Executive Summary / Key Takeaways

• Plains GP Holdings, through its investment in Plains All American Pipeline, is a leading North American midstream operator focused on crude oil and NGLs, leveraging an integrated asset base and differentiated logistics capabilities.
• The company is executing an "efficient growth" strategy centered on disciplined bolt-on acquisitions and high-return organic projects, enhancing its competitive position and driving future cash flow.
• Recent financial performance demonstrates resilience, with Q1 2025 Adjusted EBITDA showing growth driven by strong segment results, supported by favorable Permian volumes and NGL market dynamics.
• A strengthened balance sheet, highlighted by mid-BBB credit ratings and ample liquidity, provides significant financial flexibility to fund strategic initiatives and navigate market volatility.
• Management is committed to increasing returns to unitholders through distribution growth, supported by robust free cash flow generation and a positive outlook for 2025 and beyond, with expectations for 2026 EBITDA to exceed 2024 levels.

Setting the Scene: An Integrated Midstream Powerhouse

Plains GP Holdings, L.P. (PAGP) serves as an investment vehicle providing exposure to the operations of Plains All American Pipeline, L.P. (PAA), a major player in the North American midstream energy sector. PAA's core business is built upon a vast network of infrastructure designed to aggregate, transport, store, and market crude oil and natural gas liquids (NGLs). As one of the largest crude oil midstream service providers on the continent, PAA operates extensive pipeline systems, terminals, storage facilities, and gathering assets strategically located in key producing basins like the Permian, major transportation corridors, and market hubs across the United States and Canada.

The company's business model is fundamentally integrated, combining large-scale supply aggregation capabilities with the physical ownership and operation of critical assets that connect supply to key demand centers and export terminals. This integration allows PAA to offer comprehensive logistics solutions to its customers.

The competitive landscape in which Plains operates is characterized by several large, well-established players, including Enterprise Products Partners (EPD), Kinder Morgan (KMI), ONEOK (OKE), and Enbridge (ENB). Competition exists across various facets of the midstream value chain, from pipeline transportation and storage to processing and logistics. While some competitors may possess larger overall asset footprints or dominate specific sub-sectors (e.g., EPD in NGL pipelines, KMI in natural gas), Plains strategically positions itself by emphasizing flow assurance, reliability, quality control, and crucially, access to multiple markets for its customers.

A key differentiator for Plains lies in its integrated logistics capabilities, which extend beyond traditional pipelines to include specialized trucking and rail systems. This "technology," while not silicon-based, represents a critical operational advantage. The combination of pipelines, trucks, and rail provides enhanced flexibility, particularly in accessing remote production areas or delivering to diverse market destinations. This integrated approach enables faster delivery times in certain scenarios and offers customers optionality that pipeline-only operators may not provide. While specific quantitative metrics on the efficiency gains from this integrated logistics network compared to competitors are not uniformly detailed across all operations, the strategic intent is clear: to offer a more comprehensive and adaptable service that captures value in various market conditions and differentiates Plains from rivals focused solely on large-diameter trunklines. The company's operational focus includes leveraging these systems to optimize throughput and capture market opportunities.

Strategic Evolution and Operational Execution

Plains' journey has been marked by periods of significant growth and strategic adjustments. Following its formation in 2013 and building upon PAA's decades of operational history, the company has navigated complex market cycles and specific challenges. A notable historical event was the Line 901 incident in 2015, a crude oil release that resulted in substantial costs and legal proceedings. The resolution of material claims related to this incident, including recent settlements and the write-off of an insurance receivable, has provided greater financial certainty and allowed management to sharpen its focus on forward-looking strategic priorities.

Since the latter half of 2022, Plains has actively pursued an "efficient growth" strategy. This represents a deliberate shift towards leveraging its existing asset base and financial strength for accretive expansion. A core component of this strategy is the disciplined execution of bolt-on acquisitions. By the second quarter of 2024, Plains had completed eight such deals totaling approximately $535 million net to Plains, continuing this momentum into 2025 with the acquisition of Ironwood Midstream in the Eagle Ford ($481 million), the Medallion Delaware Basin gathering business, and the remaining interest in the Cheyenne Pipeline. These transactions are strategically chosen to complement the existing footprint, enhance integration, and unlock synergies, contributing to incremental growth opportunities and improving the overall financial profile. Management emphasizes that these acquisitions are evaluated through a lens of capital discipline, focusing on attractive risk-adjusted returns and the ability to integrate assets to maximize value across the broader system.

Alongside inorganic growth, Plains is also investing in high-return organic projects. A prime example is the Fort Saskatchewan Fractionation expansion in Canada, a project aimed at debottlenecking capacity and enhancing the integrated NGL value chain. This project, placed into service in Q2 2025, is supported by long-term customer commitments and is expected to contribute gradually throughout 2025, reaching a full run rate in 2026. These organic investments, combined with bolt-on acquisitions, are central to the company's strategy of building a more durable and resilient cash flow profile.

Operational execution remains a key focus, contributing to the company's performance. In the Crude Oil segment, Plains benefits from volume growth, particularly in the Permian Basin, tariff escalations, and contributions from recent acquisitions. While Q1 2025 saw some impacts from refinery downtime and higher operating costs, management noted a recovery in volumes in April and May. In the NGL segment, performance is driven by factors like NGL sales volumes, frac spreads, and operational efficiencies. The company is actively working to transition its NGL business towards a higher percentage of fee-based earnings, aiming to reduce variability and flatten the seasonal earnings profile historically associated with NGLs.

Financial Strength and Performance Trajectory

Plains' financial performance reflects its strategic execution and operational resilience. For the three months ended March 31, 2025, the company reported net income attributable to PAGP of $84 million, a significant increase from $42 million in the same period of 2024. This improvement was largely influenced by fluctuations in derivative mark-to-market valuations and stronger underlying Segment Adjusted EBITDA in both the Crude Oil and NGL segments.

Segment-level performance in Q1 2025 provided a solid start to the year. The Crude Oil segment delivered $559 million in Adjusted EBITDA, in line with $553 million in Q1 2024. This was supported by a 6% increase in average daily pipeline tariff volumes, reaching 9,086 thousand barrels per day, driven by Permian production growth and acquisition contributions, though partially offset by higher operating expenses. The NGL segment saw a notable increase in Adjusted EBITDA, rising 19% to $189 million in Q1 2025 from $159 million in Q1 2024. This was fueled by higher NGL sales volumes (up 15% to 147 thousand barrels per day), improved realized frac spreads, and lower field operating costs.

Looking back, 2024 demonstrated strong execution, with full-year Adjusted EBITDA exceeding the high end of initial guidance by approximately $105 million, or 4%, attributed to better performance across both segments and stronger volumes.

Financial health and liquidity are pillars of Plains' strategy. As of March 31, 2025, the company maintained a working capital surplus of $45 million and robust liquidity of approximately $2.6 billion, comprising cash and availability under credit facilities.

Net cash provided by operating activities was strong at $638 million for the first three months of 2025, compared to $418 million in the prior year period, reflecting solid earnings performance.

Capital allocation priorities are clear. For 2025, total investment capital is projected at approximately $500 million ($400 million net to Plains), with a significant portion directed towards Permian JV assets. Maintenance capital is projected at approximately $260 million ($240 million net). These investments are expected to be funded through operating cash flow and borrowing capacity. Financing activities in early 2025 included the issuance of $1.0 billion in senior notes, with proceeds used to fund recent acquisitions, repurchase Series A preferred units ($333 million), and manage existing debt. The company has a $1.0 billion senior note maturity in October 2025, which it expects to refinance.

Plains has made significant strides in strengthening its balance sheet, achieving mid-BBB credit ratings from all three major agencies by Q4 2024. Management expects to operate at or below the low end of its leverage target range (3.25x to 3.75x) in 2025, providing ample capacity for strategic investments.

Returning capital to unitholders is a core commitment. Plains has a multi-year framework for distribution growth and has demonstrated a willingness to accelerate increases based on performance, including a recent increase announced for the distribution payable in February 2025. Opportunistic unit buybacks are also part of the capital allocation toolkit, contingent on market valuation.

Competitive Positioning and Differentiated Capabilities

Plains operates in a competitive midstream landscape dominated by large players with extensive networks. Compared to peers like EPD and KMI, Plains' overall asset footprint, while substantial (e.g., 18,300 miles of pipelines), is generally smaller. However, Plains differentiates itself through its integrated logistics model and strategic focus areas.

In the Crude Oil segment, Plains' strong presence in the Permian Basin is a key competitive advantage, positioning it to capture growth from the most prolific U.S. producing region. Its network connects Permian supply to critical markets and export terminals. While competitors also operate in the Permian, Plains' integrated gathering, intra-basin, and long-haul assets, coupled with its marketing capabilities, allow it to offer a comprehensive solution. The acquisition strategy, focusing on bolt-ons like Ironwood and Medallion, aims to deepen its presence and enhance connectivity in core areas, creating synergies that competitors might not easily replicate. Management highlights the ability to offer flow assurance, reliability, quality control, and access to multiple markets as key differentiators valued by customers.

In the NGL segment, Plains leverages its assets in Canada and the U.S. to provide processing, fractionation, storage, and transportation services. The Fort Saskatchewan expansion bolsters its Canadian NGL value chain, aiming for increased fee-based stability. While competitors like OKE are known for processing efficiency, Plains' integrated NGL system and strategic storage assets provide flexibility. Management believes its Canadian NGL assets are unique and contribute to its competitive standing.

Financially, a comparison of TTM metrics reveals areas of strength and areas where Plains lags larger peers. Plains' TTM Gross Profit Margin (28.20%) is competitive, falling within the range of peers like EPD (13%) and KMI (56%), though direct comparison is complex due to business mix. Plains' TTM EBITDA Margin (5.79%) trails EPD (13%), KMI (29%), OKE (23%), and ENB (19%), suggesting potentially higher operating costs or different revenue structures. The TTM Net Profit Margin (0.29%) is also significantly lower than peers (EPD 10%, KMI 17%, OKE 14%, ENB 10%), impacted by factors like interest expense, taxes, and other costs.

However, Plains' focus on free cash flow generation is a key part of its value proposition. Its TTM Free Cash Flow Per Share ($10.28) supports a strong Dividend Yield (7.27%). While its TTM Debt/Equity Ratio (6.57) appears higher than some peers (EPD 1.12, KMI 1.04, OKE 1.88, ENB 1.54), management emphasizes operating within a specific leverage target range (3.25x-3.75x) and has demonstrated a commitment to maintaining mid-BBB credit ratings, which provides financial stability.

Plains' competitive advantages, particularly its integrated logistics and strategic asset footprint in key basins, allow it to compete effectively despite being smaller than some rivals. Its strategy of focusing on synergistic bolt-ons and operational efficiencies aims to improve its financial metrics over time and enhance its ability to capture market share.

Outlook and Risks

Management's outlook for 2025 is positive, projecting Adjusted EBITDA in a range of $2.8 billion to $2.95 billion. This guidance is based on key assumptions, including a $75 per barrel WTI price and continued Permian production growth of 200,000 to 300,000 barrels per day (exit 2024 to exit 2025). Management acknowledges that a sustained WTI price environment in the $60 to $65 range could result in performance in the lower half of this guidance range and potentially impact the Permian growth outlook.

The expected growth in 2025 is anticipated to be driven by contributions from bolt-on acquisitions, volume growth across the system, and pipeline tariff escalations, partially offset by the reset of certain long-haul contract tariffs in the second half of the year. The NGL segment is expected to contribute slightly less year-over-year but will benefit from the ramp-up of the Fort Saskatchewan expansion and a higher percentage of fee-based earnings (approximately 45% in 2025), supported by hedging (approximately 80% of 2025 C3+ spec sales hedged).

Looking further ahead, management expects 2026 EBITDA to be higher than 2024, driven by continued base business growth, integration synergies from acquisitions, ongoing streamlining efforts, and potential future bolt-on opportunities. The long-term capital spend is expected to remain within the $300 million to $400 million net to Plains range.

Despite the positive outlook, several risks could impact performance. Macroeconomic and geopolitical volatility, including uncertainty around trade tariffs and OPEC actions, can influence commodity prices and demand for midstream services. Operational risks, such as pipeline releases (like the recent L48 incident) and associated cleanup costs and potential penalties, remain inherent in the business. While the Line 901 legacy costs are largely settled, uncertainty regarding insurance recovery persists. Legal proceedings, such as the Louisiana coastal erosion lawsuit, also pose potential liabilities. Competition and potential capacity overbuild in certain areas could pressure rates and margins. Regulatory changes impacting oil and gas development or infrastructure operations are also a risk.

Management's strategy to mitigate these risks includes maintaining a strong balance sheet, disciplined capital allocation, hedging commodity price and interest rate exposures, and focusing on operational excellence and safety.

Conclusion

Plains GP Holdings, through its controlling interest in Plains All American Pipeline, presents an investment case built on a resilient, integrated midstream platform strategically positioned in key North American energy basins. The company's "efficient growth" strategy, focused on value-accretive bolt-on acquisitions and targeted organic investments, is enhancing its asset base and driving future cash flow generation.

Despite operating in a competitive environment with larger peers, Plains leverages its integrated logistics capabilities and operational expertise to offer differentiated services and capture market opportunities. While financial metrics like margins may trail some rivals, the company's commitment to capital discipline, a strengthened balance sheet with mid-BBB ratings, and robust free cash flow generation underpin its ability to execute its strategy and return value to unitholders.

With a positive outlook for 2025, supported by expected volume growth, acquisition contributions, and a more stable NGL business, and expectations for continued growth into 2026, Plains is positioned to deliver on its commitment to increasing distributions and enhancing enterprise value. While market volatility and operational risks persist, the company's strategic focus and financial flexibility provide a solid foundation for navigating the evolving energy landscape.