- | :------------------------------ | | Cash Distribution | $75 | $75 | $75 | | Distribution per Unit | $0.38 | $0.38 | $0.38 | - On January 31, 2025, PAA repurchased approximately 12.7 million Series A preferred units for $333 million, plus accrued distributions[67] Note 7—Partners' Capital and Distributions | Distributions to Noncontrolling Interests (in millions) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :---------------------------------------------------- | :----------------------------- | :----------------------------- | | Permian JV | $183 | $148 | | Cactus II | $38 | $37 | | Red River | $8 | $13 | | Total Consolidated Joint Venture Distributions | $229 | $198 | Note 8—Derivatives and Risk Management Activities This note describes the company's use of derivative instruments to manage commodity price, interest rate, and currency exchange rate risks - The company uses derivative instruments to manage exposure to commodity price risk, interest rate risk, and currency exchange rate risk, primarily for risk management rather than speculation[70] - Commodity derivatives are not designated for hedge accounting, with changes in fair value reported in earnings. For the six months ended June 30, 2025, a net loss of $38 million from commodity derivative activity was recognized[77] - Interest rate derivatives are designated as cash flow hedges, with changes in fair value deferred in AOCI and reclassified to interest expense as incurred. A net loss of $36 million was deferred in AOCI as of June 30, 2025[79][80] - A deal-contingent forward currency instrument (CAD$4.5 billion notional) was entered into to hedge currency exchange risk for the Canadian NGL Business sale. As of June 30, 2025, it resulted in a $49 million liability and a corresponding loss recognized in earnings[82] Note 8—Derivatives and Risk Management Activities | (in millions) | Fair Value as of June 30, 2025 | Fair Value as of December 31, 2024 | | :-------------------------- | :----------------------------- | :------------------------------- | | Commodity derivatives | $9 | $(3) | | Interest rate derivatives | $33 | $27 | | Foreign currency derivatives | $(49) | $0 | | Total net derivative asset/(liability) | $(7) | $24 | Note 9—Related Party Transactions This note discloses revenues, purchases, and receivables/payables from transactions with related parties Note 9—Related Party Transactions | (in millions) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Revenues from related parties | $12 | $11 | $23 | $22 | | Purchases and related costs from related parties | $98 | $96 | $196 | $193 | - The company engages in sales, transportation, and purchase transactions with related parties at market-approximate rates[88] Note 9—Related Party Transactions | (in millions) | June 30, 2025 | December 31, 2024 | | :---------------------------------------------------- | :------------ | :---------------- | | Trade accounts receivable and other receivables, net from related parties | $42 | $40 | | Trade accounts payable to related parties | $64 | $66 | Note 10—Commitments and Contingencies This note details the company's accruals for environmental liabilities, legal proceedings, and other contingent losses - The company accrues undiscounted liabilities for probable and reasonably estimable losses from contingencies, including legal fees. No contingent liability is recorded if the amount cannot be reasonably estimated or the likelihood is only reasonably possible or remote[91][92] - Estimated undiscounted reserves for environmental liabilities (excluding Line 901) totaled $81 million at June 30, 2025, up from $80 million at December 31, 2024[98] - For the Line 901 incident (May 2015 crude oil release), the estimated aggregate total costs are approximately $870 million. A remaining undiscounted gross liability of $20 million was recorded at June 30, 2025. The company has collected $275 million of $500 million available insurance[100][101][102] - In March 2025, a crude oil release from the Line 48 pipeline occurred, with estimated clean-up and remediation costs of approximately $20 million. $12 million has been incurred through June 30, 2025[104] - A lawsuit by The Louisiana Department of Wildlife and Fisheries was filed in October 2023 against a subsidiary for coastal erosion damages, which the company intends to vigorously defend[106] Note 11—Segment Information This note provides financial performance and capital expenditure details for the Crude Oil and NGL reportable segments - The company operates through two reportable segments: Crude Oil and NGL, with performance evaluated based on Segment Adjusted EBITDA[108] Note 11—Segment Information | Segment Adjusted EBITDA (in millions) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Crude Oil Segment Adjusted EBITDA | $580 | $576 | $1,140 | $1,130 | | NGL Segment Adjusted EBITDA | $(10) | $(11) | $(15) | $(9) | | Total Segment Adjusted EBITDA | $570 | $565 | $1,125 | $1,121 | - Crude Oil Segment Adjusted EBITDA remained relatively stable year-over-year, with favorable impacts from volume growth, tariff escalations, and acquisitions offset by fewer market-based opportunities and higher operating expenses[159][161][162] - NGL Segment Adjusted EBITDA showed a larger loss for the six months ended June 30, 2025, compared to the prior year, primarily due to lower net revenues from weaker butane basis[168] Note 11—Segment Information | Capital Expenditures (in millions) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Crude Oil Investment and acquisition capital expenditures | $218 | $79 | $1,002 | $261 | | Crude Oil Maintenance capital expenditures | $43 | $41 | $74 | $87 | | NGL Maintenance capital expenditures | $1 | $2 | $3 | $3 | Note 12—Acquisitions This note details recent acquisitions of crude oil gathering systems and pipeline interests, expanding the company's midstream footprint - On January 31, 2025, the company acquired Ironwood Midstream Energy Partners II, LLC, a gathering system in the Eagle Ford Basin, for approximately $481 million in cash, accounted for in the Crude Oil segment[118] - In January 2025, EMG Medallion 2 Holdings, LLC (crude oil gathering and transportation in Delaware Basin) was acquired for $163 million[122] - In February 2025, the remaining 50% interest in Cheyenne Pipeline LLC was acquired through a non-monetary transaction, resulting in a $31 million net gain[123] - During Q2 2025, Black Knight Midstream, a crude oil gathering business in the Permian Basin, was acquired for $59 million[124] - In July 2025, an additional 20% interest in BridgeTex Pipeline Company, LLC was acquired for approximately $180 million, increasing ownership to 40%[125] Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This section provides management's analysis of financial condition, operating results, liquidity, and capital resources Executive Summary This summary outlines PAGP's structure, its investment in PAA, and the strategic rationale behind the Canadian NGL Business sale - PAGP's sole cash-generating assets are an approximate 85% limited partner interest in AAP, which in turn holds an approximate 31% limited partner interest in PAA[127] - PAA is a leading North American crude oil midstream service provider with extensive pipeline, terminalling, storage, and gathering assets[128] - The pending sale of the Canadian NGL Business for approximately $3.75 billion (CAD$5.15 billion) is a strategic move to focus on core crude oil operations and reduce commodity price exposure, with the transaction expected to close in Q1 2026[129] Overview of Operating Results This section provides a high-level overview of the company's net income performance for the reported periods - Net income for the six months ended June 30, 2025, increased to $775 million, up from $653 million for the same period in 2024[132] Consolidated Results This section presents a consolidated view of revenues, costs, and net income, highlighting key variances and drivers Consolidated Results | (in millions, except per share data) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Variance ($) | Variance (%) | | :----------------------------------- | :----------------------------- | :----------------------------- | :----------- | :----------- | | Product sales revenues | $21,243 | $23,584 | $(2,341) | (10)% | | Services revenues | $876 | $812 | $64 | 8% | | Purchases and related costs | $(20,277) | $(22,543) | $2,266 | 10% | | Net income | $775 | $653 | $122 | 19% | | Net income attributable to PAGP | $114 | $81 | $33 | 41% | | Basic net income per Class A share | $0.58 | $0.41 | $0.17 | 41% | | Diluted net income per Class A share | $0.57 | $0.41 | $0.16 | 39% | - Net income attributable to PAGP increased by 41% for the six months ended June 30, 2025, driven by a significant increase in income from discontinued operations[133] - Product sales revenues decreased by 10% due to lower commodity prices, while services revenues increased by 8% due to higher pipeline volumes and tariff escalations[133][137][138] Continuing Operations This section analyzes the financial performance of continuing operations, focusing on revenue, expense, and income tax changes - Product sales revenues and purchases decreased for the three and six months ended June 30, 2025, primarily due to lower commodity prices, partially offset by higher crude oil sales volumes[137] - Services revenues increased due to higher pipeline volumes, tariff escalations, and recent acquisitions[138] - General and administrative expenses increased due to transaction costs from recent acquisitions[140] - Depreciation and amortization increased, largely driven by acquisitions[141] - A $31 million net gain was recognized from the acquisition of the remaining 50% interest in Cheyenne Pipeline LLC[144] - Interest expense, net, increased due to PAA's issuance of $1.0 billion senior notes in January 2025 and $650 million senior notes in June 2024[145] - Income tax expense decreased primarily due to lower Canadian withholding tax on dividends, partially offset by higher Canadian income and PAA earnings attributable to PAGP[147] Non-GAAP Financial Measures This section defines and reconciles non-GAAP financial measures like Adjusted EBITDA, used for performance evaluation - Management uses Adjusted EBITDA and Adjusted EBITDA attributable to PAA to evaluate performance, providing additional insight into operating performance and aiding financial decision-making[148][151] - Adjusted EBITDA is defined as earnings before interest, taxes, depreciation, amortization, asset sales/impairments, gains on unconsolidated entities, and adjusted for selected items impacting comparability[150] Non-GAAP Financial Measures | (in millions) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Variance ($) | Variance (%) | | :------------------------------------ | :----------------------------- | :----------------------------- | :----------- | :----------- | | Net income | $775 | $653 | $122 | 19% | | Adjusted EBITDA | $1,693 | $1,654 | $39 | 2% | | Adjusted EBITDA attributable to PAA | $1,426 | $1,391 | $35 | 3% | - Adjusted EBITDA increased by 2% to $1,693 million for the six months ended June 30, 2025, compared to $1,654 million in the prior year[153] Analysis of Operating Segments This section provides a detailed analysis of the financial performance and capital expenditures for the Crude Oil and NGL segments Crude Oil Segment This section details the Crude Oil segment's operations, Adjusted EBITDA, and capital expenditures, noting performance drivers - The Crude Oil segment involves gathering, transporting, terminalling, storage, and marketing crude oil across the U.S. and Canada, generating revenue from tariffs, capacity agreements, and sales[155][156] Crude Oil Segment | Crude Oil Segment Adjusted EBITDA (in millions) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :---------------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Segment Adjusted EBITDA | $580 | $576 | $1,140 | $1,130 | | Maintenance capital expenditures | $43 | $41 | $74 | $87 | - Crude Oil Segment Adjusted EBITDA remained relatively stable year-over-year, with favorable impacts from volume growth, tariff escalations, and acquisitions offset by fewer market-based opportunities and higher operating expenses[159][161][162] - Maintenance capital expenditures for the Crude Oil segment decreased by $13 million for the six months ended June 30, 2025, due to the timing of pipeline integrity activities[158][163] NGL Segment This section outlines the NGL segment's operations, Adjusted EBITDA, and capital expenditures, highlighting factors impacting performance - The NGL segment focuses on storage and terminalling at four U.S. facilities (Bumstead, Shafter, San Pedro, Tampa), generating revenue from fees and product sales[164] NGL Segment | NGL Segment Adjusted EBITDA (in millions) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :---------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Segment Adjusted EBITDA | $(10) | $(11) | $(15) | $(9) | | Maintenance capital expenditures | $1 | $2 | $3 | $3 | - The NGL Segment Adjusted EBITDA showed a larger loss for the six months ended June 30, 2025, primarily due to lower net revenues resulting from weaker butane basis[168] - The Segment Adjusted EBITDA loss is largely attributed to overhead costs (IT, insurance, shared services) that are part of continuing operations and not included in the Canadian NGL Business sale[167] Liquidity and Capital Resources This section discusses the company's liquidity sources, capital expenditures, debt management, and distribution policies - Primary liquidity sources include cash flow from operating activities and borrowings under PAA's credit facilities or commercial paper program, supplemented by asset sales and equity/debt issuances[169] Liquidity and Capital Resources | Liquidity (in millions) | As of June 30, 2025 | | :---------------------------------------------------- | :------------------ | | Availability under PAA senior unsecured revolving credit facility | $1,350 | | Availability under PAA senior secured hedged inventory facility | $1,312 | | Amounts outstanding under PAA commercial paper program | $(462) | | Subtotal | $2,200 | | Cash and cash equivalents | $460 | | Total | $2,660 | - Net cash provided by operating activities from continuing operations was $1.029 billion for the first six months of 2025, up from $990 million in 2024[174] Liquidity and Capital Resources | Capital Expenditures (in millions) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------------------- | :----------------------------- | :----------------------------- | | Investment capital | $348 | $185 | | Maintenance capital | $105 | $118 | | Acquisition capital | $722 | $113 | | Total | $1,175 | $416 | - Total capital expenditures significantly increased to $1,175 million for the six months ended June 30, 2025, from $416 million in 2024, primarily due to higher acquisition capital[178] - In January 2025, PAA issued $1.0 billion of 5.95% senior notes, using proceeds to fund acquisitions, repurchase Series A preferred units, and repay debt[183] - PAA repurchased 0.5 million common units for $8 million under its Common Equity Repurchase Program during the six months ended June 30, 2025, with $190 million remaining capacity[184] - PAGP will pay a quarterly cash distribution of $0.38 per Class A share on August 14, 2025[189] Liquidity and Capital Resources | Purchase Obligations (in millions) | Remainder of 2025 | 2026 | 2027 | 2028 | 2029 | 2030 and Thereafter | Total | | :--------------------------------- | :---------------- | :--- | :--- | :--- | :--- | :------------------ | :---- | | Crude oil and other purchases | $12,298 | $20,019 | $18,048 | $15,599 | $14,441 | $31,236 | $111,641 | FORWARD-LOOKING STATEMENTS This section cautions that forward-looking statements are subject to various risks that could cause actual results to differ materially - Forward-looking statements reflect current views and are subject to risks that could cause actual results to differ materially[199] - Key risk factors include general economic conditions, declines in crude oil demand/prices, fluctuations in refinery capacity, competition, ability to consummate acquisitions/divestitures (including Canadian NGL Business sale), environmental liabilities, negative societal sentiment towards hydrocarbons, natural disasters, regulatory changes, and counterparty performance[199][200] Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK This section details the company's exposure to market risks, specifically commodity price, interest rate, and currency exchange rate risks, and related hedging strategies Commodity Price Risk This section describes the company's use of derivatives to hedge commodity price risk for crude oil and power - The company uses crude oil and power derivatives (futures, forwards, swaps, options) to hedge price risk associated with pipeline, terminalling, merchant activities, and anticipated operational power requirements[204] Commodity Price Risk | (in millions) | Fair Value (June 30, 2025) | Effect of 10% Price Increase | Effect of 10% Price Decrease | | :------------ | :------------------------- | :--------------------------- | :--------------------------- | | Crude oil | $15 | $7 | $(6) | | Power | $(6) | $2 | $(2) | | Total fair value | $9 | | | Interest Rate Risk This section outlines exposure to interest rate risk from variable rate debt and hedging strategies using interest rate derivatives - The company is exposed to interest rate risk from variable rate debt and forecasted fixed rate debt issuances, managed through interest rate derivatives (forward starting swaps, treasury locks)[206] - PAA's variable rate debt outstanding at June 30, 2025, was approximately $462 million, with an average interest rate of 4.7% during the six months ended June 30, 2025[206] - A 10% increase or decrease in the forward SOFR curve would result in a $24 million increase or decrease, respectively, to the fair value of interest rate derivatives[206] - Distributions on PAA's Series B preferred units are based on the three-month SOFR, with a 100 basis point change in interest rates impacting annual distributions by approximately $8 million[207] Currency Exchange Rate Risk This section details the management of foreign currency exchange rate risk, particularly for the Canadian NGL Business sale - Foreign currency derivatives are used to hedge USD-to-CAD exchange rate risk, particularly for the pending sale of the Canadian NGL Business[208] - As of June 30, 2025, the fair value of foreign currency derivatives was a $49 million liability[208] - A 10% increase or decrease in the USD-to-CAD exchange rate would result in a $334 million increase or decrease, respectively, to the fair value of foreign currency derivatives[208] Item 4. CONTROLS AND PROCEDURES This section confirms the effectiveness of disclosure controls and procedures and reports no material changes in internal control over financial reporting - The company's disclosure controls and procedures (DCP) were evaluated and concluded to be effective as of June 30, 2025[209][210] - No changes in internal control over financial reporting occurred during the second quarter of 2025 that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[211] PART II. OTHER INFORMATION This section covers legal proceedings, risk factors, equity sales, defaults, mine safety, and other required disclosures Item 1. LEGAL PROCEEDINGS This section refers to Note 10 of the Condensed Consolidated Financial Statements for detailed information regarding legal proceedings, which are incorporated by reference - Information on legal proceedings is incorporated by reference from Note 10 to the Condensed Consolidated Financial Statements[214] Item 1A. RISK FACTORS This section directs readers to Item 1A of the 2024 Annual Report on Form 10-K for a comprehensive discussion of risk factors - Risk factors are discussed in Item 1A of the 2024 Annual Report on Form 10-K, and these, along with unknown or unpredictable factors, could materially affect the business, financial condition, and results of operations[215] Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS This section confirms no unregistered sales or issuer purchases of equity securities occurred during the reporting period - No unregistered sales of equity securities occurred[216] - No issuer purchases of equity securities occurred[217] Item 3. DEFAULTS UPON SENIOR SECURITIES This section confirms that there were no defaults upon senior securities during the reporting period - No defaults upon senior securities occurred[218] Item 4. MINE SAFETY DISCLOSURES This item is not applicable to the registrant - Mine safety disclosures are not applicable[219] Item 5. OTHER INFORMATION This section states no directors or officers adopted or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements - No directors or officers adopted or terminated any Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the quarter ended June 30, 2025[220] Item 6. EXHIBITS This section lists all exhibits filed with the Form 10-Q, including agreements, certificates, and officer certifications - The report includes various exhibits such as the Share Purchase Agreement, Certificates of Limited Partnership, Amended and Restated Agreements, Indentures for Senior Notes, and Certifications of Principal Executive and Financial Officers[222][223][224] SIGNATURES This section contains the official signatures of the company's principal executive and financial officers, certifying the report - The report is duly signed on August 8, 2025, by Willie Chiang (Chairman, CEO, and President), Al Swanson (Executive Vice President and CFO), and Chris Herbold (Senior Vice President, Finance and Chief Accounting Officer) of PAA GP Holdings LLC, as the general partner of Plains GP Holdings, L.P[226][228]