Plains All American Pipeline Q2 Earnings Call Highlights

Key Points

• Plains All American Pipeline reported second-quarter adjusted EBITDA of $738 million and reaffirmed its 2026 guidance of $2.88 billion, plus or minus $75 million. The Canadian NGL sale reduced pro forma leverage to 3.3 times.
• Plains raised its 2026 growth capital outlook to $400 million-$450 million, primarily for Permian and Canadian gathering expansions. It also sanctioned a 75,000-barrel-per-day Cactus III expansion, bringing total capacity to 725,000 barrels per day and supporting growing Corpus Christi exports.
• The company now expects Permian oil production to rise by 100,000-200,000 barrels per day in 2026, strengthening its outlook into 2027. Management expects about $1.75 billion in 2026 free cash flow while targeting distribution increases, efficiency savings and continued balance-sheet flexibility.

Plains All American Pipeline NASDAQ: PAA reported second-quarter adjusted EBITDA attributable to Plains of $738 million and said it remains on track to meet its full-year 2026 adjusted EBITDA guidance of $2.88 billion, plus or minus $75 million.

Chairman, CEO and President Willie Chiang said the company is executing on its priorities for 2026, including reducing leverage following the sale of its Canadian NGL business, capturing synergies from the Cactus III acquisition, and streamlining operations. The Canadian NGL sale closed in May and reduced Plains’ pro forma leverage ratio to 3.3 times, according to Executive Vice President and CFO Al Swanson.

Capital Spending Rises as Permian Outlook Improves

Plains increased its 2026 growth capital spending outlook to a range of $400 million to $450 million, from $350 million previously. Chiang said the projects are predominantly “quick-hit” investments expected to contribute to EBITDA in 2027 and generate returns above the company’s hurdle rate.

The expanded program includes additional build-out of Plains’ Permian gathering system in the Midland and Delaware basins. The projects serve acreage backed by producer commitments and bring the company’s POP joint venture dedicated Permian acreage to about 5.1 million acres.

The company is also expanding Canadian gathering systems supporting projects in the Clearwater and Duvernay formations. Jeremy Goebel, executive vice president and chief commercial officer, said Plains continues to see activity around its Rainbow, Rangeland and Manitou assets. He said capacity additions around Rainbow have filled as they have been added and described the contracts as long term.

Chris Chandler, executive vice president and chief operating officer, said some of the spending associated with the expanded capital program will carry into 2027 and potentially into 2028. He said 2027 investment is not expected to look “significantly different” from 2026, though it is trending above Plains’ historical annual range of $300 million to $400 million net to the company.

Cactus III Expansion Adds Export Capacity

Plains sanctioned a 75,000-barrel-per-day expansion of the Cactus III pipeline, lifting total capacity on the line to 725,000 barrels per day. The expansion was expected to enter service by the end of July and is intended to serve rising demand for export barrels moving through Corpus Christi.

Goebel said Plains’ marketing affiliate can fill the new capacity initially and seek to place it under term contracts over time. He said the expansion was executed earlier than originally anticipated because of market volatility, growing production, new buyers and the project’s short development timeline and capital efficiency.

Chandler said the latest expansion was completed more quickly and at a lower cost than Plains had anticipated when it acquired Cactus III. While he did not disclose a specific project cost, he characterized the investment as being in the “tens of millions of dollars” excluding a previously disclosed earn-out. Future expansion phases would require firm customer commitments and would take longer than the latest 75,000-barrel-per-day addition, management said.

Goebel said the additional 75,000 barrels per day would not materially change the Permian takeaway market, given Plains’ outlook for basin production growth. He said Cactus I and Cactus II are well contracted and the company is continuing to market Cactus III capacity.

Production Growth Builds Momentum Into 2027

Plains now expects Permian oil production to grow by approximately 100,000 to 200,000 barrels per day in 2026 compared with 2025 on an exit-to-exit basis, an improvement from its prior expectation for relatively flat output. Chiang attributed the higher outlook primarily to natural-gas takeaway capacity entering service earlier than expected.

Swanson said the improved volume forecast supports a stronger finish to 2026 but is expected to have a greater effect on 2027 results. He said the midpoint of Plains’ second-half crude segment EBITDA outlook is in the low-$700 million range per quarter, already above the $690 million reported in the second quarter.

Second-quarter crude oil segment adjusted EBITDA of $690 million increased by more than $100 million from the first quarter, driven by Cactus III synergies, operating efficiencies, market-based opportunities and the absence of first-quarter headwinds, Swanson said. The result included about $14 million of one-time environmental remediation expenses that the company does not expect to recur in the second half.

Plains’ NGL segment reported $40 million of adjusted EBITDA during the quarter, reflecting the mid-May closing of the Canadian NGL business sale. Swanson said Plains is considering discontinuing separate NGL segment EBITDA reporting in the third quarter and reporting adjusted EBITDA as a single segment.

Cash Returns and Efficiency Targets Remain Priorities

Swanson said Plains expects to generate approximately $1.75 billion of free cash flow in 2026. The company maintained its capital-allocation priorities of annual distribution increases targeted at $0.15 per unit, accretive bolt-on acquisitions and organic investment, and preserving balance-sheet flexibility.

The company reduced its 2026 maintenance capital forecast to $175 million, primarily because of the timing of the NGL divestiture. Plains also said it is approximately 70% hedged on pipeline loss allowance revenue for the remainder of 2026 at an average WTI price of about $62 per barrel.

Management reiterated its expectation to realize $50 million of organizational efficiencies by the end of 2026 and another $50 million by the end of 2027. Chandler said Plains had captured somewhat less than half of the 2026 target through the second quarter. The savings are being generated through organizational streamlining, changes to leadership and management roles, trucking-business right-sizing, and the closure and consolidation of marketing offices.

Chiang said Plains continues to evaluate both organic projects and bolt-on acquisitions, while emphasizing that investment decisions will be driven by strategic fit and returns rather than a specific region.

About Plains All American Pipeline (NASDAQ:PAA)

Plains All American Pipeline NASDAQ: PAA is a publicly traded energy infrastructure company that provides midstream services for crude oil and natural gas liquids (NGLs). The company’s core activities include gathering, transporting, storing and marketing hydrocarbons, using an integrated network of pipelines, storage terminals, rail and truck transloading facilities. Plains also offers logistics and marketing services that connect upstream producers with refiners, traders and export markets.

Plains owns and operates a portfolio of pipeline and terminal assets concentrated in major U.S.

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