Plains GP (PAGP) - 2020 Q4 - Annual Report

Financial Performance and Strategy - PAA's long-term debt-to-Adjusted EBITDA multiple averages between 3.0x and 3.5x, with an average total debt-to-total capitalization ratio of approximately 60% or less[36] - Over the last five years, PAA completed acquisitions totaling approximately $2.0 billion, primarily focused on midstream assets[42] - PAA has completed asset sales exceeding $3 billion since initiating its divestiture program in 2016, aimed at optimizing its asset portfolio[43] - The company focuses on evaluating potential transactions to optimize its asset portfolio and strengthen its balance sheet, including selling non-core assets[37] - The company expects its fee-based Transportation and Facilities segments to comprise more than 90% of its aggregate segment results[115] Capital Investments - The 2021 capital plan includes projected investments of $425 million in capital-efficient projects, primarily in the Transportation and Facilities segments[45] - PAA's investment in the Permian Basin Takeaway Pipeline is projected at $140 million, with an in-service date expected between 2021 and 2022[45] Market Demand and Operations - Global crude oil demand is expected to recover to pre-COVID-19 levels by the end of 2021, with a potential need for incremental supply[52] - In 2019, global demand for crude oil averaged approximately 101 million barrels per day, growing at an annual rate of 1.0 to 1.5 million barrels per day since 2000[49] - In April 2020, global crude oil demand fell to approximately 81 million barrels per day due to the COVID-19 pandemic[50] - North American natural gas demand is growing due to increased LNG exports, natural gas exports to Mexico, new natural gas-fired power plants, and sustained fuel switching from coal to natural gas[61] Pipeline and Transportation Assets - The company operates approximately 18,370 miles of active crude oil and NGL pipelines, with an average daily throughput of 6,266 thousand barrels per day[66] - The Permian Basin gathering pipelines have a capacity of over 2.5 million barrels per day, with approximately 75% of this capacity located in the Delaware Basin[68] - The Eagle Ford Pipeline has a total capacity of approximately 660,000 barrels per day, connecting production from the Permian and Eagle Ford areas to Corpus Christi, Texas[79] - The Diamond Pipeline, which extends from Cushing to Memphis, has a current capacity of 200,000 barrels per day, with plans to expand to approximately 420,000 barrels per day[82] - The Red River Pipeline has a capacity of approximately 235,000 barrels per day and supports long-term shipper commitments, with recent expansions to increase throughput[82] - The company has significant investments in transportation assets, generating revenue through tariffs and pipeline capacity agreements[65] - The W2W Pipeline is expected to provide approximately 1.5 million barrels per day of crude oil capacity, with phase two expected to be in service in Q4 2021[78] - Saddlehorn Pipeline has a capacity of 290,000 barrels per day, including a recent expansion of 100,000 barrels per day, supported by minimum volume commitments[83] - White Cliffs Pipeline system has a crude oil capacity of approximately 100,000 barrels per day and an NGL capacity of approximately 90,000 barrels per day, with long-term throughput agreements[83] - Co-Ed NGL pipeline system has a transportation capacity of approximately 70,000 barrels per day, gathering NGL from Alberta for delivery to fractionation facilities[84] Storage Capacity - The Facilities segment includes approximately 75 million barrels of crude oil storage capacity, 28 million barrels of NGL storage capacity, and 68 billion cubic feet of natural gas storage capacity[89] - The Sarnia Fractionator is the largest in Eastern Canada, capable of producing approximately 120,000 barrels per day of spec NGL products[99] - The Gardendale condensate processing facility has a processing capacity of 120,000 barrels per day and usable storage capacity of 160,000 barrels[103] - Crude oil rail facilities have a loading capacity of 264,000 barrels per day and an unloading capacity of 350,000 barrels per day[104] - The company owns 18 operational NGL rail facilities with 284 rack spots and 1,589 storage spots[105] - The Empress Area facilities can process up to 6.0 billion cubic feet of natural gas per day, producing approximately 30,000 to 40,000 barrels per day of NGL[100] Regulatory and Compliance Issues - The company’s operations are subject to extensive regulations, which can increase costs and impact profitability[123] - In 2020, the costs associated with the inspection, testing, and correction of identified anomalies in the United States were approximately $41 million, with a preliminary estimate of $32 million for 2021[127] - Costs incurred for voluntary integrity management initiatives were approximately $24 million in 2020, with a preliminary estimate of $18 million for 2021[127] - Compliance with the Oil Spill Response Bill in California will add to the operational costs, with milestone dates for compliance including a retrofit completion due by April 1, 2023[129] - The budget for API 653 compliance activities in 2021 is approximately $30 million, up from $27 million in 2020[131] - Costs for integrity management activities were approximately $69 million in 2020, with a preliminary estimate of $81 million for 2021[133] - Regulatory changes from PHMSA have increased operational costs, with new rules published in October 2019 expanding reporting and inspection obligations[128] - The California GHG cap-and-trade program requires compliance instruments for GHG emissions, with one facility currently subject to the program[147] - The company is subject to the EPA's Risk Management Plan regulations, which require a risk management program to minimize offsite consequences of catastrophic releases[139] - Future regulatory changes regarding GHG emissions could lead to increased compliance costs and operational restrictions[150] - The company operates under comprehensive regulations from various federal, state, and local agencies, which can impose substantial penalties for non-compliance[188] Workforce and Diversity - The company employed approximately 4,400 people in North America as of December 31, 2020, with about 3,200 in the U.S. and 1,200 in Canada[199] - Approximately 68% of the workforce, or about 3,000 employees, are field employees, including around 880 in the trucking division[199] - As of December 31, 2020, approximately 21% of the overall workforce was female, and minorities represented about 31% of the U.S. workforce[201] - The company offers comprehensive benefits, including life and health insurance, flexible spending accounts, and a retirement savings plan[204] - The company has established an employee resource group called Cultivating Connections to promote diversity and inclusion within the workforce[202] - The company has a commitment to developing future leaders through training programs and internal leadership development initiatives[203] Tax and Financial Reporting - The company has elected to be treated as a corporation for U.S. federal income tax purposes, affecting the tax treatment of distributions on Class A shares[207] - Distributions on Class A shares will be treated as dividends for U.S. federal income tax purposes to the extent paid from current or accumulated earnings and profits[217] - Non-U.S. holders may be subject to a 30% U.S. withholding tax on distributions unless an applicable income tax treaty provides for a lower rate[217] - Non-U.S. holders must provide IRS Form W-8BEN or W-8BEN-E to claim reduced withholding rates under tax treaties[217] - Gain on the sale of Class A shares by non-U.S. holders may be subject to U.S. federal income tax at a rate of 30% if certain conditions are met[220] - The company is expected to remain a United States real property holding corporation (USRPHC) for U.S. federal income tax purposes[222] - Backup withholding will not apply to distributions if non-U.S. holders certify their non-U.S. status using IRS Form W-8BEN or W-8BEN-E[224] - Payments from the sale of Class A shares through a U.S. broker will generally be subject to information reporting and backup withholding unless exemptions are established[225] - FATCA imposes a 30% withholding tax on dividends paid to foreign financial institutions or non-financial foreign entities unless certain conditions are met[228] - The company provides annual reports and other financial information on its website, which is not incorporated by reference into SEC filings[229] Risk Management - The company employs various derivative instruments to hedge against commodity price volatility and manage interest rate and currency exchange rate risks[117] - The company anticipates increased competition for uncommitted barrels and contract renewals due to multiple pipeline expansions in the Permian Basin[120] - The company has credit risk exposure related to its sales of NGL, primarily propane, but does not believe these transactions pose a material concentration of credit risk[112] - The company maintains various insurance policies to cover operations, but certain liabilities may not be fully covered, potentially impacting financial results[141] - The partnership structure carries inherent risks, including potential conflicts of interest and dependence on cash distributions from PAA[233]