2018 mlpa conference - mlpassociation.org · equity, private-equity arrangements 2018(g): guidance...

1www.plainsallamerican.com NYSE: PAA & PAGP

2018 MLPA ConferenceOrlando, FL May 23-24, 2018


Forward-Looking Statements And Non-GAAP Financial Measures

Except for the historical information contained herein, the matters discussed in this presentation consist of forward-looking statements. These forward-looking statements are based on PAGP’s and PAA’s current views with respect to future events, based on what we believe to be reasonable assumptions. Actual results may differ significantly because of risks and uncertainties that are difficult to predict and that may be beyond the control of PAGP and PAA. You should read PAGP’s and PAA’s Annual Reports on Form 10-K for the year ended December 31, 2017 and their most recently filed Quarterly Report on Form 10-Q for a more extensive list of factors that could cause actual results or outcomes to differ materially from the results or outcomes anticipated in the forward-looking statements. PAGP and PAA undertake no obligation to revise any forward-looking statements to reflect events or circumstances occurring after today’s date.

This presentation also contains non-GAAP financial measures relating to PAA, such as adjusted EBITDA. A reconciliation of these measures to the most directly comparable GAAP measures is available in the Investor Relations section of PAA’s and PAGP’s website at www.plainsallamerican.com, select “PAA” or “PAGP,” navigate to the “Financial Information” tab, then click on “Non-GAAP Reconciliations.”

http://www.plainsallamerican.com/


Discussion Outline

Overview of Plains All American

Current Industry Dynamics & Permian Update

PAA Positioning and Capital Projects Update

Closing Thoughts & Key Takeaways


Financial structure provides flexibility & optionality

PAA – MLP security, owns 100% of assets and operations

PAGP – GP security, indirect ownership in PAA common units (economic parity) plus tax attributes

PAGP – do not expect to pay corporate income taxes for 10+ years

Cash distributions treated as a “return of capital” until positive earnings and profits for tax purposes (est. timing 8+ years)

Public Investors

Plains AAP, L.P. (AAP)

PAA GP Holdings, LLC(PAGP GP)

Public Investors (NYSE: PAGP)

Investors Receive 1099

(NYSE: PAA)Investors Receive K-1

Private Owners & Management

Unified Board

Right to Exchange AAP Unit For PAGP

Class A Share

Right to Redeem AAP Unit For PAA

Common Unit

Or, alternatively:

Plains’ Organization Structure (Simplified)

Series A & B Preferred Holders


Volumes Handled(1):

>5 mmb/d Transportation volumes

~1.3 mmb/d Supply & Logistics

Total Enterprise Value: ~$31B(2)

PAA Total Assets: ~$25B(3)

Plains’ Current Profile

Over Past 20+ Years, PAA Has Developed One of the Largest and Most Integrated Midstream Systems in North America

Note: Map contains only most significant PAA assets, including recent/pending acquisitions, current projects and equity-investments assets (excludes non-core assets where sale is announced/pending).

PAA’s Crude Oil Value Chain

(1) Average daily Transportation segment and Supply & Logistics segment volumes for the year ending 12/31/17. (2) Based on balance sheet data as of 12/31/17 and closing unit prices as of 5/21/18.(3) Asset data as of 12/31/17.

Key Takeaways:

1. Highly integrated U.S. crude oil pipeline & terminal system

2. Minimal direct exposure to commodity prices

3. Leading crude oil midstream service provider in the Permian Basin

Legend

Strategic value across multiple regions, but today’s remarks focus on Permian Basin due to time constraints


Current Industry Dynamics and Permian Update


Last 5 years – big change for U.S. crude oil industry US crude imports substantially reduced, displaced by significant domestic production growth

US crude exports emerging (>2mmb/d* increase from Dec ‘15 to May ‘18)

30+ Year Trend of Declining US Oil Production / Growing Foreign Imports, Turned on its Head by U.S. Shale

U.S. Crude Oil Production (blue)

U.S. Crude Oil Net Imports (green)

U.S. crude oil infrastructure overhauled (focus on flowing out vs. flowing in)

Source: EIA

*EIA weekly U.S. exports of crude oil as of May 11, 2018


Today: Transitioning Out of Downcycle Constructive Fundamentals Drive Positive Outlook for Industry & PAA

Global Inventories Declining – past 12 months, significant acceleration of inventory draws

Geopolitical Factors – disciplined OPEC compliance, intent to “overbalance” the market

Robust Global Demand – long-term, driven by developing nations, China and India

Visibility to Market Balancing

U.S. Today – World’s #1 Liquids Producer

2017 Avg. World Liquids Production: ~98 mmb/d

U.S. & Canada = >20 mmb/d; Saudi Arabia = 12.2 mmb/d

Permian Basin = Largest U.S. producing region

U.S. Future – Stable Production Growth

U.S. emerging from cycle with stable production growth trajectory

Incremental barrel positioned for export, driven by light crude & condensate

Source: EIA, PAA Estimates

www.plainsallamerican.com NYSE: PAA & PAGP 9

15.6 12.2

11.2

5.4 4.9 4.8 4.6 3.5 3.3 3.4

4.3

-

2.0

4.0

6.0

8.0

10.0

12.0

14.0

16.0

18.0

U.S. SaudiArabia

Russia Iraq Canada China Iran UAE Kuwait Brazil Permian

2012 2017

U.S. is World’s #1 Liquid Hydrocarbon ProducerPermian Basin: Largest U.S producing region

Source: EIA, BTU Analytics & PAA EstimatesNote: Liquids includes production of crude oil (including lease condensates),

natural gas plant liquids, biofuels, other liquids, and refinery processing gains.

mmb/d

Top 10 Liquids Producing Nations(bars reflect full-year average production level)

2017 Avg. World Liquids Production: ~98 mmb/d

U.S. & Canada = >20 mmb/d

Permian Basin would rank #8 liquids producer as a standalone country

2017

Crude Oil 9.3

L48 7.2

Alaska 0.5

Fed GOM 1.7

NGLs 3.7

Renew./other 1.4

Refinery gains 1.1

15.6

~16.5 mmb/d as of Dec ‘17


1,220 1,119 1,212

1,263 1,374

1,417 1,513

1,583 1,707

1,814 1,953

2,114 2,254

2,411 2,497

2,594 2,723

2,853 2,975

3,086

1,000

1,500

2,000

2,500

3,000

3,500

Total DUCs

2,4662,761

2,9633,219 3,240

~3,800

2,000

2,200

2,400

2,600

2,800

3,000

3,200

3,400

3,600

3,800

4,000

1Q17 2Q17 3Q17 4Q17 1Q18 2018(G)

PAA Permian Tariff Volumes(2)

Permian DUCs Building# DUCs

DUC inventory increased >490 from Dec ’17 to Apr ‘18

L48 Hz Rig Activity Ramp

mb/d

Positive Permian Fundamentals Reinforce PAA’s Outlook for Continued Fee-based Growth

Sources: Drilling Info, EIA & Company Presentations

(1) Reflects 2017 actuals & publicly announced 2018 completion plan by operator.(2) 2018(G) reflects estimated average full-year 2018 Permian tariff volumes.

333 362

386416

0

200

400

600

800

2/5/2018 5/21/2018

# HZ Rigs

Onshore Rig Count Increasing, Permian Leading

Permian (>50% of rig

increase)

Other L48 Onshore

Permian Completion Activity Accelerating(1)

Completions 2017 2018 Delta % Growth

Anadarko 97 160 63 65%

Diamondback 123 180 57 46%

Devon 50 100 50 100%Cimarex 97 139 42 44%Pioneer 224 265 41 18%

Parsley 126 160 34 27%Concho 211 244 33 16%Energen 108 125 17 16%Total 1,036 1,374 338 33%

Quarterly Actuals

Annual Guidance


Crude Oil Production Growth Will Impact Flows & Will Require Export, Particularly for Light Crudes

Permian

Cushing

+2,800 to 3,600 mb/d

Source: Company Filings, PAA estimates

(1) Does not include a potential Capline reversal

Incremental Volumes to USGC (Q4'16 vs. 2021)

Permian +1,700 to +1,900 mb/d

DAPL +350 to +450 mb/d

Eagle Ford +400 to +500 mb/d

Potential Capline Shut Down +350 mb/d

Canada/Other (Seaway/Seaway Twin/Marketlink) 75 to +375 mb/d

Gulf of Mexico Flat

Total +2,800 to +3,600 mb/d

YE 2021 crude growth impact

(illustrative)

(1)

--Excerpt from prior PAA presentations--


Wichita Falls

Longview

Shreveport

Nederland

Cushing to

Broome

Caddo

Exports

Memphis

Diamond

Colorado

City

Corpus Christi

McCamey

Crane

Driver

Jal

Midland

Wink

Three

RiversGardendale

Lyssy

Local Refiners

Cushing Hub

Corpus Christi Refiners

Cushing Supplied Refiners

Constructing Corpus JV dock for broader access to

domestic and global markets

Houston

Corsicana

Lake

Charle

s

Anchorage

St.

James

PAA’s Permian System: Unmatched Capacity & Interconnectivity Providing Flow Assurance & Access To Multiple Markets

Permian

STACK JV

Gathering: ~2 mmb/d

Intra-basin: ~2 mmb/d

Long-Haul: ~1 mmb/d

PAA’s Capacity To Market

PAA Large-diameter PipelinesPAA Pipelines Under ConstructionPAA Potential Projects (identified)3rd Party Export PipelinesPAA FacilityPAA Rail FacilityPAA Dock Facility3rd Party Refinery

Legend

Orla

Note: Illustrative map, only includes most significant PAA assets and select third party pipelines for context.(1) Asset data as of 12/31/17 & volume data as of 3/31/18; Storage includes linefill

Permian Basin Assets / Activities(1)

Transportation Volumes >3,200 mb/d

Lease Gathering Volumes >600 mb/d

Active Pipeline Miles >4,700

Crude Storage Capacity ~18 mmbls


PAA Positioning & Capital Projects Update


$1.4

$1.1

$0.0

$0.2

$0.4

$0.6

$0.8

$1.0

$1.2

$1.4

$1.6

2016 2017 2018(G) 2019 Carryover

Executing Capital ProgramPermian represents ~80% of PAA’s 2018/2019 Capital Program

2018 CAPEX includes:

Cactus II - investment expected to be shared in JV structure, to span +/-18 month timeframe

Sunrise Extension & Loop (Phases I & II)

Complementary Permian growth projects

Strong demand for Permian infrastructure

Driven by elevated producer activity levels & additional demand for gathering & intra-basin capacity

No change to total 2018/2019 Capital Program

Working to accelerate certain 2019 projects into 2018

Evaluating additional projects

Potential sources of additional funding, if needed:

Additional asset sales, non-convertible preferred equity, private-equity arrangements

2018(G): Guidance as of May 8, 2018. 2019 Carryover: Preliminary Forecast as of May 8, 2018; currently sanctioned and carried over into 2019.

*Recently executed definitive agreements on three transactions representing a little over half of the targeted amount.

($ billions)

~$1.4

+/-$0.55

2018 (G) Expansion Capital

($ millions)

2018(G)2019

CarryoverIn-Service

Timing

Permian Takeaway $765 $370 1Q19 – 4Q19

Complementary Permian 375 100 1Q18 – 4Q19

Facilities (e.g. St. James, Ft. Sask) 50 0 2Q18 – 4Q18

Other Projects 210 80 1Q18 – 2019+

$1,400 $550

Note: Several 2016 projects carried over into 2017 (e.g. Diamond)

PAA Expansion Capital Summary


Executing Permian Capital Projects

Long-Haul Takeaway

Complementary Projects

Additional Opportunities

Terminalling & storage expansions(Wink & Midland)

Gathering & intra-basin capacity

Sunrise I & II (+500mb/d Midland to CC & WF; +120 mb/d to Cushing)

Cactus II (+670 mb/d to Corpus Christi)

MCCAMEY

MIDLAND

WINK

Terminalling & Storage

Expansions

CORPUS CHRISTI

INGLESIDE

Continued demand for additional gathering & intra-basin capacity

HOUSTON

Permian BasinCUSHING


New Projects Underpinned by Recent MVCs Provide

Incremental Capacity & Revenue Optimization Opportunities

Source Hub

Long-Haul Hub

Capacity View (Late 2017)

Long-haul pipes & certain intra-basin lines are the near-term constraint

Existing system positions PAA to win new project opportunities and deploy capital efficiently

--Map color coding is illustrative; incorporates PAA estimates for MVC commitments & Permian production growth--

ORLA


New Projects Underpinned by Recent MVCs Provide

Incremental Capacity & Revenue Optimization Opportunities

Source Hub

Long-Haul Hub

2019*: Reflects targeted in-service timings for Sunrise Expansion (1Q19) & Cactus II (4Q19)

ORLA

Capacity View (Late 2019*)

Expanding long-haul pipes: debottlenecks entire system & adds significant capability

Adds ~800mb/d of long-haul takeaway capacity

Enables volume pull-through on / expansion of gathering & intra-basin systems

--Map color coding is illustrative; incorporates PAA estimates for MVC commitments & Permian production growth--


-

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

10,000

$0.8 $0.9 $1.0 $1.1

$1.6

$2.1 $2.3 $2.2 $2.2 $2.2 $2.1

+/-$2.3

Expect14-15% growth

Y/Y

$0.0

$0.5

$1.0

$1.5

$2.0

$2.5

$3.0

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018(G) 2019(PF)

PAA Has Transitioned Through the Cycle Integrated Model Drives Continued Fee-Based Growth

($ billions)

Margin-based Adj. EBITDAFee-based Adj. EBITDA

(mb/d )

(G) Guidance furnished May 8 , 2018(PF) Preliminary Forecast of fee-based growth as described on May 8, 2018

1. Captured S&L margins from infrastructure constraints

2. Provided visibility for growth CAPEX / increased operating leverage

3. Operating leverage & additional fee-based growth capacity

L48 Onshore Production Growth

$0.5 $0.6 $0.7 $0.8

$1.0 $1.3

$1.4 $1.6 $1.6

$1.8

$2.0

+/-$2.2

Expect14-15% growth

Y/Y

$0.3 $0.3

$0.3 $0.3

$0.6

$0.9

$0.9 $0.7 $0.6 $0.4 $0.1

+/-$0.1

$0.0

$0.5

$1.0

$1.5

$2.0

$2.5

$3.0

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018(G) 2019(PF)

Directional illustration

Total Adj. EBITDA


3.0x 2.9x

3.9x

4.7x 4.7x4.4x

2.0x

2.5x

3.0x

3.5x

4.0x

4.5x

5.0x

$-

$2

$4

$6

$8

$10

$12

$14

$16

$18

2012 2013 2014 2015 2016 2017 2018(G)Organic Growth Acquisition LT Debt/Adj. EBITDA

(Lev.)PAA Cumulative CAPEX vs. Leverage Ratio

Positioning For Long-term Growth Executing deleveraging plan

Downturn has challenged PAA’s credit metrics, driven by:

~$14 billion of CAPEX (primarily focused in Permian)

Increased competition and delayed fee-based EBITDA growth

With a long-term focus, PAA executed multiple financial actions to fund CAPEX, reduce cost of equity and manage balance sheet

2018 (G): Guidance as of May 8, 2018

(Lev): Represents PAA’s year-end LT Debt to Adj. EBITDA ratio

Raised ~$4B of equity (preferred & common)

Simplified & aligned GP/LP Structure

Completed ~$2 billion in non-core asset sales

In 3Q17, announced plan to reduce leverage by +/-$1.4B

PAA Target

Leverage

($ billions)

On track to return to targeted credit metrics by 1H19 & maintain substantial distribution coverage

Executing ~$2 billion capital program (2018 & 2019) drives continued growth in 2019++


Plains has an operational vision to be a recognized leader within the industry

through safe, reliable & responsible operations

Continued Growth is Key, but Preserving Base is Crucial Complementing growth through system optimization

3 goals outline the path to this operational vision:

1. Reduce Risk – people & environment

2. Beyond Compliance – exceeding requirements

3. Operational Excellence – leadership

OMS: a framework to reduce risk, promote safety, and continuously improve

Critical to achieving zero incidents

Consistent application across operations, safety, integrity management, engineering, stakeholder engagement, and corporate social responsibility

Key focus areas to preserve the base business & drive continued growth:

System optimization Cost management Operational reliability


Closing Thoughts & Key Takeaways


PAA On Track to Executing 2018 Goals

1. Run a safe, reliable, and responsible operation

2. Meet or exceed 2018 operating and financial guidance

3. Progress deleveraging plan for return to targeted credit metrics by early 2019

4. Capture Permian growth opportunities, further enhancing PAA’s positioning for 2019 and beyond

On Track

On Track

On Track

On Track

PAA’s 2018 Goals: Status


Suggested Takeaways from TodayPAA executing operating and financial initiatives; Positioned for growth

Robust global demand growth (demand for U.S. crude)

Permian Basin key U.S. supply engine

Midstream infrastructure – critical link between supply and demand / export

Focused on Execution

Strong Asset Positioning

Solid Industry Fundamentals

Premier Permian franchise; PAA’s core growth asset

Significant scale, regional interconnectivity & capabilities

Well positioned for continued growth

Deleveraging plan

Capital program & commercial opportunities

Operational excellence, reliability, system optimization, cost management


Q&A

2018 mlpa conference - mlpassociation.org · equity, private-equity arrangements 2018(g): guidance...

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