Plains All American Pipeline(US:PAA)2023-05-09 16:00PART I. FINANCIAL INFORMATION Item 1. Unaudited Condensed Consolidated Financial Statements PAA reported significantly increased Q1 2023 profitability, with net income attributable to PAA rising to $422 million, driven by higher operating income Condensed Consolidated Balance Sheets As of March 31, 2023, total assets slightly decreased to $27.46 billion, with total liabilities also falling Condensed Consolidated Balance Sheet Highlights (in millions) | Account | March 31, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Total Current Assets | $5,122 | $5,355 | | Total Assets | $27,456 | $27,892 | | Total Current Liabilities | $5,366 | $5,891 | | Total Liabilities | $13,973 | $14,567 | | Total Partners' Capital | $13,483 | $13,325 | Condensed Consolidated Statements of Operations Q1 2023 revenues decreased to $12.34 billion, but operating income increased to $473 million, doubling net income Q1 2023 vs Q1 2022 Statement of Operations (in millions, except per unit data) | Metric | Q1 2023 | Q1 2022 | | :--- | :--- | :--- | | Total Revenues | $12,341 | $13,694 | | Operating Income | $473 | $293 | | Net Income | $475 | $225 | | Net Income Attributable to PAA | $422 | $187 | | Basic and Diluted Net Income per Common Unit | $0.52 | $0.19 | Condensed Consolidated Statements of Cash Flows Q1 2023 operating cash flow substantially increased to $743 million, investing activities provided $158 million Q1 2023 vs Q1 2022 Cash Flows (in millions) | Cash Flow Category | Q1 2023 | Q1 2022 | | :--- | :--- | :--- | | Net cash provided by operating activities | $743 | $340 | | Net cash provided by/(used in) investing activities | $158 | $(81) | | Net cash used in financing activities | $(776) | $(597) | | Net increase/(decrease) in cash | $125 | $(335) | Notes to the Condensed Consolidated Financial Statements Notes detail accounting policies, revenue disaggregation, debt, derivatives, segment performance, and contingencies Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management attributes improved Q1 2023 results to favorable NGL margins and crude oil market opportunities, with Adjusted EBITDA attributable to PAA increasing to $715 million - The increase in operating results for Q1 2023 was primarily driven by more favorable margins in the NGL segment, increased earnings from crude oil pipelines, and better crude oil market-based opportunities115 Adjusted EBITDA Reconciliation (in millions) | Metric | Q1 2023 | Q1 2022 | | :--- | :--- | :--- | | Net income | $475 | $225 | | Adjusted EBITDA | $813 | $690 | | Adjusted EBITDA attributable to PAA | $715 | $614 | - The company projects total investment capital for 2023 to be approximately $420 million ($325 million net to PAA's interest) and maintenance capital to be $205 million ($195 million net)168 Results of Operations Q1 2023 consolidated net income attributable to PAA surged 126% to $422 million, boosted by asset sales and mark-to-market gains - Net gains on asset sales in Q1 2023 included a gain of approximately $140 million related to the sale of the Keyera Fort Saskatchewan facility124 - Other income of $64 million in Q1 2023 was primarily driven by a $58 million gain on the mark-to-market adjustment of the Preferred Distribution Rate Reset Option embedded derivative128 Liquidity and Capital Resources As of March 31, 2023, the company maintained $3.1 billion in total liquidity, redeemed $400 million in senior notes, and generated $823 million in Free Cash Flow - As of March 31, 2023, the company had approximately $3.1 billion of available liquidity162 - On January 31, 2023, the company redeemed its 2.85%, $400 million senior notes175 Free Cash Flow (in millions) | Metric | Q1 2023 | Q1 2022 | | :--- | :--- | :--- | | Net cash provided by operating activities | $743 | $340 | | Free Cash Flow | $823 | $200 | | Free Cash Flow after Distributions | $581 | $36 | Item 3. Quantitative and Qualitative Disclosures About Market Risk The company manages commodity price and interest rate risks with derivatives; as of March 31, 2023, commodity derivatives were a $44 million net asset Commodity Derivative Fair Value Sensitivity (in millions) | Commodity | Fair Value (Mar 31, 2023) | Effect of 10% Price Increase | Effect of 10% Price Decrease | | :--- | :--- | :--- | :--- | | Crude oil | $5 | $(47) | $48 | | Natural gas | $(48) | $11 | $(11) | | NGL and other | $87 | $(32) | $32 | | Total | $44 | | | - The fair value of interest rate derivatives was a net asset of $115 million as of March 31, 2023, with a 10% change in the forward LIBOR curve impacting this fair value by approximately $18 million197 Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective as of March 31, 2023, with no material changes to internal control - The Chief Executive Officer and Chief Financial Officer have concluded that the company's disclosure controls and procedures are effective as of March 31, 2023199 - No material changes to internal control over financial reporting occurred during the first quarter of 2023200 PART II. OTHER INFORMATION Item 1. Legal Proceedings Legal proceedings, detailed in Note 9, include the Line 901 incident with estimated total costs of $740 million and a remaining $100 million gross liability - The company refers to Note 9 of its financial statements for details on legal proceedings204 - As of March 31, 2023, the estimated aggregate total cost for the Line 901 incident is approximately $740 million, with a remaining undiscounted gross liability of about $100 million99100 Item 1A. Risk Factors No material changes to risk factors previously disclosed in the 2022 Annual Report on Form 10-K are reported - The company's risk factors are discussed in Item 1A of its 2022 Annual Report on Form 10-K, and no material changes are reported for the current period205 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds No unregistered sales of equity securities or issuer purchases of equity securities occurred in Q1 2023 - There were no unregistered sales of equity securities or issuer purchases of equity securities in the reported period206207 Item 6. Exhibits This section lists all exhibits filed with the Form 10-Q, including corporate governance documents, senior note indentures, and officer certifications - The report includes various exhibits, such as amendments to partnership agreements, supplemental indentures for senior notes, and required CEO/CFO certifications212214215