Plains All American Pipeline(PAA) - 2023 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported adjusted EBITDA attributable to PAA of $715 million for Q1 2023 and reaffirmed the adjusted EBITDA guidance range for 2023 of $2.45 billion to $2.55 billion [22][56] - Free cash flow generation is expected to be approximately $1.6 billion, with common distribution coverage at 215% [22][34] - The company anticipates generating $2.3 billion in cash flow from operations and aims for year-end leverage of approximately 3.5x [34] Business Line Data and Key Metrics Changes - The Crude Oil segment is expected to see year-over-year growth driven by continued Permian production and tariff growth volumes [23][33] - The NGL segment is projected to have an adjusted EBITDA midpoint of $420 million, reflecting a more pronounced winter to summer saddle compared to 2022 [57] Market Data and Key Metrics Changes - The company expects production growth in the Permian of approximately 500,000 barrels a day exit-to-exit in 2023, with current horizontal rig count tracking in line with the expected full-year average of 340 rigs [31][38] - The demand for the Capline has been strong, outperforming expectations year-to-date, with a mix of light and heavy barrels anticipated [8] Company Strategy and Development Direction - The company remains committed to significant returns of capital to equity holders, capital discipline, and reducing debt [25][35] - The focus is on execution and optimizing the system to capture increasing volumes, particularly in the Permian [22][30] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the long-term positioning of the company despite macroeconomic volatility, including recessionary concerns and OPEC production cuts [30] - The company believes that North American energy supply will continue to be critical in meeting growing global demand [30][35] Other Important Information - The company is evaluating various projects, including a battery energy storage project in Ontario, and is exploring opportunities in renewable power generation and hydrogen storage [6] - The company has a capital allocation framework targeting multi-year annualized distribution increases and further debt reduction [54] Q&A Session Summary Question: Update on Permian growth and producer activity - Management noted that the rig count remains stable at around 340 rigs, with expected growth of 40,000 to 50,000 barrels a day per month necessary to achieve the target [60] Question: Capital expenditure outlook for 2024 - The company expects expansion CapEx to remain between $300 million to $400 million, with no jeopardy to free cash flow [40] Question: Pipeline utilization and potential expansions - Management confirmed that long-haul lines are running very full, and while optimization is ongoing, no major expansions are anticipated at this time [43][88] Question: Impact of upstream M&A on recontracting - The company views recent M&A activity positively, as it supports growth numbers by increasing production from previously undeveloped inventory [123] Question: Expectations for NGL segment and maintenance - The NGL segment is expected to see a downturn year-over-year, but management did not change guidance for the segment [47][80]