Plains All American Reports Fourth-Quarter and Full-Year 2022 Results; Announces 2023 Guidance

Plains All American Pipeline, L.P.; Plains GP Holdings

HOUSTON, Feb. 08, 2023 (GLOBE NEWSWIRE) -- Plains All American Pipeline, L.P. (Nasdaq: PAA) and Plains GP Holdings (Nasdaq: PAGP) today reported fourth-quarter and full-year 2022 results, announced 2023 guidance and provided the following highlights:

2022 Highlights

• Fourth-quarter and full-year 2022 Net income attributable to PAA of $263 million and $1.04 billion, respectively, and 2022 Net cash provided by operating activities of $335 million and $2.41 billion, respectively
  
  

• Delivered better than expected fourth-quarter and full-year 2022 Adjusted EBITDA attributable to PAA of $659 million and $2.51 billion, respectively
  
  

• Generated full-year 2022 Free Cash Flow of $1.61 billion, repurchased $74 million of common units, repaid $774 million of total debt and achieved year-end leverage of 3.7x
  
  

• Announced multi-year capital allocation framework prioritizing Free Cash Flow generation, further improving financial flexibility and increasing returns of capital to equity holders
  

2023 Outlook

• Expect full-year 2023 Adjusted EBITDA attributable to PAA of $2.45 - $2.55 billion and year-end 2023 leverage of +/- 3.5x
  
  

• Increased the annualized common distribution by $0.20 to $1.07 per unit in January 2023 (to be paid in February)
  
  

• Expect to generate approximately $1.60 billion of Free Cash Flow in 2023, underpinning multi-year return of capital to equity holders and absolute debt reduction
  
  

• Remain focused on disciplined capital investments, anticipating full-year 2023 Investment and Maintenance Capital of $325 million and $195 million, net to PAA
  

“2022 represented a positive inflection point for Plains, evidenced by strong execution of our goals and initiatives. This included reaching the lower-end of our leverage target range and increasing returns of capital to equity holders through a combination of increased distributions and share repurchases. Additionally, we achieved record health, safety, and environmental performance by achieving or exceeding 20% reduction targets in our key metrics,” stated Willie Chiang, Chairman and CEO of Plains. “Looking to 2023, our Permian Basin assets are well positioned to benefit from continued production growth. In our NGL segment, we continue to evaluate capital efficient debottlenecking opportunities which we expect to improve our long-term fee-based earnings. We remain focused on continuing to generate significant Free Cash Flow, which provides visibility for improving shareholder returns primarily through distribution increases and disciplined accretive investments, all while maintaining balance sheet flexibility.”

Plains All American Pipeline

Summary Financial Information (unaudited)
(in millions, except per unit data)

		Three Months Ended December 31,						%				Twelve Months Ended December 31,						%
GAAP Results			2022			2021		Change					2022			2021		Change
Net income attributable to PAA (1)		$	263		$	450		(42	)%			$	1,037		$	593		75	%
Diluted net income per common unit		$	0.30		$	0.56		(46	)%			$	1.19		$	0.55		116	%
Diluted weighted average common units outstanding			698			709		(2	)%				701			716		(2	)%
Net cash provided by operating activities		$	335		$	635		(47	)%			$	2,408		$	1,996		21	%
Distribution per common unit declared for the period		$	0.2675		$	0.1800		49	%			$	0.9200		$	0.7200		28	%

(1)

Reported results for the three and twelve months ended December 31, 2022 include a non-cash asset impairment of $330 million related to our California assets and a non-cash gain on investments in unconsolidated entities of approximately $370 million related to our purchase of an additional interest in the Cactus II pipeline. Reported results for the twelve months ended December 31, 2021 include aggregate non-cash asset impairments of approximately $695 million related to the sale of our gas storage assets and the write-down of certain crude oil terminal assets.

		Three Months Ended December 31,							%				Twelve Months Ended December 31,						%
Non-GAAP Results (1)			2022				2021		Change					2022			2021		Change
Adjusted net income attributable to PAA		$	286			$	231		24	%			$	1,091		$	884		23	%
Diluted adjusted net income per common unit		$	0.33			$	0.25		32	%			$	1.26		$	0.95		33	%
Adjusted EBITDA		$	759			$	646		17	%			$	2,875		$	2,290		26	%
Adjusted EBITDA attributable to PAA (2)		$	659			$	564		17	%			$	2,510		$	2,196		14	%
Implied DCF per common unit and common unit equivalent		$	0.58			$	0.54		7	%			$	2.26		$	2.05		10	%
Free Cash Flow (3)		$	(4	)		$	539		(101	)%			$	1,610		$	2,369		(32	)%
Free Cash Flow after Distributions		$	(218	)		$	349		(162	)%			$	828		$	1,654		(50	)%

(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 our Non-GAAP financial measures, including their reconciliation to the most directly comparable measures as reported in accordance with GAAP, and certain selected items that PAA believes impact comparability of financial results between reporting periods.
(2)	Excludes amounts attributable to noncontrolling interests in the Plains Oryx Permian Basin LLC joint venture, Cactus II Pipeline LLC and Red River Pipeline LLC.
(3)	Fourth-quarter 2022 Free Cash Flow is impacted by a $230 million payment related to the settlement of a Line 901 class action lawsuit and the purchase of an additional interest in the Cactus II pipeline for approximately $85 million.

Summary of Selected Financial Data by Segment (unaudited)
(in millions)

	Segment Adjusted EBITDA
	Crude Oil				NGL
Three Months Ended December 31, 2022	$	504			$	151
Three Months Ended December 31, 2021	$	423			$	141
Percentage change in Segment Adjusted EBITDA versus 2021 period		19	%			7	%
	Segment Adjusted EBITDA
	Crude Oil				NGL
Twelve Months Ended December 31, 2022	$	1,986			$	518
Twelve Months Ended December 31, 2021	$	1,909			$	285
Percentage change in Segment Adjusted EBITDA versus 2021 period		4	%			82	%
Percentage change in Segment Adjusted EBITDA versus 2021 period further adjusted for impact of divested assets (1)		7	%			82	%

(1)	Estimated impact of divestitures completed during 2021 and 2022, assuming an effective date of January 1, 2021. Divested assets primarily included natural gas storage facilities that were previously reported in our Crude Oil segment.

Fourth-quarter 2022 Crude Oil Segment Adjusted EBITDA increased 19% versus comparable 2021 results primarily due to higher volumes across our pipeline systems, particularly our Permian gathering and intra-basin assets in addition to the start-up of the Wink-to-Webster and Capline pipelines, as well as more favorable market conditions for our merchant activities, particularly in Canada. These benefits were partially offset by higher operating expenses as a result of increased volumes and utility costs.

Fourth-quarter 2022 NGL Segment Adjusted EBITDA increased 7% versus comparable 2021 results primarily due to higher throughput at certain of our fractionation, gas processing and storage assets partially offset by higher operating expenses as a result of higher volumes and utility costs, along with an increased ownership interest at Empress.

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 attached hereto.

Conference Call

PAA and PAGP will hold a joint conference call at 4:30 p.m. CT on Wednesday, February 8, 2023 to discuss the following items:

1. PAA’s fourth-quarter and full-year 2022 performance;

2. Capitalization and liquidity; and

3. 2023 Financial guidance.
   

Conference Call Webcast Instructions

To access the internet webcast, please go to https://edge.media-server.com/mmc/p/igr8sbqe.

Alternatively, the webcast can be accessed on our website (www.plains.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. Slides will be posted prior to the call and a complete transcript will be posted 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, common equity repurchases and other general partnership purposes. The primary additional measures used by management are Adjusted EBITDA, Adjusted EBITDA attributable to PAA, Implied Distributable Cash Flow (“DCF”), Free Cash Flow and Free Cash Flow after Distributions.

Adjusted EBITDA is defined as earnings before interest, taxes, depreciation and amortization (including our proportionate share of depreciation and amortization, including write-downs related to cancelled projects and impairments, of unconsolidated entities), gains and losses on asset sales and asset impairments, goodwill impairment losses and gains or losses on and impairments of investments in unconsolidated entities, adjusted for certain selected items impacting comparability. Our definition and calculation of certain non-GAAP financial measures may not be comparable to similarly-titled measures of other companies. Adjusted EBITDA, Adjusted EBITDA attributable to PAA, Implied DCF and certain other non-GAAP financial performance measures are reconciled to Net Income, 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 Consolidated Financial Statements and accompanying notes. In addition, we encourage you to visit our website at www.plains.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. We do not reconcile non-GAAP financial measures on a forward-looking basis as it is impractical to do so without unreasonable effort.

Performance Measures

Management believes that the presentation of Adjusted EBITDA, Adjusted EBITDA attributable to PAA 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 either related to investing activities (such as the purchase of linefill) or purchases of long-term inventory, and inventory valuation adjustments, as applicable, (iii) long-term inventory costing adjustments, (iv) items that are not indicative of our core operating results and/or (v) other items that we believe should be excluded in understanding our core operating performance. These measures may be further 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” in our Consolidated Financial Statements. We also adjust for amounts billed by our equity method investees related to deficiencies under minimum volume commitments. 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 Annual Report on Form 10-K.

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, common equity repurchases and other general partnership purposes. Free Cash Flow is defined as Net Cash Provided by Operating Activities, less Net Cash Provided by/(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, net of proceeds from the sales of assets and further impacted by distributions to and contributions from noncontrolling interests. Free Cash Flow is further reduced by cash distributions paid to our preferred and common unitholders to arrive at Free Cash Flow after Distributions.

PLAINS ALL AMERICAN PIPELINE, L.P. AND SUBSIDIARIES
FINANCIAL SUMMARY (unaudited)

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in millions, except per unit data)

	Three Months Ended December 31,								Twelve Months Ended December 31,
		2022				2021				2022				2021
REVENUES	$	12,952			$	12,989			$	57,342			$	42,078
COSTS AND EXPENSES
Purchases and related costs		11,995				11,760				53,176				38,504
Field operating costs		343				319				1,315				1,065
General and administrative expenses		82				87				325				292
Depreciation and amortization		254				223				965				774
(Gains)/losses on asset sales and asset impairments, net		315				—				269				592
Total costs and expenses		12,989				12,389				56,050				41,227
OPERATING INCOME/(LOSS)		(37	)			600				1,292				851
OTHER INCOME/(EXPENSE)
Equity earnings in unconsolidated entities		96				83				403				274
Gain/(loss) on investments in unconsolidated entities, net		345				2				346				2
Interest expense, net		(100	)			(106	)			(405	)			(425	)
Other income/(expense), net		18				6				(219	)			19
INCOME BEFORE TAX		322				585				1,417				721
Current income tax expense		(24	)			(38	)			(84	)			(50	)
Deferred income tax (expense)/benefit		12				(50	)			(105	)			(23	)
NET INCOME		310				497				1,228				648
Net income attributable to noncontrolling interests		(47	)			(47	)			(191	)			(55	)
NET INCOME ATTRIBUTABLE TO PAA	$	263			$	450			$	1,037			$	593
NET INCOME PER COMMON UNIT:
Net income allocated to common unitholders — Basic and Diluted	$	210			$	398			$	831			$	393
Basic and diluted weighted average common units outstanding		698				709				701				716
Basic and diluted net income per common unit	$	0.30			$	0.56			$	1.19			$	0.55

PLAINS ALL AMERICAN PIPELINE, L.P. AND SUBSIDIARIES
FINANCIAL SUMMARY (unaudited)

CONDENSED CONSOLIDATED BALANCE SHEET DATA
(in millions)

	December 31, 2022			December 31, 2021
ASSETS
Current assets (including Cash and cash equivalents of $401 and $449, respectively)	$	5,355		$	6,137
Property and equipment, net		15,250			14,903
Investments in unconsolidated entities		3,084			3,805
Intangible assets, net		2,145			1,960
Linefill		961			907
Long-term operating lease right-of-use assets, net		349			393
Long-term inventory		284			253
Other long-term assets, net		464			251
Total assets	$	27,892		$	28,609
LIABILITIES AND PARTNERS’ CAPITAL
Current liabilities	$	5,891		$	6,232
Senior notes, net		7,237			8,329
Other long-term debt, net		50			69
Long-term operating lease liabilities		308			339
Other long-term liabilities and deferred credits		1,081			830
Total liabilities		14,567			15,799
Partners’ capital excluding noncontrolling interests		10,057			9,972
Noncontrolling interests		3,268			2,838
Total partners’ capital		13,325			12,810
Total liabilities and partners’ capital	$	27,892		$	28,609

DEBT CAPITALIZATION RATIOS
(in millions)

	December 31, 2022				December 31, 2021
Short-term debt	$	1,159			$	822
Long-term debt		7,287				8,398
Total debt	$	8,446			$	9,220
Long-term debt	$	7,287			$	8,398
Partners’ capital excluding noncontrolling interests		10,057				9,972
Total book capitalization excluding noncontrolling interests (“Total book capitalization”)	$	17,344			$	18,370
Total book capitalization, including short-term debt	$	18,503			$	19,192
Long-term debt-to-total book capitalization		42	%			46	%
Total debt-to-total book capitalization, including short-term debt		46	%			48	%

PLAINS ALL AMERICAN PIPELINE, L.P. AND SUBSIDIARIES
FINANCIAL SUMMARY (unaudited)

COMPUTATION OF BASIC AND DILUTED NET INCOME PER COMMON UNIT ⁽¹⁾
(in millions, except per unit data)

	Three Months Ended December 31,								Twelve Months Ended December 31,
		2022				2021				2022				2021
Basic and Diluted Net Income per Common Unit
Net income attributable to PAA	$	263			$	450			$	1,037			$	593
Distributions to Series A preferred unitholders		(37	)			(37	)			(149	)			(149	)
Distributions to Series B preferred unitholders		(15	)			(12	)			(52	)			(49	)
Amounts allocated to participating securities		(1	)			(3	)			(5	)			(2	)
Net income allocated to common unitholders	$	210			$	398			$	831			$	393
Basic and diluted weighted average common units outstanding (2) (3)		698				709				701				716
Basic and diluted net income per common unit	$	0.30			$	0.56			$	1.19			$	0.55

(1)	We calculate net income allocated to common unitholders based on the distributions pertaining to the current period’s net income. After adjusting for the appropriate period’s distributions, the remaining undistributed earnings or excess distributions over earnings, if any, are allocated to common unitholders and participating securities in accordance with the contractual terms of our partnership agreement in effect for the period and as further prescribed under the two-class method.
(2)	The possible conversion of our Series A preferred units was excluded from the calculation of diluted net income per common unit for the three and twelve months ended December 31, 2022 and 2021 as the effect was either antidilutive or did not change net income per common unit.
(3)	Our equity-indexed compensation plan awards that contemplate the issuance of common units are considered dilutive unless (i) they become vested only upon the satisfaction of a performance condition and (ii) that performance condition has yet to be satisfied. Equity-indexed compensation plan awards that are deemed to be dilutive are reduced by a hypothetical common unit repurchase based on the remaining unamortized fair value, as prescribed by the treasury stock method in guidance issued by the FASB. For the three and twelve months ended December 31, 2022 and 2021, the effect of equity-indexed compensation plan awards was either antidilutive or did not change net income per common unit.

PLAINS ALL AMERICAN PIPELINE, L.P. AND SUBSIDIARIES
FINANCIAL SUMMARY (unaudited)

NON-GAAP RECONCILIATIONS

COMPUTATION OF BASIC AND DILUTED ADJUSTED NET INCOME PER COMMON UNIT ⁽¹⁾
(in millions, except per unit data)

	Three Months Ended December 31,								Twelve Months Ended December 31,
		2022				2021				2022				2021
Basic and Diluted Adjusted Net Income per Common Unit
Net income attributable to PAA	$	263