HOUSTON – Plains All American Pipeline, L.P. (NYSE: PAA) and Plains GP Holdings (NYSE: PAGP) today reported third-quarter 2020 results and furnished updated 2020 guidance in addition to several other significant updates, which are highlighted below.
Summary Highlights
- Reported net income for the quarter of $143 million
- Delivered third-quarter 2020 Adjusted EBITDA of $682 million
- Completed the sale of LA Basin Terminals (closed October 15, 2020) for approximately $200 million (brings year-to-date asset sales proceeds to approximately $450 million)
- Increased full-year 2020 Adjusted EBITDA guidance to +/- $2.585 billion (increase of $85 million, or 3%)
- Provided preliminary estimate for 2021 Adjusted EBITDA of +/- $2.2 billion (assumes a $50 million contribution from the Supply & Logistics segment, and is net of the LA Basin Terminals sale and $600 million or more of additional asset sales targeted in 2021)
- Provided preliminary estimate for 2021 Free Cash Flow after distributions of roughly $300 million, or $900 million or more when including the benefit of proceeds from additional asset sales targeted in 2021
- Announced $500 million Common Equity Repurchase Program intended to be utilized as an additional method of returning capital to investors
“We delivered third-quarter results favorable to our expectations and raised our full-year 2020 guidance, which is now in-line with our beginning of the year pre-COVID expectations,” stated Willie Chiang, Chairman and CEO of Plains. “We have continued to execute across each of our key initiatives: operating safely and reliably, maximizing Free Cash Flow after distributions, reducing leverage, minimizing capital investment, optimizing our assets, streamlining our organization and reducing costs throughout the business.”
Mr. Chiang continued, “Our current equity valuation does not reflect the strength of our asset base or the long-term durability of our business, and we have reached an inflection point where we expect to generate meaningful levels of Free Cash Flow after distributions. Given the combination of these factors, today we announced a $500 million common equity repurchase program to be used as an additional method of returning capital to investors. In addition to reducing debt, we believe it is appropriate to allocate a portion of our Free Cash Flow after distributions to invest in our equity.”
Plains All American Pipeline |
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Summary Financial Information (unaudited) |
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(in millions, except per unit data) |
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|
|
Three Months Ended |
|
% |
|
|
Nine Months Ended |
|
% |
|||||||||||||||||
GAAP Results |
|
2020 |
|
2019 |
|
Change |
|
|
2020 |
|
|
2019 |
|
Change |
||||||||||||
Net income/(loss) attributable to PAA (1) |
|
$ |
143 |
|
|
$ |
449 |
|
|
(68 |
) |
% |
|
|
$ |
(2,562 |
) |
|
|
$ |
1,865 |
|
|
(237 |
) |
% |
Diluted net income/(loss) per common unit |
|
$ |
0.13 |
|
|
$ |
0.55 |
|
|
(76 |
) |
% |
|
|
$ |
(3.72 |
) |
|
|
$ |
2.28 |
|
|
(263 |
) |
% |
Diluted weighted average common units outstanding (2) |
|
728 |
|
|
800 |
|
|
(9 |
) |
% |
|
|
728 |
|
|
|
800 |
|
|
(9 |
) |
% |
||||
Net cash provided by operating activities |
|
$ |
282 |
|
|
$ |
314 |
|
|
(10 |
) |
% |
|
|
$ |
1,256 |
|
|
|
$ |
1,778 |
|
|
(29 |
) |
% |
Distribution per common unit declared for the period |
|
$ |
0.18 |
|
|
$ |
0.36 |
|
|
(50 |
) |
% |
|
|
|
|
|
|
|
____________________________________ | ||||
(1) |
Reported results for the nine months ended September 30, 2020 include aggregate non-cash goodwill and asset impairments and the write-down of certain of our investments in unconsolidated entities totaling $3.3 billion representing a nine-month net loss of $4.55 after tax per common unit. |
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(2) |
For the three and nine months ended September 30, 2019, includes all potentially dilutive securities (our Series A preferred units and equity-indexed compensation awards) outstanding during the period. See the “Computation of Basic and Diluted Net Income/(Loss) Per Common Unit” table attached hereto for additional information. |
|
|
Three Months Ended |
|
% |
|
|
Nine Months Ended |
|
% |
||||||||||||||
Non-GAAP Results (1) |
|
2020 |
|
2019 |
|
Change |
|
|
2020 |
|
2019 |
|
Change |
||||||||||
Adjusted net income attributable to PAA |
|
$ |
382 |
|
|
$ |
430 |
|
|
(11) |
% |
|
|
$ |
1,070 |
|
|
$ |
1,546 |
|
|
(31) |
% |
Diluted adjusted net income per common unit |
|
$ |
0.46 |
|
|
$ |
0.52 |
|
|
(12) |
% |
|
|
$ |
1.26 |
|
|
$ |
1.88 |
|
|
(33) |
% |
Adjusted EBITDA |
|
$ |
682 |
|
|
$ |
731 |
|
|
(7) |
% |
|
|
$ |
2,001 |
|
|
$ |
2,377 |
|
|
(16) |
% |
Implied DCF per common unit and common equivalent unit |
|
$ |
0.63 |
|
|
$ |
0.63 |
|
|
— |
% |
|
|
$ |
1.84 |
|
|
$ |
2.21 |
|
|
(17) |
% |
Free cash flow |
|
$ |
73 |
|
|
$ |
(79) |
|
|
** |
|
|
$ |
195 |
|
|
$ |
535 |
|
|
** |
||
Free cash flow after distributions |
|
$ |
(95) |
|
|
$ |
(378) |
|
|
** |
|
|
$ |
(466) |
|
|
$ |
(343) |
|
|
** |
____________________________________ | ||
** |
Indicates that variance as a percentage is not meaningful. |
|
(1) |
See the section of this release entitled “Non-GAAP Financial Measures and Selected Items Impacting Comparability” and the tables attached hereto for information regarding certain selected items that PAA believes impact comparability of financial results between reporting periods, as well as for information regarding non-GAAP financial measures (such as Adjusted EBITDA, Implied DCF, Free Cash Flow and Free Cash Flow After Distributions) and their reconciliation to the most directly comparable measures as reported in accordance with GAAP. |
Segment Adjusted EBITDA for the third quarter and first nine months of 2020 and 2019 is presented below:
Summary of Selected Financial Data by Segment (unaudited) |
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(in millions) |
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|
Segment Adjusted EBITDA |
|||||||||||
|
Transportation |
|
Facilities |
|
Supply and |
|||||||
Three Months Ended September 30, 2020 |
$ |
444 |
|
|
$ |
176 |
|
|
$ |
61 |
|
|
Three Months Ended September 30, 2019 |
$ |
462 |
|
|
$ |
173 |
|
|
$ |
92 |
|
|
Percentage change in Segment Adjusted EBITDA versus 2019 period |
(4) |
% |
|
2 |
% |
|
(34) |
% |
||||
|
|
|
|
|
|
|||||||
|
Segment Adjusted EBITDA |
|||||||||||
|
Transportation |
|
Facilities |
|
Supply and |
|||||||
Nine Months Ended September 30, 2020 |
$ |
1,233 |
|
|
$ |
560 |
|
|
$ |
205 |
|
|
Nine Months Ended September 30, 2019 |
$ |
1,271 |
|
|
$ |
529 |
|
|
$ |
571 |
|
|
Percentage change in Segment Adjusted EBITDA versus 2019 period |
(3) |
% |
|
6 |
% |
|
(64) |
% |
Third-quarter 2020 Transportation Segment Adjusted EBITDA decreased 4% versus comparable 2019 results due to reductions in tariff volumes in multiple regions resulting from lower crude oil prices, reduced drilling and completion activity and compressed regional basis differentials, partially offset by the benefit of minimum volume commitment deficiency payments associated with second quarter deficiencies.
Third-quarter 2020 Facilities Segment Adjusted EBITDA increased 2% versus comparable 2019 results primarily due to operational cost savings, increased spot activity at certain of our West Coast crude oil storage terminals and increased capacity at certain of our Mid-Continent and Gulf Coast crude oil storage terminals, partially offset by decreased activity at certain of our rail terminals resulting from less favorable market conditions and the impact of asset sales.
Third-quarter 2020 Supply and Logistics Segment Adjusted EBITDA decreased 34% versus comparable 2019 results due to less favorable crude oil differentials in both the Permian Basin and Canada, partially offset by the benefit of contango-based margin opportunities.
2020 Full-Year Guidance
The table below presents our full-year 2020 financial and operating guidance:
Financial and Operating Guidance (unaudited) |
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(in millions, except volumes, per unit and per barrel data) |
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|
Twelve Months Ended December 31, |
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|
2018 |
|
2019 |
|
2020 (G) |
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|
|
|
|
|
+ / – |
|||||||
Segment Adjusted EBITDA |
|
|
|
|
|
|||||||
Transportation |
$ |
1,508 |
|
|
$ |
1,722 |
|
|
$ |
1,620 |
|
|
Facilities |
711 |
|
|
705 |
|
|
715 |
|
||||
Fee-Based |
$ |
2,219 |
|
|
$ |
2,427 |
|
|
$ |
2,335 |
|
|
Supply and Logistics |
462 |
|
|
803 |
|
|
250 |
|
||||
Adjusted other income/(expense), net |
3 |
|
|
7 |
|
|
— |
|
||||
Adjusted EBITDA (1) |
$ |
2,684 |
|
|
$ |
3,237 |
|
|
$ |
2,585 |
|
|
Interest expense, net of certain non-cash items (2) |
(419) |
|
|
(407) |
|
|
(415) |
|
||||
Maintenance capital |
(252) |
|
|
(287) |
|
|
(215) |
|
||||
Current income tax expense |
(66) |
|
|
(112) |
|
|
(50) |
|
||||
Other |
1 |
|
|
(55) |
|
|
20 |
|
||||
Implied DCF (1) |
$ |
1,948 |
|
|
$ |
2,376 |
|
|
$ |
1,925 |
|
|
Preferred unit distributions paid (3) |
(161) |
|
|
(198) |
|
|
(200) |
|
||||
Implied DCF Available to Common Unitholders |
$ |
1,787 |
|
|
$ |
2,178 |
|
|
$ |
1,725 |
|
|
|
|
|
|
|
|
|||||||
Implied DCF per Common Unit and Common Equivalent Unit (1) |
$ |
2.38 |
|
|
$ |
2.91 |
|
|
$ |
2.35 |
|
|
|
|
|
|
|
|
|||||||
Distributions per Common Unit (4) |
$ |
1.20 |
|
|
$ |
1.38 |
|
|
$ |
0.90 |
|
|
Common Unit Distribution Coverage Ratio |
2.05 |
x |
|
2.17 |
x |
|
2.63 |
x | ||||
|
|
|
|
|
|
|||||||
Diluted Adjusted Net Income per Common Unit (1) |
$ |
1.88 |
|
|
$ |
2.51 |
|
|
$ |
1.59 |
|
|
|
|
|
|
|
|
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Operating Data |
|
|
|
|
|
|||||||
Transportation |
|
|
|
|
|
|||||||
Average daily volumes (MBbls/d) |
5,889 |
|
|
6,893 |
|
|
6,380 |
|
||||
Segment Adjusted EBITDA per barrel |
$ |
0.70 |
|
|
$ |
0.68 |
|
|
$ |
0.69 |
|
|
|
|
|
|
|
|
|||||||
Facilities |
|
|
|
|
|
|||||||
Average capacity (MMBbls/Mo) |
124 |
|
|
125 |
|
|
124 |
|
||||
Segment Adjusted EBITDA per barrel |
$ |
0.48 |
|
|
$ |
0.47 |
|
|
$ |
0.48 |
|
|
|
|
|
|
|
|
|||||||
Supply and Logistics |
|
|
|
|
|
|||||||
Average daily volumes (MBbls/d) |
1,309 |
|
|
1,369 |
|
|
1,290 |
|
||||
Segment Adjusted EBITDA per barrel |
$ |
0.97 |
|
|
$ |
1.61 |
|
|
$ |
0.53 |
|
|
|
|
|
|
|
|
|||||||
Investment Capital |
$ |
1,888 |
|
|
$ |
1,340 |
|
|
$ |
950 |
|
|
Fourth-Quarter Adjusted EBITDA as Percentage of Full Year |
35 |
% |
27 |
% |
23 |
% |
____________________________________ | |||
(G) |
2020 Guidance forecasts are intended to be + / – amounts. |
||
(1) |
See the section of this release entitled “Non-GAAP Financial Measures and Selected Items Impacting Comparability” and the Non-GAAP Reconciliation tables attached hereto for information regarding non-GAAP financial measures and, for the historical 2018 and 2019 periods, their reconciliation to the most directly comparable measures as reported in accordance with GAAP. We do not provide a reconciliation of non-GAAP financial measures to the equivalent GAAP financial measures on a forward-looking basis as it is impractical to forecast certain items that we have defined as “Selected Items Impacting Comparability” without unreasonable effort, due to the uncertainty and inherent difficulty of predicting the occurrence and financial impact of and the periods in which such items may be recognized. Thus, a reconciliation of non-GAAP financial measures to the equivalent GAAP financial measures could result in disclosure that could be imprecise or potentially misleading. |
||
(2) |
Excludes certain non-cash items impacting interest expense such as amortization of debt issuance costs and terminated interest rate swaps. |
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(3) |
Cash distributions paid to our preferred unitholders during the year presented. Distributions on our Series A preferred units were paid-in-kind for the February 2018 quarterly distribution. Distributions on our Series A preferred units have been paid in cash since the May 2018 quarterly distribution. Distributions on our Series B preferred units are payable in cash semi-annually in arrears on May 15 and November 15. |
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(4) |
Cash distributions per common unit paid during 2018 and 2019. 2020 (G) reflects the annualized distribution rate of $1.44 per common unit paid in February and the decreased annualized distribution rate of $0.72 per common unit for the remainder of the year. |
Plains GP Holdings
PAGP owns an indirect non-economic controlling interest in PAA’s general partner and an indirect limited partner interest in PAA. As the control entity of PAA, PAGP consolidates PAA’s results into its financial statements, which is reflected in the condensed consolidating balance sheet and income statement tables included at the end of this release. Information regarding PAGP’s distributions is reflected below:
|
Q3 2020 |
|
Q2 2020 |
|
Q3 2019 |
|||||||
Distribution per Class A share declared for the period |
$ |
0.18 |
|
|
$ |
0.18 |
|
|
$ |
0.36 |
|
|
Q3 2020 distribution percentage change from prior periods |
|
|
— |
% |
|
(50) |
% |
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Conference Call
PAA and PAGP will hold a joint conference call at 4:30 p.m. CT on Monday, November 2, 2020 to discuss the following items:
- PAA’s third-quarter 2020 performance;
- Capitalization and liquidity; and
- Financial and operating guidance.
Conference Call Webcast Instructions
To access the internet webcast, please go to https://event.webcasts.com/starthere.jsp?ei=1378562&tp_key=8945f97d3b.
Alternatively, the webcast can be accessed on our website (www.plainsallamerican.com) under Investor Relations (Navigate to: Investor Relations / either “PAA” or “PAGP” / News & Events / Quarterly Earnings). Following the live webcast, an audio replay in MP3 format will be available on our website within two hours after the end of the call and will be accessible for a period of 365 days. A transcript will also be available after the call at the above referenced website.
Non-GAAP Financial Measures and Selected Items Impacting Comparability
To supplement our financial information presented in accordance with GAAP, management uses additional measures known as “non-GAAP financial measures” in its evaluation of past performance and prospects for the future and to assess the amount of cash that is available for distributions, debt repayments and other general partnership purposes.
The primary additional measures used by management are earnings before interest, taxes, depreciation and amortization (including our proportionate share of depreciation and amortization of unconsolidated entities), gains and losses on asset sales and asset impairments, goodwill impairment losses and gains on and impairments of investments in unconsolidated entities, adjusted for certain selected items impacting comparability (“Adjusted EBITDA”), Implied distributable cash flow (“DCF”), Free Cash Flow and Free Cash Flow After Distributions.
Our definition and calculation of certain non-GAAP financial measures may not be comparable to similarly-titled measures of other companies. Adjusted EBITDA, Implied DCF and certain other non-GAAP financial performance measures are reconciled to Net Income/(Loss), and Free Cash Flow and Free Cash Flow After Distributions are reconciled to Net Cash Provided by Operating Activities, (the most directly comparable measures as reported in accordance with GAAP) for the historical periods presented in the tables attached to this release, and should be viewed in addition to, and not in lieu of, our Condensed Consolidated Financial Statements and notes thereto. In addition, we encourage you to visit our website at www.plainsallamerican.com (in particular the section under “Financial Information” entitled “Non-GAAP Reconciliations” within the Investor Relations tab), which presents a reconciliation of our commonly used non-GAAP and supplemental financial measures.
Performance Measures
Management believes that the presentation of Adjusted EBITDA and Implied DCF provides useful information to investors regarding our performance and results of operations because these measures, when used to supplement related GAAP financial measures, (i) provide additional information about our core operating performance and ability to fund distributions to our unitholders through cash generated by our operations and (ii) provide investors with the same financial analytical framework upon which management bases financial, operational, compensation and planning/budgeting decisions. We also present these and additional non-GAAP financial measures, including adjusted net income attributable to PAA and basic and diluted adjusted net income per common unit, as they are measures that investors, rating agencies and debt holders have indicated are useful in assessing us and our results of operations. These non-GAAP measures may exclude, for example, (i) charges for obligations that are expected to be settled with the issuance of equity instruments, (ii) gains and losses on derivative instruments that are related to underlying activities in another period (or the reversal of such adjustments from a prior period), gains and losses on derivatives that are related to investing activities (such as the purchase of linefill) and inventory valuation adjustments, as applicable, (iii) long-term inventory costing adjustments, (iv) items that are not indicative of our core operating results and business outlook and/or (v) other items that we believe should be excluded in understanding our core operating performance. These measures may further be adjusted to include amounts related to deficiencies associated with minimum volume commitments whereby we have billed the counterparties for their deficiency obligation and such amounts are recognized as deferred revenue in “Other current liabilities” on our Condensed Consolidated Financial Statements. Such amounts are presented net of applicable amounts subsequently recognized into revenue. Furthermore, the calculation of these measures contemplates tax effects as a separate reconciling item, where applicable. We have defined all such items as “selected items impacting comparability.” Due to the nature of the selected items, certain selected items impacting comparability may impact certain non-GAAP financial measures, referred to as adjusted results, but not impact other non-GAAP financial measures. We do not necessarily consider all of our selected items impacting comparability to be non-recurring, infrequent or unusual, but we believe that an understanding of these selected items impacting comparability is material to the evaluation of our operating results and prospects.
Although we present selected items impacting comparability that management considers in evaluating our performance, you should also be aware that the items presented do not represent all items that affect comparability between the periods presented. Variations in our operating results are also caused by changes in volumes, prices, exchange rates, mechanical interruptions, acquisitions, divestitures, investment capital projects and numerous other factors. These types of variations may not be separately identified in this release, but will be discussed, as applicable, in management’s discussion and analysis of operating results in our Quarterly Report on Form 10-Q.
Liquidity Measures
Management also uses the non-GAAP financial measures Free Cash Flow and Free Cash Flow After Distributions to assess the amount of cash that is available for distributions, debt repayments and other general partnership purposes. Free Cash Flow is defined as Net Cash Provided by Operating Activities, less Net Cash Used in Investing Activities, which primarily includes acquisition, investment and maintenance capital expenditures, investments in unconsolidated entities and the impact from the purchase and sale of linefill and base gas, net of proceeds from the sales of assets and further impacted by distributions to, contributions from and proceeds from the sale of noncontrolling interests. Free Cash Flow is further reduced by cash distributions paid to preferred and common unitholders to arrive at Free Cash Flow After Distributions.