01—Abstract
Summary
Summary of the 10-K filed March 1, 2023. Cited figures are marked; the original filing is the authoritative source.
Plains All American Pipeline, L.P.
(PAA) reported net income attributable to PAA of $1.037 billiona for 2022, compared with $593 million in 2021, with results driven primarily by more favorable NGL segment margins and higher crude oil pipeline tariff volumes. Results were partially offset by a $269 million net loss on asset sales and impairments, including a $330 million non-cash impairment on certain California crude oil assets, and by higher field operating costs tied to the Line 901 incident. Consolidated Adjusted EBITDA attributable to PAA was $2.51 billion, up from $2.20 billion, and Implied DCF was $1.79 billion.
Balance sheet and liquidity remain central to the investment case. At December 31, 2022, the company reported approximately $3.0 billionb of liquidity, a working capital deficit of $536 million, and consolidated debt face value of approximately $8.5 billion. Free Cash Flow was $1.61 billion and Free Cash Flow after Distributions was $828 million, versus $2.37 billion and $1.65 billion in 2021.
Management reiterated its target of maintaining an investment grade credit profile and noted that the Series A preferred unitholders elected the Preferred Distribution Rate Reset Option, moving that distribution to 9.375% per annum effective January 31, 2023. Looking ahead, the company projects 2023 investment capital of approximately $420 millionc ($325 million net to its interest) and maintenance capital of $205 million. Key risks disclosed include competition and capacity overbuild in the Permian and other regions, pending insurer denials of coverage for $185 million of the Line 901 class action settlement recovery, and exposure to commodity price and merchant activity volatility.
02—Key points
Key Highlights
- Net income attributable to PAA rose to $1.037 billion in 2022 from $593 million in 2021; net income per common unit was $1.19 versus $0.55.
- NGL segment Segment Adjusted EBITDA increased to $518 million from $285 million, driven by higher realized frac spreads and increased NGL mix at straddle plants.
- Crude Oil segment Segment Adjusted EBITDA was $1.986 billion, up from $1.909 billion, supported by higher pipeline tariff volumes (7.565 million barrels per day total, up 22%).
- Non-cash impairment of approximately $330 million on certain California crude oil assets drove a $269 million net loss on asset sales and impairments for 2022.
- Net cash provided by operating activities was $2.408 billion; Free Cash Flow after Distributions declined to $828 million from $1.654 billion.
- Insurers responsible for $185 million of remaining Line 901 coverage formally denied coverage for the Class Action Settlement; the company's total Line 901 cost estimate is approximately $740 million.
- Series A preferred distribution rate reset to 9.375% per annum effective January 31, 2023, and common distribution was $0.2675 per unit for the fourth quarter of 2022.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2022, Plains All American Pipeline kept $0.02.
- Revenue$57.34B100.0%
- Cost of revenue−$53.18B92.7%
- Gross profit$4.17B7.3%
- Operating costs−$2.87B5.0%
- Operating income$1.29B2.3%
- Interest, other & tax−$62.0M0.1%
- Net income$1.23B2.1%
Where FY2022 revenue went
$57.34B- Cost of revenue: $53.18B, 93% of revenue
- Net income: $1.23B, 2.1% of revenue
- Operating costs: $2.87B, 5.0% of revenue
Kept 2.1% as net incomeNet income $1.23B · 2.1%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2022filed March 1, 2023Financial Statements
FY2022 against FY2021
| Line item | FY2022FY2021 | Change |
|---|---|---|
| Revenue | $57.34B$42.08B | +36.3% |
| Cost of Revenue | $53.18B$38.50B | +38.1% |
| Gross Profit | $4.17B$3.57B | +16.6% |
| Operating Expenses | $56.05B$41.23B | +36.0% |
| Operating Income | $1.29B$851.00M | +51.8% |
| Interest Expense | $405.00M$425.00M | −4.7% |
| Net Income | $1.23B$648.00M | +89.8% |
05—Questions
Frequently Asked Questions
What drove the increase in net income in 2022?
Net income attributable to PAA increased to $1.037 billion from $593 million, primarily due to more favorable NGL segment margins and higher crude oil pipeline tariff volumes, along with a $346 million net gain on investments in unconsolidated entities that included a $370 million remeasurement gain on Cactus II. These were partially offset by the $269 million net loss on asset sales and impairments and a $189 million mark-to-market loss on the Preferred Distribution Rate Reset Option.
How much liquidity does the company have and what are its debt levels?
As of December 31, 2022, the company had approximately $3.0 billion of liquidity, including $378 million of cash and cash equivalents, and a working capital deficit of $536 million. Consolidated debt face value was approximately $8.5 billion, consisting of about $7.3 billion of long-term debt and $1.2 billion of short-term borrowings.
What are the company's capital spending plans for 2023?
Total investment capital for 2023 is projected at approximately $420 million ($325 million net to the company's interest), with roughly half expected to be invested in the Permian JV assets. Maintenance capital is projected at $205 million ($195 million net to its interest). The company expects to fund these primarily with retained cash flow.
What are the main risks to the Line 901 incident recovery?
The company has recognized a long-term insurance receivable of approximately $225 million. Insurers responsible for $185 million of the remaining $225 million of coverage formally denied coverage for the Class Action Settlement, and the insurer for the final $40 million has not responded. The company states it believes recovery is probable, but an unfavorable resolution could have a material impact on results of operations.
How are distributions to unitholders and preferred holders changing?
The company paid a quarterly common unit distribution of $0.2675 per unit on February 14, 2023 ($1.07 annualized). The Series A preferred unitholders elected the Preferred Distribution Rate Reset Option, so the distribution rate becomes 9.375% per annum on the original issue price effective January 31, 2023 (approximately $2.46 per unit annualized). The Series B preferred distribution floats at three-month LIBOR plus 4.11%, with the February 15, 2023 rate at 8.71614%.
06—Continue