2018 MLPA Conference Orlando, FL May 23-24, 2018

Transcription

1 2018 MLPA Conference Orlando, FL May 23-24,

2 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 select PAA or PAGP, navigate to the Financial Information tab, then click on Non-GAAP Reconciliations. 2

3 Discussion Outline Overview of Plains All American Current Industry Dynamics & Permian Update PAA Positioning and Capital Projects Update Closing Thoughts & Key Takeaways 3

4 Plains Organization Structure (Simplified) Right to Exchange AAP Unit For PAGP Class A Share Or, alternatively: Right to Redeem AAP Unit For PAA Common Unit PAA GP Holdings, LLC (PAGP GP) (NYSE: PAGP) Investors Receive 1099 Plains AAP, L.P. (AAP) (NYSE: PAA) Investors Receive K-1 Unified Board Public Investors Private Owners & Management Public Investors Series A & B Preferred Holders 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) 4

5 Over Past 20+ Years, PAA Has Developed One of the Largest and Most Integrated Midstream Systems in North America PAA s Crude Oil Value Chain Legend Plains Current Profile Volumes Handled (1) : >5 mmb/d Transportation volumes ~1.3 mmb/d Supply & Logistics Total Enterprise Value: ~$31B (2) PAA Total Assets: ~$25B (3) 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 Strategic value across multiple regions, but today s remarks focus on Permian Basin due to time constraints Note: Map contains only most significant PAA assets, including recent/pending acquisitions, current projects and equityinvestments assets (excludes non-core assets where sale is announced/pending). (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. 5

6 Current Industry Dynamics and Permian Update 6

7 30+ Year Trend of Declining US Oil Production / Growing Foreign Imports, Turned on its Head by U.S. Shale 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) 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) *EIA weekly U.S. exports of crude oil as of May 11, 2018 Source: EIA 7

8 Today: Transitioning Out of Downcycle Constructive Fundamentals Drive Positive Outlook for Industry & PAA Visibility to Market Balancing 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 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 8

9 U.S. is World s #1 Liquid Hydrocarbon Producer Permian Basin: Largest U.S producing region 2017 Avg. World Liquids Production: ~98 mmb/d mmb/d U.S. & Canada = >20 mmb/d Permian Basin would rank #8 liquids producer as a standalone country ~16.5 mmb/d as of Dec U.S Saudi Arabia 11.2 Top 10 Liquids Producing Nations (bars reflect full-year average production level) Russia Iraq Canada China Iran UAE Kuwait Brazil Permian Crude Oil 9.3 L Alaska 0.5 Fed GOM 1.7 NGLs 3.7 Renew./other 1.4 Refinery gains 1.1 Note: Liquids includes production of crude oil (including lease condensates), Source: EIA, BTU Analytics & PAA Estimates natural gas plant liquids, biofuels, other liquids, and refinery processing gains.

10 Positive Permian Fundamentals Reinforce PAA s Outlook L48 Hz Rig Activity for Ramp Continued Fee-based Growth Onshore Rig Count Increasing, Permian Leading # HZ Rigs /5/2018 5/21/2018 Permian (>50% of rig increase) Other L48 Onshore Permian Completion Activity Accelerating (1) Completions Delta % Growth Anadarko % Diamondback % Devon % Cimarex % Pioneer % Parsley % Concho % Energen % Total 1,036 1, % # DUCs 3,500 3,000 2,500 2,000 1,500 1,000 4,000 3,800 3,600 3,400 3,200 3,000 2,800 2,600 2,400 2,200 2,000 mb/d 1,220 Total DUCs 2,466 Permian DUCs Building DUC inventory increased >490 from Dec 17 to Apr 18 1,814 1,707 1,583 1,374 1,417 1,513 1,263 1,119 1,212 PAA Permian Tariff Volumes (2) 2,761 Quarterly Actuals 2,963 3,086 2,975 2,853 2,723 2,594 2,497 2,411 2,254 2,114 1,953 3,219 3,240 Annual Guidance ~3,800 1Q17 2Q17 3Q17 4Q17 1Q (G) Sources: Drilling Info, EIA & (1) Reflects 2017 actuals & publicly announced 2018 completion plan by operator. Company Presentations (2) 2018(G) reflects estimated average full-year 2018 Permian tariff volumes. 10

11 Crude Oil Production Growth Will Impact Flows & Will Require Export, Particularly for Light Crudes --Excerpt from prior PAA presentations-- YE 2021 crude growth impact (illustrative) Cushing Permian 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 Canada/Other (Seaway/Seaway Twin/Marketlink) Gulf of Mexico Total (1) +350 mb/d 75 to +375 mb/d Flat +2,800 to +3,600 mb/d +2,800 to 3,600 mb/d Source: Company Filings, PAA estimates (1) Does not include a potential Capline reversal 11

12 PAA s Permian System: Unmatched Capacity & Interconnectivity Providing Flow Assurance & Access To Multiple Markets 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 s Capacity To Market Gathering: ~2 mmb/d Intra-basin: ~2 mmb/d Long-Haul: ~1 mmb/d Legend PAA Large-diameter Pipelines PAA Pipelines Under Construction PAA Potential Projects (identified) 3 rd Party Export Pipelines PAA Facility PAA Rail Facility PAA Dock Facility 3 rd Party Refinery Orla Permian Jal Wink Crane McCamey Local Refiners Midland Driver Colorado City Cushing Hub Gardendale Corpus Christi Refiners Wichita Falls Three Rivers Lyssy STACK JV Cushing to Broome Corsicana Houston Corpus Christi Longview Diamond Cushing Supplied Refiners Caddo Exports Shreveport Lake Charle s Nederland Anchorage Constructing Corpus JV dock for broader access to domestic and global markets Memphis St. James 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 12

13 PAA Positioning & Capital Projects Update 13

14 Executing Capital Program Permian 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 ($ billions) $1.6 $1.4 $1.2 $1.4 PAA Expansion Capital Summary $1.1 ~$1.4 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 $1.0 $0.8 $0.6 $0.4 $0.2 $ (G) 2019 Carryover Note: Several 2016 projects carried over into 2017 (e.g. Diamond) ($ millions) 2018 (G) Expansion Capital 2018(G) 2019 Carryover +/-$0.55 In-Service Timing Permian Takeaway $765 $370 1Q19 4Q19 Complementary Permian Q18 4Q19 Facilities (e.g. St. James, Ft. Sask) Q18 4Q18 Other Projects Q $1,400 $ (G): Guidance as of May 8, Carryover: Preliminary Forecast as of May 8, 2018; currently sanctioned and carried over into *Recently executed definitive agreements on three transactions representing a little over half of the targeted amount.

15 Executing Permian Capital Projects Permian Basin CUSHING Terminalling & Storage Expansions WINK MCCAMEY MIDLAND Long-Haul Takeaway Sunrise I & II (+500mb/d Midland to CC & WF; +120 mb/d to Cushing) Cactus II (+670 mb/d to Corpus Christi) Complementary Projects Terminalling & storage expansions (Wink & Midland) Gathering & intra-basin capacity Additional Opportunities Continued demand for additional gathering & intra-basin capacity HOUSTON INGLESIDE CORPUS CHRISTI 15

16 New Projects Underpinned by Recent MVCs Provide Incremental Capacity & Revenue Optimization Opportunities 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 ORLA Source Hub Long-Haul Hub --Map color coding is illustrative; incorporates PAA estimates for MVC commitments & Permian production growth-- 16

17 New Projects Underpinned by Recent MVCs Provide Incremental Capacity & Revenue Optimization Opportunities 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 ORLA Source Hub Long-Haul Hub --Map color coding is illustrative; incorporates PAA estimates for MVC commitments & Permian production growth *: Reflects targeted in-service timings for Sunrise Expansion (1Q19) & Cactus II (4Q19) 17

18 PAA Has Transitioned Through the Cycle Integrated Model Drives Continued Fee-Based Growth 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 ($ billions) $3.0 Margin-based Adj. EBITDA Fee-based Adj. EBITDA $2.5 Total Adj. EBITDA $2.0 $1.5 $1.0 $0.5 $0.0 L48 Onshore Production Growth $0.3 $0.3 $0.8 $0.9 $0.6 $0.5 $0.3 $1.0 $0.7 $0.3 $1.1 $0.8 $0.6 $1.6 $1.0 $0.9 $2.1 $1.3 $0.9 $0.7 $0.6 $2.3 $2.2 $2.2 $2.2 $2.1 $2.0 $1.4 $1.6 $1.6 $0.4 $0.1 +/-$2.2 +/-$2.3 Expect 14-15% growth Y/Y (G) 2019(PF) $1.8 +/-$0.1 Directional illustration (mb/d ) 10,000 9,000 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000 - (G) Guidance furnished May 8, 2018 (PF) Preliminary Forecast of fee-based growth as described on May 8,

19 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 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 +/-$1.4B On track to return to targeted credit metrics by 1H19 & maintain substantial distribution coverage ($ billions) $18 $16 $14 $12 $10 $8 $6 $4 $2 $- PAA Cumulative CAPEX vs. Leverage Ratio PAA Target Leverage 3.0x 2.9x 3.9x 4.7x 4.7x 4.4x (Lev.) 5.0x 4.5x 4.0x 3.5x 3.0x 2.5x 2.0x (G) Organic Growth Acquisition LT Debt/Adj. EBITDA Executing ~$2 billion capital program (2018 & 2019) drives continued growth in (G): Guidance as of May 8, 2018 (Lev): Represents PAA s year-end LT Debt to Adj. EBITDA ratio 19

20 Continued Growth is Key, but Preserving Base is Crucial Complementing growth through system optimization Key focus areas to preserve the base business & drive continued growth: System optimization Plains has an operational vision to be a recognized leader within the industry through safe, reliable & responsible operations 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 Operational reliability Cost management Consistent application across operations, safety, integrity management, engineering, stakeholder engagement, and corporate social responsibility 20

21 Closing Thoughts & Key Takeaways 21

22 PAA On Track to Executing 2018 Goals PAA s 2018 Goals: 1. Run a safe, reliable, and responsible operation Status On Track 2. Meet or exceed 2018 operating and financial guidance On Track 3. Progress deleveraging plan for return to targeted credit metrics by early 2019 On Track 4. Capture Permian growth opportunities, further enhancing PAA s positioning for 2019 and beyond On Track 22

23 Suggested Takeaways from Today PAA executing operating and financial initiatives; Positioned for growth Solid Industry Fundamentals 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 Strong Asset Positioning Premier Permian franchise; PAA s core growth asset Significant scale, regional interconnectivity & capabilities Well positioned for continued growth Focused on Execution Deleveraging plan Capital program & commercial opportunities Operational excellence, reliability, system optimization, cost management 23

24 Q&A 24