Plains All American Pipeline(US:PAA)2024-11-08 19:23Financial Data and Key Metrics Changes - The company reported third quarter adjusted EBITDA net to PAA of $659 million, benefiting from higher Permian volumes across its gathering, intra-basin, and long-haul footprint [10] - The adjusted EBITDA guidance for 2024 has been updated to a range of $2.725 billion to $2.775 billion, with expectations to be towards the top end of this range [5][12] - The company expects to generate approximately $1.45 billion of adjusted free cash flow for 2024, with $1.15 billion allocated to common and preferred distributions [11] Business Line Data and Key Metrics Changes - Permian volume growth remains on track, with an original forecast of 200,000 to 300,000 barrels a day for 2024, driven primarily by organic growth from completions across the system [6][19] - The NGL business is on track to complete the Fort Saskatchewan fractionation expansion project on schedule and on budget in the first half of 2025 [6] Market Data and Key Metrics Changes - The company has seen substantial organic growth in Permian gathering volumes, with modest growth from acquisitions [19] - The TMX start-up has reduced exports from the Gulf Coast of heavy crude by about 150,000 to 200,000 barrels a day, impacting the heavy side of the market [41] Company Strategy and Development Direction - The company continues to pursue bolt-on acquisitions to advance its efficient growth strategy, recently acquiring the Fivestones Permian gathering system [7] - The focus remains on generating significant multi-year free cash flow, maintaining capital discipline, and returning capital to investors while preserving financial flexibility [16] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the future of the U.S. energy industry, expecting benefits from improved energy policy and regulatory frameworks [14] - The company is well-positioned to navigate through a volatile macro environment, with a focus on improving the durability of earnings [15] Other Important Information - The company settled two lawsuits related to the 2015 oil spill in California, booking a charge of $120 million to its overall Line 901 accrual [8] - Moody's upgraded the company's rating to Baa2 with a stable outlook, achieving a mid BBB rating at all three credit rating agencies [13] Q&A Session Summary Question: About Permian gathering volumes and organic growth - Management noted substantial organic growth as the primary driver of strong Permian gathering volumes, with modest contributions from acquisitions [19] Question: Future leverage targets with lower current leverage - Management confirmed they do not intend to lower their leverage range of 3.25 to 3.75x, focusing on maximizing free cash flow and capital efficiency [21][22] Question: Early discussions with producers for 2025 budget - Management indicated that initial producer forecasts align with their expectations for continued growth in the 200,000 to 300,000 barrels a day range [28][29] Question: Impact of public valuation markers on bolt-on deals - Management emphasized that while midstream assets are highly valued, they will remain disciplined in evaluating transactions [31][33] Question: Thoughts on the water business and potential disposals - Management stated they have no current exposure to the water business but would consider opportunities that offer synergies [35][36] Question: Canadian platform growth initiatives - Management highlighted the focus on completing the Fort Saskatchewan project and potential opportunities for synergies in the Canadian market [38] Question: Changes in crude flows and impacts on storage assets - Management reported that throughput at Cushing reached all-time records, with no significant impacts on their assets from changes in crude flows [41] Question: NGL segment operations after contract changes - Management noted a shift from margin-based to fee-based business, leading to steadier volumes and financial performance [72]