Plains Eyes $100M in Savings, But Permian Growth Stalls for Now

Date of Call: Feb 6, 2026

Guidance:

• Adjusted EBITDA guidance of $2.75 billion net to Plains at the midpoint plus or minus $75 million for 2026.
• Crude segment EBITDA midpoint of $2.64 billion net to Plains, implying 13% YOY growth.
• NGL segment EBITDA expected to be $100 million, assuming divestiture closes Q1 end.
• Permian crude production expected relatively flat year-over-year in 2026, around 6.6 million barrels end of year.
• Growth capital investment expected ~$350 million; maintenance capital ~$165 million net to PAA.
• Adjusted free cash flow expected ~$1.8 billion for 2026.
• Targeted annualized distribution growth remains $0.15 per unit.

Business Commentary:

Financial Performance and Strategic Transition:

• Plains All American Pipeline reported fourth quarter adjusted EBITDA of $738 million and full-year EBITDA of $2.833 billion.
• The company is transitioning to a pure-play crude company, enhancing cash flow quality and durability through the sale of its NGL business and acquisition of the Cactus III pipeline.

Cost Efficiency and Streamlining Initiatives:

• Plains All American is targeting $100 million in annual savings by 2027, with about half expected in 2026, driven by reducing G&A and OpEx and exiting lower-margin businesses.
• These initiatives are part of a broader strategy to streamline operations and improve cost structure following the sale of the Mid-Continent lease marketing business.

Capital Allocation and Distribution Strategy:

• The company announced a 10% increase in the quarterly distribution, bringing the annual distribution to $1.67 per unit, reflecting an 8.5% yield.
• This adjustment aligns with the company's focus on stable cash flows and improved visibility, allowing for future distribution growth while maintaining a prudent coverage level.

Permian Basin Outlook and Growth:

• Permian crude production is expected to be relatively flat in 2026, with growth anticipated in 2027 due to constructive oil market fundamentals.
• The outlook is supported by ongoing global energy demand growth and diminishing OPEC spare capacity, positioning the Permian Basin for future growth.

Recent Acquisitions and Their Impact:

• Plains All American acquired the Wild Horse terminal in Cushing, Oklahoma, for approximately $10 million, adding 4 million barrels of storage capacity.
• The acquisition is expected to generate returns above internal thresholds and enhance the company's storage capabilities adjacent to existing terminal assets.

Sentiment Analysis:

Overall Tone: Positive

• Management describes 2025 as a 'pivotal' and 'transformational' year, proactively executing major transactions. They state '2026 will be a year of execution and self-help' and expect to 'generate significant free cash flow' while taking steps to 'strengthen our company for the future' and 'position Plains more competitively'.

Q&A:

• Question from Manav Gupta (UBS Investment Bank): Focus on Cactus III synergy benefits and ability to expand without putting more pipe in the ground.
  Response: Synergies of $50M are largely on run rate; expansion will be considered in phases, capital-efficiently, after stabilizing the base pipeline.

• Question from Manav Gupta (UBS Investment Bank): Details on $100M in cost savings through 2027.
  Response: Savings driven by streamlining post-NGL sale, targeting $50M in 2026 and $50M in 2027.

• Question from Brandon Bingham (Scotiabank Global Banking and Markets): Permian Basin outlook and producer sentiment given $60-$65 WTI guidance.
  Response: Cautiously optimistic; producers are becoming more efficient, and growth is expected to resume in 2027.

• Question from Brandon Bingham (Scotiabank Global Banking and Markets): Capital allocation priorities and distribution coverage ratio shift.
  Response: Capital allocation unchanged; primary return is distribution growth, with 150% coverage seen as consistent with peers.

• Question from Michael Blum (Wells Fargo Securities): Rationale behind distribution coverage reset to 150%.
  Response: A modest reset consistent with peers, reflecting more durable cash flow and enabling multiyear distribution growth.

• Question from Michael Blum (Wells Fargo Securities): Details on $350M growth CapEx and if it's a new run rate.
  Response: $350M is within typical $300M-$400M range; includes Permian connectivity, Cactus III integration, and Canadian opportunities.

• Question from Jeremy Tonet (JPMorgan Chase & Co): Impact of recent geopolitical developments (Venezuela) on asset utilization or repurposing.
  Response: Near-term creates opportunities for quality optimization; longer-term could lead to logistical opportunities but requires significant investment for repurposing.

• Question from Keith Stanley (Wolfe Research): Whether $0.15 distribution increases are planned for at least 2 more years and growth drivers for 2027/2028.
  Response: Confidence in ability to grow beyond 2026 driven by self-help, Permian growth, and asset synergies.

• Question from John Mackay (Goldman Sachs Group): Bridge for long-haul firming volume guidance and margin mix.
  Response: Driven by full-year Cactus III integration, higher contracted capacity (lower margins), and BridgeTex run rate.

• Question from Sunil Sibal (Seaport Research Partners): Additional factors behind lowering distribution coverage to 150% besides Cactus III contracting.
  Response: Crude segment is stable; coverage remains conservative and funds routine investment capital.

• Question from Andrew John O'Donnell (Tudor, Pickering, Holt & Co. Securities): Market-based opportunities trending above/below the outlined $50M synergy mark for Venezuela.
  Response: Current market reflects budget, providing derisking opportunities as spreads were locked in.

Contradiction Point 1

Capital Allocation Priority Post-NGL Sale

Contradiction on primary focus for capital returns after NGL divestiture.

How is the shift in capital allocation priorities impacting the 150% distribution coverage ratio? - Brandon Bingham (Scotiabank Global Banking and Markets)

2025Q4: The primary focus is still on distribution growth, supported by the 150% coverage level... Bolt-ons, preferred security repurchases, and common unit buybacks will be opportunistic. - Al Swanson(CFO)

Given effective use of NGL sale proceeds, what is your stance on new debt retirement and its priority in capital allocation? - Brandon Bingham (Scotiabank Global Banking and Markets)

2025Q3: The capital allocation priority will then revert to returning cash via distributions, bolt-on acquisitions, and opportunistic common unit repurchases, with a bias towards bolt-ons if good return opportunities exist. - Al Swanson(CFO)

Contradiction Point 2

Rationale for Lowering Distribution Coverage to 150%

Contradiction in the stated reason for adjusting the distribution coverage threshold.

Why lower distribution coverage to 150% instead of a lower threshold? - Michael Blum (Wells Fargo Securities)

2025Q4: The move to 150% is a modest reset that maintains a conservative approach... and reflects improved visibility and a more durable cash flow stream post-NGL sale. - Willie Chiang(CEO)

How does the transition to a pure-play crude business affect the medium- to long-term DCF coverage target? - Sunil Sibal (Seaport Research Partners)

2025Q3: The 160% coverage target remains unchanged, but the company has more financial levers to work with in the new business mix. - Willie Chiang(CEO)

Contradiction Point 3

Capital Allocation & Bolt-on Strategy

Shift in priority from active bolt-on pursuit to opportunistic, capital-disciplined approach.

How has the shift in capital allocation priorities affected the 150% distribution coverage ratio? - Brandon Bingham (Scotiabank Global Banking and Markets)

2025Q4: Bolt-ons, preferred security repurchases, and common unit buybacks will be opportunistic. - Al Swanson(CFO)

How should we think about executing bolt-ons and considering larger deals with the expected $3 billion in proceeds from the NGL sale? - Spiro Dounis (Citi)

2025Q2: The financial flexibility created by the sale provides capacity to act on suitable deals, whether small, medium, or large, as they arise. - Willie Chiang(CEO)

Contradiction Point 4

Permian Basin Production Outlook

Contradiction on Permian production growth trajectory for 2026.

What is the Permian Basin outlook and producer sentiment under a $60-$65 WTI scenario? - Brandon Bingham (Scotiabank Global Banking and Markets)

2025Q4: Permian production is expected to be flat in 2026 but growth is anticipated for 2027+. - Jeremy Goebel(EVP & Chief Commercial Officer), Willie Chiang(CEO)

What are the recent discussions with producers about Permian production volumes and the 2025/2026 outlook? - Michael Blum (Wells Fargo Securities)

2025Q1: Over 100,000 bpd growth has already occurred since year-end. Near-term (3-6 months) activity is expected to be stable; if prices sustain below $55/bbl, growth could flatten or decline; if above $65/bbl, growth could resume. - Jeremy Goebel(EVP & Chief Commercial Officer), Willie Chiang(CEO)

Contradiction Point 5

EBITDA Guidance Confidence Level

Change in certainty regarding EBITDA guidance from a range to a specific lower half.

What is the short-term impact of recent storms on volumes and recovery? - John Mackay (Goldman Sachs Group)

2025Q4: The guidance is for the lower half of the $2.8 billion to $2.95 billion EBITDA range. - Al Swanson(CFO)

Does the EBITDA guidance remain in the lower half of the range, or is there a higher likelihood of reaching the midpoint? - Brandon Bingham (Scotiabank)

2025Q2: The company reiterates its guidance for the lower half of the $2.8 billion to $2.95 billion EBITDA range. - Al Swanson(CFO)