Plains GP (PAGP) - 2023 Q4 - Annual Report

Financial Structure and Debt Management - As of December 31, 2023, PAA's long-term debt comprised approximately 99% of its publicly-traded senior notes[35] - PAA targets a leverage multiple averaging between 3.25x to 3.75x, with an average long-term debt-to-total capitalization ratio of approximately 50% or less[36] - The average total debt-to-total capitalization ratio is targeted to be approximately 60% or less[36] - Since 1998, the company has completed acquisitions totaling approximately $2.7 billion and asset sales exceeding $4.9 billion, reflecting a strategic focus on optimizing its asset portfolio[102] - The total investment capital for the year ending December 31, 2024, is projected to be approximately $465 million, with over half associated with the Permian JV[104] - Maintenance capital for 2024 is projected to be approximately $250 million, with $230 million net to the company's interest[104] Infrastructure and Operations - The Crude Oil segment includes 18,335 miles of active crude oil transportation pipelines and gathering systems, with a commercial storage capacity of 72 million barrels[47] - The average daily volumes transported on crude oil pipelines for the year ended December 31, 2023, totaled 8,460 thousand barrels[47] - The Permian Basin gathering pipelines represent approximately 3.8 million barrels per day of pipeline capacity, with 75% of this capacity located in the Delaware Basin[52] - PAA operates a condensate processing facility in the Eagle Ford area with an aggregate processing capacity of 120,000 barrels per day[47] - 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 refiners and terminals[60] - The Basin Pipeline, with an 87% ownership interest, serves as the primary route for transporting crude oil from the Permian Basin to Cushing, Oklahoma, with multiple origination locations[60] - The Cactus II Pipeline, operated by the company, has a capacity of approximately 670,000 barrels per day and connects directly to the Corpus Christi market[60] - The company's Cushing terminal has a commercial storage capacity of 27 million barrels and is a key delivery point for NYMEX light sweet crude oil futures contracts[66] - The Capline Pipeline, in which the company holds a 54% interest, extends from Patoka, Illinois to St. James, Louisiana, supported by long-term shipper commitments[68] - The Diamond Pipeline, operated by the company, has a total capacity of approximately 200,000 barrels per day, extending from the Cushing Terminal to Valero's refinery in Memphis, Tennessee[69] - The NGL segment includes seven fractionation plants with an aggregate usable capacity of approximately 171,000 barrels per day[78] - The company operates a condensate processing facility in La Salle County, Texas, stabilizing condensate sourced from the Eagle Ford area[62] - The NGL storage facilities have a total capacity of approximately 24 million barrels[78] - The company owns and operates approximately 1,565 miles of active NGL transportation pipelines[78] - The Empress plants have a processing capacity of up to 5.7 Bcf of natural gas per day, typically operating in the 3.0 to 4.0 Bcf per day range, producing approximately 50,000 to 85,000 barrels per day of ethane and 30,000 to 50,000 barrels per day of NGL mix[83] - The Fort Saskatchewan facility has an inlet design capacity of 88,400 barrels per day and can produce approximately 44,400 barrels per day of propane, butane, and condensate[85] - The Sarnia fractionator can process an average of approximately 100,000 barrels per day of NGL products, with ownership stakes ranging from 61% to 85%[86] Market and Commodity Risks - In 2023, the WTI price fluctuated between approximately $67 and $94 per barrel, indicating significant commodity price volatility[87] - ExxonMobil accounted for 26%, 20%, and 15% of revenues for the years ended December 31, 2023, 2022, and 2021, respectively, highlighting customer concentration risk[94] - The company employs various financial risk management tools to mitigate risks associated with commodity price fluctuations and market volatility[90] - PAA's profitability is dependent on the volume of crude oil, natural gas, and NGL shipped, which can be negatively impacted by external factors[224] - Competition in the industry poses risks to PAA's profitability, with competitors potentially having significantly greater capital resources[227] - Fluctuations in supply and demand for crude oil and hydrocarbons can negatively affect PAA's operating results, influenced by global economic conditions and geopolitical events[231] - Excess global supply of crude oil may decrease prices, impacting profitability in areas serviced by PAA[232] - Demand fluctuations, such as refinery shutdowns, can reduce throughput on PAA's transportation systems, negatively affecting operating results[233] Regulatory and Compliance Issues - The company is subject to extensive legal requirements and regulations, which increase the overall cost of doing business and may affect profitability[105] - The company is required to report GHG emissions from certain facilities, with two facilities subject to federal GHG reporting requirements in 2023[124] - California has implemented a GHG cap-and-trade program, requiring finished fuels providers to purchase GHG emission credits[125] - Future regulations on GHG emissions could result in material increased compliance costs and reduced demand for petroleum-based fuels[126] - The U.S. Federal Water Pollution Control Act imposes strict controls on pollutant discharge into navigable waters, with penalties for non-compliance[128] - The U.S. Oil Pollution Act subjects facility owners to significant liability for oil spill containment and removal costs[129] - The Energy Policy Act of 2005 allows FERC to impose civil penalties for violations of the Interstate Commerce Act, with penalties for 2024 set at $16,170 per day per violation[138] - The Federal Trade Commission has regulations to prohibit market manipulation in the petroleum industry, with civil penalties up to $1.5 million per violation per day[147] - The Dodd-Frank Act expands the CFTC's authority to prohibit market manipulation, with penalties up to $1.23 million or triple the monetary gain for each violation[147] - Compliance with new cybersecurity directives from the Transportation Security Administration may significantly impact operations[145] - Canadian pipeline assets are regulated by the CER and provincial regulators, which can impose conditions on rates and terms of service[140] Workforce and Employee Management - As of December 31, 2023, the company employed approximately 4,200 people in North America, with about 3,000 in the U.S. and 1,200 in Canada[152] - Approximately 69% of the workforce, or about 2,900 employees, are field employees, including around 800 in the trucking division[152] - The company has a commitment to diversity, with approximately 21% of the overall workforce being female and under-represented groups comprising about 35% of the U.S. workforce[154] - The company has established a Health, Safety, Environmental and Sustainability (HSES) Committee to enhance its focus on safety and sustainability matters[153] - The company offers comprehensive benefits, including health insurance, retirement savings plans, and mental health resources, to attract and retain employees[157] - The company prioritizes employee training and leadership development, providing programs in various operational and management areas[156] - The company has a performance-based annual bonus program that includes components tied to safety and environmental performance targets[153] Shareholder and Tax Considerations - 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[169] - 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[170] - Non-U.S. holders must provide IRS Form W-8BEN or W-8BEN-E to claim reduced withholding tax rates[171] - 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[172] - A corporation is considered a U.S. real property holding corporation (USRPHC) if the fair market value of its U.S. real property interests equals or exceeds 50% of its worldwide real property interests[174] - Backup withholding will not apply if the non-U.S. holder certifies its non-U.S. status using IRS Form W-8BEN or W-8BEN-E[176] - Payments from the sale of Class A shares through a U.S. broker may be subject to information reporting and backup withholding unless an exemption is established[177] - FATCA imposes a 30% withholding tax on dividends paid to foreign financial institutions or non-financial foreign entities unless certain conditions are met[180] - The partnership structure carries inherent risks, including cash flow dependency on PAA's ability to make distributions[185] - PAA's cash flow is entirely dependent on its ability to make cash distributions to AAP, which currently consists exclusively of cash distributions from PAA[191] - At December 31, 2023, AAP owned approximately 84% limited partner interest in AAP, which owned approximately 232.7 million PAA common units[193] - Cash distributions from PAA may fluctuate based on its performance, and may occur during periods of losses or not occur during periods of profits[193] - PAA's distributions to AAP may be limited by various factors, including increased expenses, capital requirements, and restrictions in credit facilities[192][196] - The partnership structure carries inherent risks, including tax risks and potential changes in tax treatment that could reduce cash available for distribution[190] - PAA's ability to comply with credit facility restrictions may be affected by external economic conditions, which could limit distributions to AAP[196] - The issuance of additional Class A shares or other equity securities could dilute existing shareholders' ownership and reduce cash available for distribution[201] - If PAA's general partner is removed, AAP may lose its ability to manage and control PAA, impacting its investment[202] - The market price of Class A shares may be volatile, influenced by factors unrelated to operating performance[208] - Cash distributions are not guaranteed and may fluctuate with PAA's performance and the establishment of financial reserves[190] - As of December 31, 2023, the Legacy Owners held approximately 16% of the combined voting power of Class A and Class B shares[212] - The gross deferred tax asset was approximately $1.3 billion as of December 31, 2023, with no valuation allowance required[213] - Future sales of Class A shares could reduce the share price and may have a dilutive effect on shareholders[210] Strategic Partnerships and Joint Ventures - The company is engaged in over 25 joint venture arrangements, which provide strategic alignment and volume commitments, enhancing operational efficiency[100]