01—Abstract
Summary
Summary of the 10-Q filed August 9, 2024. Cited figures are marked; the original filing is the authoritative source.
Plains All American Pipeline, L.P.
(PAA) reported total revenues of $12.93 billiona for the three months ended June 30, 2024, up from $11.60 billion a year earlier, while net income attributable to PAA fell to $250 million from $293 million. For the six months, net income attributable to PAA was $515 million versus $715 million. The filing attributes the decline mainly to the 2023 period including gains on asset sales and a mark-to-market gain on the Preferred Distribution Rate Reset Option, along with a 2024 income tax expense.
Non-GAAP Adjusted EBITDA rose 15% to $807 millionb in the second quarter and 9% to $1.65 billion for the six months. The Crude Oil segment drove the improvement, with Segment Adjusted EBITDA up to $576 million for the quarter from $529 million, and the NGL segment rising to $94 million from $62 million. Cash generation weakened on a GAAP basis.
Net cash provided by operating activities was $1.072 billionc for the first six months of 2024 versus $1.631 billion in 2023, which management attributes to unfavorable working capital changes, primarily margin requirements tied to hedging. Adjusted Free Cash Flow after Distributions was negative $92 million, compared with $985 million a year earlier. At June 30, 2024, the partnership reported a working capital deficit of $19 million and about $3.2 billion of liquidity.
In June 2024 it issued $650 milliond of 5.70% senior notes due 2034, with proceeds intended to partially repay its $750 million 3.60% senior notes due November 2024. The filing highlights continuing Line 901 exposure. Management now estimates total Line 901 costs at approximately $750 million, which exceeds the $500 million 2015 insurance program limit by $250 million.
The partnership has recognized a receivable of about $225 million for costs it believes are probable of recovery, and insurers have denied coverage for $185 million of the remaining $225 million of Class Action Settlement coverage. PAA has initiated arbitration against those insurers, and the filing states that an unfavorable resolution could have a material impact on results of operations.
02—Key points
Key Highlights
- Total revenues were $12.93 billion in Q2 2024 versus $11.60 billion in Q2 2023; six-month revenues were $24.93 billion versus $23.94 billion.
- Net income attributable to PAA was $250 million for Q2 2024 (down 15%) and $515 million for the six months (down 28%), with the 2023 period including gains on asset sales and a Preferred Distribution Rate Reset Option mark-to-market gain.
- Adjusted EBITDA increased 15% to $807 million in Q2 2024 and 9% to $1,654 million for the six months; Implied DCF for the six months was $1,001 million versus $929 million.
- Net cash provided by operating activities fell to $1.072 billion for the six months from $1.631 billion, with the 2024 period impacted by hedging-related margin requirements.
- Line 901 total estimated costs are approximately $750 million, exceeding the $500 million insurance limit by $250 million; a receivable of about $225 million is recognized, and insurers have denied $185 million of remaining coverage, which PAA is contesting through arbitration.
- In June 2024 PAA issued $650 million of 5.70% senior notes due 2034 and plans to use proceeds to partially repay the $750 million 3.60% senior notes due November 2024; liquidity was about $3.2 billion at June 30, 2024.
- The quarterly common unit distribution was maintained at $0.3175 per unit, and Q2 2024 basic and diluted net income per common unit was $0.26 versus $0.32.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q2 FY2024, Plains All American Pipeline kept $0.02.
- Revenue$12.76B100.0%
- Cost of revenue−$11.84B92.8%
- Gross profit$919.0M7.2%
- Operating costs−$587.0M4.6%
- Operating income$332.0M2.6%
- Interest, other & tax−$82.0M0.6%
- Net income$250.0M2.0%
04—Financials
Financial Highlights
Figures from 10-QQ2 FY2024filed August 9, 2024Financial Statements
Q2 FY2024 against Q2 FY2023
| Line item | Q2 FY2024Q2 FY2023 | Change |
|---|---|---|
| Revenue | $12.76B$11.60B | +10.0% |
| Cost of Revenue | $11.84B$10.54B | +12.3% |
| Gross Profit | $919.00M$1.06B | −13.1% |
| Operating Expenses | $12.43B$11.22B | +10.7% |
| Operating Income | $332.00M$378.00M | −12.2% |
| Net Income | $250.00M$293.00M | −14.7% |
05—Questions
Frequently Asked Questions
Why did net income decline even though Adjusted EBITDA increased?
Net income attributable to PAA fell to $250 million in Q2 2024 from $293 million, while Adjusted EBITDA rose 15% to $807 million. The filing says the 2023 period included favorable impacts from gains on asset sales (including about $140 million from the Keyera Fort Saskatchewan sale in Q1 2023) and a mark-to-market gain on the Preferred Distribution Rate Reset Option. Adjusted EBITDA excludes many of these items, such as derivative activities, inventory valuation adjustments, and interest, so the two measures move differently.
Why was operating cash flow lower in the first half of 2024?
Net cash provided by operating activities was $1.072 billion for the six months ended June 30, 2024, compared with $1.631 billion in 2023. The filing says the 2024 period was impacted unfavorably, primarily by margin requirements related to hedging activities, while the 2023 period benefited from reducing inventory levels.
What is the financial exposure from the Line 901 incident?
The filing estimates total Line 901 costs at about $750 million, of which approximately $505 million is considered probable of recovery from insurance carriers, with about $280 million collected through June 30, 2024. The remaining undiscounted gross liability is about $81 million. Insurers responsible for $185 million of the remaining $225 million of coverage have denied coverage for the Class Action Settlement, and PAA has started arbitration. The filing says an unfavorable resolution could have a material impact on results of operations.
How is the partnership managing its debt and liquidity?
During the first half of 2024, PAA made net repayments of $433 million under its commercial paper program, funded partly by the June 2024 issuance of $650 million of 5.70% senior notes due 2034. Total debt was $7.976 billion at June 30, 2024, including $765 million of short-term debt. The partnership reported about $3.2 billion of liquidity, subject to covenant compliance, and stated it was in compliance with its covenants.
What are the 2024 capital spending expectations and distribution levels?
The filing projects 2024 investment capital of about $465 million ($375 million net to PAA's interest) and maintenance capital of about $270 million ($250 million net to PAA's interest), to be funded primarily with retained cash flow. Common unit distributions of $0.3175 per unit were declared for the quarter, unchanged from the prior quarter, and the filing states that $1.27 per unit on an annualized basis.
06—Continue