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Plains All American Pipeline 8-K Report, Corporate Update (Jan 10, 2025)

Reports
Other Events·Exhibits & Filings
Filing Date
Filed January 10, 2025
Period End
January 7, 2025
Securities
PAAPAAPU
In the record · 2016–202610-K1110-Q328-K168

PAA filed 11 annual reports (10-K), 32 quarterly reports (10-Q) and 168 current reports (8-K) between 2016 and 2026.

  1. Material agreement8-K · Oct ’17Oct ’17
  2. Leadership change8-K · Sep ’20Sep ’20
  3. Material agreement8-K · Aug ’22Aug ’22
  4. Leadership change8-K · Sep ’26Sep ’26

01—Abstract

Summary

Summary of the 8-K filed January 10, 2025. Cited figures are marked; the original filing is the authoritative source.

Plains All American Pipeline, L.P.

(Nasdaq: PAA) reported on January 7, 2025, through Exhibit 99.1 to this Form 8-K, that it announced three bolt-on acquisitions, a capital structure optimization transaction, and a distribution increase. The three acquisitions total an aggregate cash consideration of approximately $670 milliona net to Plains: the agreed purchase of Ironwood Midstream Energy, an Eagle Ford Basin gathering system, from EnCap Flatrock Midstream for approximately $475 million (expected to close in the first quarter of 2025); the acquisition by a subsidiary of the Plains Permian Basin joint venture of Medallion Midstream's Delaware Basin crude oil gathering business for approximately $160 million ($105 million net to PAA's interest), effective January 1, 2025; and the acquisition of the remaining 50% interest in Midway Pipeline LLC from a subsidiary of CVR Energy for approximately $90 million, completed December 23, 2024. Management states these transactions enhance Plains' crude oil footprint in the Permian, Eagle Ford and Mid-Con.

On the capital structure side, Plains agreed to buy approximately 12.7 million Series A Preferred Units, or 18% of the outstanding amount, at par ($26.25b) for approximately $330 million plus accrued and unpaid distributions, from EnCap Flatrock Midstream, with closing expected in late January 2025. After giving effect to these transactions, the leverage ratio is expected to be at or below the low end of the 3.25x to 3.75x target range. The Board also approved an increase in the quarterly distribution payable in February 2025 for both PAA common units and PAGP Class A shares, from $0.3175 to $0.38 per unit.

The filing states this represents an annualized increase of $0.25c per unit, or 20%, over the distribution paid in November 2024. The filing is signed by Richard McGee, Executive Vice President, on January 10, 2025.

02—Key points

Key Highlights

  1. Three bolt-on acquisitions with aggregate cash consideration of approximately $670 million net to Plains, including Ironwood Midstream Energy (Eagle Ford gathering, about $475 million, expected to close in Q1 2025).
  2. Medallion Midstream's Delaware Basin crude oil gathering business acquired for approximately $160 million ($105 million net to PAA's interest), effective January 1, 2025.
  3. Remaining 50% interest in Midway Pipeline LLC acquired from CVR Energy's subsidiary for approximately $90 million on December 23, 2024.
  4. Purchase of approximately 12.7 million Series A Preferred Units (18% of outstanding) at par ($26.25) for about $330 million plus accrued and unpaid distributions, expected to close in late January 2025.
  5. Post-transaction leverage ratio expected to be at or below the low end of the 3.25x to 3.75x target range.
  6. Quarterly distribution increased from $0.3175 to $0.38 per unit for PAA common units and PAGP Class A shares, payable February 2025, a stated 20% annualized increase over the November 2024 payment.

03—Questions

Frequently Asked Questions

  1. How much is Plains spending on acquisitions and preferred unit repurchases in this announcement?

    The three bolt-on acquisitions carry aggregate cash consideration of approximately $670 million net to Plains. Separately, the preferred unit purchase is approximately $330 million, plus accrued and unpaid distributions.

  2. What is the largest acquisition and what does it add?

    The largest is Ironwood Midstream Energy, which owns an Eagle Ford Basin gathering system, acquired from EnCap Flatrock Midstream for approximately $475 million. Plains says the bolt-ons enhance its crude oil footprint in the Permian, Eagle Ford and Mid-Con.

  3. When are these transactions expected to close?

    The Ironwood acquisition is expected to close in the first quarter of 2025, and the Series A Preferred Unit purchase is expected to close in late January 2025. The Medallion Midstream acquisition is effective January 1, 2025, and the Midway Pipeline interest was acquired on December 23, 2024.

  4. How much is the distribution increasing and what does it mean for unitholders?

    The quarterly distribution payable in February 2025 rises from $0.3175 to $0.38 per unit for PAA common units and PAGP Class A shares. The filing states this is an annualized increase of $0.25 per unit, or 20%, over the November 2024 distribution.

  5. What is the expected effect on Plains' leverage?

    After giving effect to all of these transactions, Plains' leverage ratio is expected to be at or below the low end of its 3.25x to 3.75x target range, which management says provides significant balance sheet optionality and flexibility.

04—Continue

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