V&E and TPH 2014 Infrastructure Summit Crude Oil Midstream Update Houston, TX September 16, 2014 1
Forward-Looking Statements & Non-GAAP Financial Measures Disclosure This presentation contains forward-looking statements, including, in particular, statements about the plans, strategies and prospects of Plains All American Pipeline, L.P. ( PAA ) and Plains GP Holdings, L.P. ( PAGP ). These forward-looking statements are based on PAA s current assumptions, expectations and projections about future events as of the date of our most recent guidance furnished on August 6, 2014, unless otherwise noted. Although PAA and PAGP believe that the expectations reflected in these forward-looking statements are reasonable, they can give no assurance that these expectations will prove to be correct or that synergies or other benefits anticipated in the forward-looking statements will be achieved. Important factors, some of which may be beyond PAA s or PAGP s control, that could cause actual results to differ materially from management s expectations are disclosed in PAA s and PAGP s respective filings with the Securities and Exchange Commission. This presentation also contains non-gaap financial measures relating to PAA. A reconciliation of these measures to the most directly comparable GAAP measures is available in the appendix to this presentation. For additional detail regarding selected items impacting comparability, please visit the Investor Relations section of PAA s website at www.plainsallamerican.com. 2
Opening Observations There are multiple topics worthy of discussion in the midstream crude oil space: Rail, exports, quality issues, basis differentials, impact of new pipelines, need for new pipelines, etc. Unlikely to do justice to many of them in 20-30 minutes Two Perspectives High & Low Level Both Important From 30,000 feet, the earth s surface appears relatively level, with very manageable challenges From ground level, relatively small challenges can appear substantial To successfully develop and execute a business plan, it is important to integrate both perspectives 3
Discussion Outline Brief Introduction To Plains All American Qualifications / Curriculum Vitae For Today s Topic Brief, but beware of subliminal messages for PAA Summary of the Current Industry Environment Discussion of Permian / West Texas & its Interrelationship with Cushing, Houston & Corpus Christi Illustration of Dual Perspectives Biggest Infrastructure Issue (ex Gov t & ROW) 4
Plains All American Current Profile One Business, Two Investment Vehicles (NYSE: PAA & PAGP) Financial Profile (1) Total Enterprise Value $49.7 B PAA Equity Market Cap $21.8 B PAGP et. al. Eq. Mkt Cap $20.0 B Total LT Debt $7.9 B Current PAA Yield ~4.4% Current PAGP Yield ~2.4% PAA Total Assets $21.5 B PAA S&P / Moody s Ratings BBB / Baa2 PAA Public Guidance Mid-point 2014 Adjusted EBITDA (2) $2.18 B PAA Assets (3) Pipelines (active miles) 18,150 miles Liquids Storage 120 MMBbls Natural Gas Storage 97 Bcf Fractionation Facilities (4) 235,000 Bbl/d Natural Gas Processing (5) 8.5 Bcf/d Crude & NGL Rail Facilities 24 Crude & NGL Railcars 7,400 Truck Fleet 1,700 Trailers 840 Trucks Barge Fleet 130 Barges 60 Tugs 2014 Adj. Net Income (2) $1.35 B Crude & NGL Volumes: ~4.0 MMBbl/d (1) As applicable, based on balance sheet data as of 06/30/14 and 09/02/14 closing unit price. PAGP equity market cap includes AAP Management units. (2) Adjusted EBITDA and Adjusted Net Income Attributable to PAA, which has been abbreviated as Adj. Net Income, are the mid-point of PAA s public guidance furnished via form 8-K on 08/06/14 and exclude selected items impacting comparability. (3) Assets as of 12/31/13. All amounts are approximate. (4) Amount represents gross capacity. (5) Amount represents net capacity. Natural gas processing capacity also includes approximately 2.5 Bcf per day for a long-term liquid supply contract. 5
PAA s Midstream Crude Oil Activities Extend Over the Entire Value Chain From Wellhead to Refinery Inlet <--------------PAA s areas of involvement reflected in Yellow---------> 6
PAA s Interconnected Pipelines, Rail Assets, Trucks, & Barges Combined With Inland and Coastal Terminals = Max Flexibility PAA s Comprehensive System provides: First mile, intermediate & last mile access Access to multiple markets via multiple transportation modes Processing, segregation, import and export access Ability to address periodic physical bottlenecks and market disruptions Permian Mid West Canada Rockies Williston Continent Coast Gulf Coast Eagle Ford Crude Oil Multiple Pipeline Connections East Coast Storage Trucks Rail Marine Access N/A N/A N/A N/A 7
PAA Assets & Business Model Benefit From Volatility: Solid Performance In a Variety of Markets and Supply and Demand Scenarios Adjusted EBITDA ($MM) PAA Adjusted EBITDA : Actual Performance vs. Guidance (1) Met or Exceeded Guidance for over 12 Years (50 Consecutive Qtrs) $2,400 $2,100 $1,800 $1,500 $1,200 $900 $600 Outperformance BOY Annual Guidance Distributions Paid ($MM) $300 $0 $1,500 $1,200 $900 $600 $300 2004 2005 2006 2007 2008 2009 2010 2011 2012 20132014(G) Total Distribution Growth Increased Distribution in 39 out of 41 Qtrs (20 Consecutive Qtrs) PAA LP PAA GP U.S. Products Imports/Exports $0 2004 2005 2006 2007 2008 2009 2010 2011 2012 20132014(T) (1)Crude oil market structure chart does not include 09/22/08 data point on which the backwardated spread widened to over $11/barrel. (G) Midpoint of guidance furnished via form 8-K on August 6, 2014. (T) Targeted distribution for 2014. 8
N.A. Crude Production Outlook & Impact on Infrastructure 9
30 Second Elevator Speech U.S. & Canada crude production is on the rise, with significant running room (dependent on commodity prices and capital availability) Significant midstream infrastructure expansion required to balance the system The very light, sweet quality of the incremental barrel presents infrastructure challenges magnified by export restrictions, regulatory issues and lack of clarity Until the infrastructure is right sized and integrated to create sufficient slack in the system, there will be episodic volatility (may feel like chaos at the time) Therein lies both opportunity and reason for caution 10
North American Crude Oil Production Forecast by Region Dominated by the Big 6 and Western Canada 16.0 14.0 12.0 Methodology Assumes Constructive Oil Prices, Constant Rig / Completion Counts & Well Productivity; Upward Bias in Several (MMBbls/d) Regions YE 13 (1) 11.5 YE 18 15.5 10.0 8.0 6.0 4.0 2.0-2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2018YE (1) Regions included in Other N.A.: Midwest, PADD 1, PADD V and Eastern Canada Source: PAA and 3 rd party estimates including Bentek & CAPP 11
Projected North American Production Increases Weighted Towards Light Crudes 18.0 16.0 14.0 12.0 2013 YE 2018 YE Growth Light 6.3 9.0 2.6 Medium Sour 2.7 2.8 0.1 Heavy 2.5 3.6 1.2 Total NA (MMBbls/d) 11.6 15.4 3.9 YE 13 10.0 8.0 6.0 4.0 Light / Sweet 2.0-2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2018 YE Note: Definition of Light crude includes condensate, light sweet, light sour, and medium sweet grades. Source: PAA and 3 rd party estimates including Bentek & CAPP Light Medium Sour Heavy 12
Takeaway: Double Digit Volume Growth in All Regions Subliminal Message: Note PAA s Significant Presence in Each Area! Volume Growth Driving Increased Infrastructure Requirements Western Canada:~1,175 MBbls/d (+30%) Williston Basin (Bakken):~625 MBbls/d (+60%) Rockies: ~285 MBbls/d (+55%) Mid Continent: ~175 MBbls/d (+25%) Permian Basin: ~590 MBbls/d (+40%) Projected North American Crude Oil Production Growth YE2013 YE2018 Rockies Mid Continent Williston Basin (Bakken) Permian Basin Eagle Ford Gulf of Mexico Western Canada ~3.9 MMBbls/d ( +30%) Eagle Ford: ~690 MBbls/d (+60%) GOM: ~360 MBbls/d (+15%) Note: Crude amounts shown represent the change in production in these areas from YE2013 YE2018 based on PAA s estimates as of May 2014. All amounts are approximate. Map only includes PAA s most significant assets. Some assets shown are not yet in-service. 13
Permian Basin Discussion 14
Permian Basin: PAA s Largest Asset Footprint Direct Connectivity to Cushing, Corpus Christi and Indirect Connectivity to Houston/Other Markets Crude Oil Assets/Activities (1) Barrels Transported: 1,440 MBbls/d 1 st Purchaser Gathered Barrels: 375 MBbls/d Pipeline Miles: 3,550 Storage Capacity: 8 MMBbls Truck Injection Stations: ~100 Crude Oil Production (MBbls/d) (2) +40% 1,410 2,000 925 2009 YE2013 YE2018 Permian Basin Increasing rig count & improving efficiency = significant upward bias Bone Spring Legend (3) (1) Pipeline miles are only those miles associated with PAA s transportation segment and are as of 12/31/13. Pipeline tariff volumes are average of 4Q13. 1 st purchaser gathered barrels are average of December 2013. Other assets/activities are as of 02/27/14. (2) Industry sources and PAA estimates assuming constant rig count and well productivity. (3) Map only includes most significant PAA assets. Some assets shown are not yet in service. Spraberry / Wolfberry -15- Crude Pipelines > 12 Crude Pipelines < 12 > 6 Crude Pipelines <6 Crude Pipeline Under Construction Crude Storage Facility Future Crude Oil Rail Facility 15
WTI Mid-Cush Differential Rapidly Rising Oil Production Exceeds Takeaway Capacity / Required Slack Since 2009, Production Growth Has Nearly Doubled 16
Recent and Planned Large Volume Pipelines Set to Provide Permian Basin Takeaway Capacity Takeaway projects currently under construction are on track to provide ~700,000 b/d of incremental capacity (BridgeTex, Cactus & Permian Express II). 11. Permian Express I: Connects to Basin at Wichita Falls and serves Gulf Coast 22. West Texas Gulf: Connects to Basin/Mesa at Colorado City and serves Gulf Coast and extends to East Texas 3. BridgeTex: Connects to Basin/Mesa/Sunrise at Colorado City to Serve Gulf Coast 4. Longhorn: Connects to PAA at Crane to serve Gulf Coast 5. Cactus: Connects PAA assets from McCamey to Gardendale in South Texas; also serves Gulf Coast 6. Permian Express II: Originates in Garden City connects to Colorado City & Corsicana to serve Gulf Coast (Capacities in thousands of barrels/day reflected in blue) Permian Basin Jal Hendrick 240 Odessa 240 240 Crane McCamey PAA s Basin / Mesa / Sunrise Pipelines 5 Midland 200 4 Colorado City 6 Garden City Wichita Falls 3 2 1 Cushing Corsicana (1) PAA owns 87% of Basin Pipeline, and 63% of Mesa pipeline. 17
Upon Completion of Current Projects, Permian Basin Export Capacity Appears Sufficient for Expected Production (MMBbls/d) 3.0 2.5 2.0 YTD 14 Differentials: WTI @ Midland ~($7) WTS @ Midland ~($6) WTG expansion Longhorn Higher Volume Cases Could Require More Slack for Efficient Operations Cactus BridgeTex Longhorn Expansion Permian Express II Excess PL Takeaway Capacity 1.5 1.0 2009 Pipeline Takeaway Capacity Pipeline 0.5-2009 2013 YE 2014 2015 2016 2017 2018 2018 YE Loc. Refining Source: PAA Refining Demand Exports to Houston Exports to Port Arthur Exports to Corpus Christi Exports to Cushing / Mid-con Production & Heavy Imports PL Takeaway & Refining Capacity Reasonable Potential Production Cases 18
Upon Closer Inspection: Potential Permian Market Clearing Issues Majority of incremental takeaway capacity will access the Gulf Coast, particularly Houston market Vast majority of ~700,000 b/d available to GC will be light, sweet crude GC currently imports very little light sweet crude GC has no Cushing Hub equivalent thus reluctance to build inventory or pre-position crude; semi-opaque price discovery Cost of marginal Permian takeaway capacity ranges from <$1.00/bbl to Cushing to >$3.50/bbl to Gulf Coast area (ex Permian area gathering/transport fees) Permian production rising +/- 20,000 b/d each month Cushing expecting incremental barrels via local production and incremental pipelines (WC, PXP, etc.) Result: What happens away from Midland could be very important. Rotational displacement; dynamic market prices especially in the event of operating upsets (Basin PL c/b very important header system) Midland Wichita Falls Colorado City Corpus Christi Very simplified Houston Market Cushing 19
Examples of Ground Level Issues (requiring some level of slack in the system) Pipelines do not run at nameplate capacity on a 24 / 7 / 365 basis Routine testing, maintenance repair and/or replacement of pumps, valves and facilities Multiple grades & batching requirements can reduce effective capacity Connecting pipelines & refineries may not be able to receive at full rates E.g. 750,000 b/d name plate at 22/24 hour avg run-time = 690,000 b/d rate Turnaround can take longer Periodic outages of refineries, pipelines, terminals etc. Routine refinery maintenance (not always executed as planned) Operating upsets, product releases, electrical outages, weather related issues, etc. An unexpected interruption or extended period of a planned event can reasonably create the need for up to 300,000 b/d of additional pipeline capacity Production growth is non-linear introduction of pad drilling amplifies the issue (forecast implies average of 20+kb/d growth per month) Marginal excess barrel can put meaningful downward price pressure on a large portion of uncommitted volumes 20
Permian Basin Observation From a high level, existing/pending projects appear sufficient to balance the takeaway requirements From ground level, there will be kinks to be worked out until there is sufficient slack in the system The most important factors impacting differentials and the direction the marginal barrel flows will likely be determined by what happens outside of the Midland market (Gulf Coast, Cushing, Rockies, etc.) Despite excess takeaway capacity for normal operations, there may / will be episodic volatility 21
Biggest Infrastructure Issue = Lower Oil Prices & Interruption in Production Momentum (ex Gov t & ROW) Notable Considerations: U.S. E&Ps spending ~$90 to $100 billion/year alone in crude oriented resource plays Many smaller but active players outspending cash flow; relying on capital markets to make up gap N.A. crude & NGL production growth alone is on track to exceed +/- 1.2 mmb/d annual growth in worldwide petroleum demand. Requires: More demand; less Saudi/OPEC oil; zero return to market of production capacity in geopolitically conflicted countries Absent exports, light sweet prices could fall independent of index prices Many plays still economical at lower prices; however: Decrease in oil prices = less cash flow = more leverage/outside capital = higher cost of capital Will E&P boards & shareholders embrace high spending in lower price environment? Due to high decline rates, low oil prices will likely be short-lived (six months to a year?) Lower oil prices likely results in consolidation at both E&P and midstream entity levels 22
Q&A 23
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