Plains All American (PAA): A Mispriced Midstream Opportunity Amid NGL Divestiture and EPIC Acquisition

In the ever-evolving landscape of energy infrastructure, few stories have captured the attention of investors as compellingly as Plains All American's (PAA) strategic repositioning. By late 2025, the company has executed a dual maneuver: acquiring full control of the EPIC Crude Pipeline and preparing to divest its Canadian NGL business. These moves, underpinned by disciplined capital allocation and a clear vision for operational efficiency, present a compelling case for a valuation re-rating.

Strategic Acquisition of EPIC Crude Holdings

Plains All American's acquisition of the remaining 45% interest in EPIC Crude Holdings, completed in October and November 2025, marks a pivotal step in its transformation into a premier crude oil midstream provider. The total purchase price of $1.33 billion, inclusive of $500 million in debt, reflects a commitment to securing operational control and capturing synergies. A potential earnout of up to $157 million, contingent on pipeline expansions by 2028, further aligns management with long-term value creation.

The integration of EPIC into Plains' Cactus long-haul system is expected to yield significant cost savings, with management projecting mid-teens returns and a 2026 EBITDA multiple of approximately 10x. This acquisition not only enhances scale but also diversifies cash flow streams, reducing exposure to volatile NGL markets. As stated by Plains in its third-quarter 2025 earnings call, the transaction accelerates synergy capture and positions the company to deliver "solid, durable cash flows".

NGL Divestiture: Refocusing on Core Strengths

Simultaneously, Plains is finalizing the sale of its Canadian NGL business to Keyera Corp, a transaction expected to close by the end of Q1 2026. This divestiture, subject to regulatory approvals, will allow the company to retain its U.S. NGL assets while shedding non-core Canadian operations. The proceeds from this sale will be redeployed into the EPIC acquisition, ensuring a balanced capital structure and alignment with its target leverage ratio of ~3.5x.

By exiting the Canadian NGL market, Plains is streamlining its portfolio to focus on higher-margin crude oil transportation. This strategic clarity is critical in an industry where operational simplicity and predictable cash flows are increasingly valued. As noted in a report by Bloomberg, the move is expected to normalize Plains' leverage profile and enhance its credit profile.

Capital Allocation: A Framework for Shareholder Value

Plains' capital allocation strategy post-EPIC and NGL transactions is centered on three pillars: debt reduction, distribution growth, and disciplined reinvestment. With a current leverage ratio of 3.3x as of Q3 2025, the company is well-positioned to delever further post-divestiture. Management has reaffirmed its commitment to a $0.15 annual distribution increase target, underscoring its dedication to unitholder returns.

The company's distribution yield of approximately 9.5% is already attractive, but the anticipated cost savings from EPIC integration and reduced leverage could further enhance this metric. Analysts at Wolfe Research and Scotiabank have set price targets of $22 and $23, respectively, reflecting confidence in Plains' ability to re-rate its valuation.

Valuation Re-Rating Potential

Plains' current EV/EBITDA ratio of 10.49 appears undemanding relative to its peers, particularly given its improved operational profile. The 2026 EBITDA multiple of ~10x, projected to rise significantly over the next few years, suggests substantial upside. With a narrowed 2025 Adjusted EBITDA guidance of $2.84–$2.89 billion, the company is demonstrating both operational discipline and financial resilience.

Moreover, the unit price's 5.2% gain in 2025, outperforming the Alerian MLP Index ETF, hints at growing investor confidence. If Plains can maintain its leverage within the target range post-divestiture and deliver on its synergy promises, a re-rating to 12x–14x EBITDA-a more typical multiple for high-quality midstream assets-could unlock significant value.

Conclusion

Plains All American's strategic pivot toward crude oil midstream dominance, coupled with a robust capital allocation framework, positions it as a compelling opportunity for investors seeking undervalued infrastructure plays. The completion of the EPIC acquisition and the pending NGL divestiture are not merely operational milestones but catalysts for a valuation re-rating. As the energy transition reshapes market dynamics, Plains' focus on durable cash flows and operational efficiency may well prove to be its most enduring strengths.