Plains GP (PAGP) Q1 2026 Earnings Transcript

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DATE

Friday, May 8, 2026 at 10 a.m. ET

CALL PARTICIPANTS

• Chairman, President, and Chief Executive Officer — Willie Chiang
• Executive Vice President and Chief Financial Officer — Al Swanson
• Executive Vice President and Chief Commercial Officer — Jeremy L. Goebel
• Executive Vice President and Chief Operating Officer — Christopher R. Chandler
• Senior Vice President, Investor Relations and Communications — Blake Michael Fernandez

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TAKEAWAYS

• Adjusted EBITDA -- $730 million reported for the quarter attributable to Plains GP Holdings (NASDAQ:PAGP).
• Crude Oil Segment Adjusted EBITDA -- $582 million for the quarter, reflecting a full-quarter contribution from Cactus III, offset by winter weather impacts, system maintenance, and minimum volume commitment (MVC) timing.
• NGL Segment Adjusted EBITDA -- $145 million driven by higher straddle production and improving frac spreads.
• Full-Year 2026 Adjusted EBITDA Guidance -- Midpoint raised by $130 million to $2.88 billion, based on NGL outperformance and updated divestiture timing.
• NGL Segment 2026 EBITDA Guidance -- Now $170 million, reflecting first quarter strength and asset retention into May 2026.
• Key EBITDA Guidance Drivers -- $70 million increase from NGL segment (outperformance, divestiture delay), $60 million from crude segment (optimization, tariff escalators, increased spot tariff and West Coast volumes).
• Growth Capital and Maintenance Capital -- $350 million growth capital; maintenance capital increased to $185 million due to NGL asset ownership extended to May.
• Expected 2026 Adjusted Free Cash Flow -- Approximately $1.85 billion, excluding working capital changes and NGL sale proceeds.
• Leverage Metrics -- Pro forma leverage at quarter end was 4.1x (including Cactus III); would decrease to approximately 3.5x post NGL sale; management expects migration toward low end of target 3.25x-3.75x range by year-end.
• Expected NGL Sale Proceeds -- Approximately $3.3 billion, an increase of $100 million over prior estimates.
• Tax Impact from Restructuring -- Current and deferred taxes are elevated this quarter; no cash tax effect yet, with payments tied to NGL divestiture closure and future periods.
• Cost Reduction Initiatives -- $50 million efficiencies targeted by 2026 and additional $50 million by 2027; management confirms progress and ongoing potential upside.
• Capital Allocation Priorities -- Immediate focus on debt paydown with NGL proceeds (term loan, CP, $750 million note), followed by distribution growth, investment funding, possible preferred redemption, and opportunistic repurchases as leverage improves.
• Payout Update -- Management no longer expects to pay a special distribution post NGL sale due to the offsetting impact of prior Cactus III acquisition taxes.
• Pending Keyera Transaction -- Anticipated to close within the month despite a legal challenge by the Competition Bureau, which does not prevent closure.
• Cactus III Expansion Capacity -- Management highlights flexible, phased expansion potential tied to commercial demand, with no binary expansion requirement.

SUMMARY

Management raised the full-year 2026 adjusted EBITDA guidance midpoint by $130 million to $2.88 billion based on stronger NGL segment outperformance, delayed divestiture, and captured optimization gains in the crude segment. The company projects $1.85 billion in adjusted free cash flow, excluding asset sales and working capital, and expects leverage to improve toward the low end of its target range following anticipated $3.3 billion in NGL sale proceeds. Plains GP Holdings no longer expects a special distribution due to the mitigated tax impact of recent transactions, and it affirmed efficient progress on cost reductions and strategic capital allocation. Flexible expansion options for major assets and disciplined capital investment continue as the company positions for long-term market shifts due to ongoing geopolitical events and increasing North American crude demand.

• Management described the recent closure of the Strait of Hormuz as a factor in “significantly disrupted global shipping channels and Middle East supply,” which is underpinning a stronger crude market and could lead to future restocking of global strategic petroleum reserves.
• The NGL segment’s guidance was increased following a $45 million first-quarter outperformance and asset divestiture timing moving to May.
• Al Swanson said, “The NGL segment increased by $70 million, driven by outperformance in the first quarter along with the ownership of NGL assets into May.”
• Al Swanson stated, “First quarter leverage pro forma for the NGL sale would decrease to approximately 3.5x, and we would expect leverage to migrate towards the low end of our target range of 3.25x to 3.75x by the end of the year.”
• Al Swanson clarified guidance sensitivity by explaining most pricing assumptions for the crude segment were largely hedged and that “the first quarter performance and the nine months of our guide are very minimally impacted by actual PLA pricing.”
• Management confirmed no meaningful shift in U.S. Permian producer behavior has yet occurred but highlighted disciplined production and readiness for potential upside in late-year volume ramping.
• Christopher R. Chandler confirmed, “We are on track to capture the efficiencies—$50 million by 2026 and an additional $50 million in 2027.”
• Al Swanson specified, “with the proceeds from NGL, we anticipate paying down a little over $3 billion of debt, which would be the term loan, the outstanding CP we have, and a $750 million note that matures later this year.”

INDUSTRY GLOSSARY

• Cactus III: A major oil pipeline and gathering system recently acquired by Plains GP Holdings, L.P., referenced in the call as a key contributor to segment EBITDA and future expansion capacity.
• Minimum Volume Commitments (MVCs): Contractual shipping volume thresholds guaranteeing pipeline usage or payments; timing of accrual and reversal impacted quarterly segment results.
• Frac Spread: The profit margin between the price of natural gas liquids produced and the cost of natural gas input, cited as a driver for NGL segment outperformance.
• Straddle Production: Extraction of natural gas liquids at straddle plants located on main natural gas pipelines—in this context, specifically leading to higher NGL volumes for the company.
• PLA: Pipeline Loss Allowance; refers here to a mechanism compensating operators for volumetric losses, with minimal impact on current quarter EBITDA guidance per management.
• CP: Commercial Paper, denoting short-term debt that is part of the debt reduction priorities post-NGL asset sale.

Full Conference Call Transcript

Willie Chiang: Thank you, Blake. Good morning, everyone, and thank you for joining us. This morning, we reported first quarter adjusted EBITDA attributable to Plains GP Holdings, L.P. of $730 million. Al will cover the details on our results in his portion of the call. Let me start with the macro environment, which has changed significantly since our last call. Recent geopolitical events have reiterated the importance of reliable, secure, and responsibly produced energy. The closure of the Strait of Hormuz has significantly disrupted global shipping channels and Middle East supply, contributing to stronger commodity prices over the past couple of months. In response, excess floating storage has been drawn down, and strategic petroleum reserves are being released globally.

While this helps balance the market deficit on a short-term basis, we are seeing a more constructive oil market developing on a longer-term basis. We expect this destocking environment to continue over the next number of months and ultimately drive a restocking phenomenon longer term as countries replenish depleted strategic petroleum reserves globally. Postwar, we would not be surprised to see several countries restock their SPRs above prewar levels, essentially creating an additional layer of demand into the future, which should support prices and incent producer activity. On the supply side, OPEC production capacity postwar remains uncertain, but we suspect spare capacity will be tighter based on a slower recovery of shut-in production and infrastructure damage during the war.

We believe the conflict shifts the focus towards more geopolitically stable regions to ensure security of supply. Against this backdrop, North America, including the Permian, remains well positioned to play a critical role in meeting global demand. As this occurs, the value of existing infrastructure in the ground should continue to increase over time. For these reasons, we believe Plains GP Holdings, L.P. is well positioned for both the near-term volatility and longer-term macro environment. Based on these market dynamics and the growth trajectory that we see for our business, we have increased our initial 2026 EBITDA guidance.

As highlighted on slide four, we are increasing the midpoint of our full-year 2026 adjusted EBITDA guidance by $130 million to $2.88 billion. The NGL segment EBITDA is now expected to be $170 million this year, following first quarter outperformance of $45 million and the updated divestiture timing now in May 2026. Our trajectory of growth this year is underpinned by three key drivers: the sale of our NGL assets, Cactus III synergy capture and streamlining. The growth of our EBITDA is paced with the execution of these initiatives and is enhanced by capturing optimization opportunities that have been substantially secured over the next three quarters.

We are also seeing increased producer interest in both Canada and the United States for additional connections to our system. The combination of all these factors will ramp up through the year and position us well into the future. Our premier crude oil footprint continues to support stable fee-based cash flows in a variety of macro backdrops. As global markets turn to North America for long-term energy supply, we are well positioned across key producing basins and downstream markets to drive multiyear growth. We remain committed to our efficient growth strategy, generating significant free cash flow, optimizing our assets, maintaining a flexible balance sheet, and continuing to return cash to unitholders via our disciplined capital allocation framework.

With that, I will turn the call over to Al to cover our quarterly performance and other financial matters.

Al Swanson: Thanks, Willie. Slides five and six contain adjusted EBITDA walks that provide additional details on our performance. For the first quarter, we reported crude oil segment adjusted EBITDA of $582 million, which was broadly in line with our internal estimate and includes a full-quarter contribution from the Cactus III acquisition, offset by a number of one-off items, including winter weather impact in the Permian, system maintenance, and timing of minimum volume commitments. Moving to the NGL segment, we reported adjusted EBITDA of $145 million, reflecting a stronger-than-expected contribution from higher straddle production and improving frac spreads in March. A summary of 2026 guidance and key assumptions are on slide seven.

Growth capital remains $350 million while maintenance capital was increased to $185 million reflecting ownership of the NGL assets into May. Regarding the $130 million increase in EBITDA guidance, key drivers are outlined in the waterfall on slide eight. The NGL segment increased by $70 million, driven by outperformance in the first quarter along with the ownership of NGL assets into May. The oil segment was increased by $60 million, driven by captured optimization opportunities, FERC tariff escalators, increased spot tariff volumes, and increased West Coast volumes. To the extent that the elevated commodity environment persists into the second half of the year, we would expect to capture incremental opportunities.

For 2026 guidance, we continue to assume Permian crude oil production to be relatively flat year over year. While we have yet to see a meaningful shift in U.S. producer behavior, any increase in activity would likely benefit 2027 and beyond. We expect an improving back end of the crude oil curve and removal of natural gas takeaway constraints as new egress projects start up later this year to drive incremental activity throughout the year. Illustrated on slide nine, we remain committed to generating significant free cash flow and returning capital to unitholders while maintaining financial flexibility.

For 2026, we expect to generate approximately $1.85 billion of adjusted free cash flow excluding changes in assets and liabilities, and excluding sales proceeds from the NGL divestiture. Our pro forma leverage at the end of the first quarter was 4.1x, reflecting the Cactus III acquisition. First quarter leverage pro forma for the NGL sale would decrease to approximately 3.5x, and we would expect leverage to migrate towards the low end of our target range of 3.25x to 3.75x by the end of the year. We expect net proceeds from the NGL sale to be approximately $3.3 billion, which is approximately $100 million higher than our prior estimate.

Our acquisition of Cactus III last year has mitigated the tax liability of the unitholders resulting from the NGL divestiture. As a result, we no longer expect to pay a special distribution following the closing of the NGL sale. Before handing it back to Willie, I would note that both current and deferred taxes are elevated on the statement of operations this quarter because of the restructuring activities associated with the NGL sale. There was no cash tax impact in the quarter, as payment of the related taxes will be made in conjunction with closing or in future periods. With that, I will turn the call back to Willie.

Willie Chiang: Thanks, Al. In the midst of volatile energy markets, we remain steadfast and focused on our three initiatives for 2026: closing the NGL sale, driving synergies on Cactus III, and advancing our streamlining initiatives. Our efficient growth strategy has positioned us well to execute through a range of market environments, generating durable cash flow and creating long-term value. Importantly, the improving oil macro environment is starting to present additional organic investment opportunities with strong returns. We continue to evaluate both organic and inorganic opportunities in a disciplined manner. Capital investments help underpin long-term EBITDA growth, but they must meet our return thresholds and provide visibility into future return of capital to unitholders.

Our transition to a pure-play crude midstream company, coupled with the acquisition of Cactus III, is proving timely, as tensions in the Middle East position North America as a key source of global energy supply into the future. Before I turn the call over to Blake, I would like to make a brief comment about our pending transaction with Keyera. In terms of timing, as reported by both Keyera and Plains GP Holdings, L.P. in separate releases earlier this week, we are targeting to close the transaction this month.

While it is unfortunate that the Competition Bureau has chosen to challenge the transaction, their lawsuit does not prevent the parties from closing the transaction, which both Plains GP Holdings, L.P. and Keyera are committing to do. I realize you may have some additional questions, but I hope you understand it would be inappropriate for us to comment any further on this matter, so we would appreciate it if you would refrain from asking questions regarding the transaction. Blake, I am now going to turn it over to you to lead us through Q&A.

Blake Michael Fernandez: Thanks, Willie. As we enter the Q&A session, please limit yourself to two questions. This will allow us to address as many questions as possible from participants in our available time this morning. With that, Michelle, we are ready for questions.

Operator: Thank you. If your question has been answered and you would like to remove yourself from the queue, please press 11 again. Our first question comes from Brandon B. Bingham with Scotiabank. Your line is open.

Brandon B. Bingham: Thanks. Good morning, everybody. Just wanted to ask on the new guide. If I look at your sensitivity and the new crude price expectations, it would imply that, at least on price movements alone, the crude contribution should probably be higher than what is currently shown. Could you just walk us through what is baked into the new guide and maybe the embedded outlook in there? And, in light of some of the commentary in your prepared remarks about a more constructive longer-term market and the macro environment as it stands today, how are you thinking about the potential for the EPIC expansion at this point?

Al Swanson: Sure, Brandon. Yes, our original guidance for the year assumed a $60 to $65 environment for 2026, call it a $62 average. We came into the year highly hedged at roughly those levels. The $85 environment that we are talking about for the future is roughly the strip from June through December when we looked at it. So there would be some benefit based on crude prices on our PLA, but we had hedged quite a bit before entering the year. That sensitivity we give is just a raw sensitivity; in order to make it more meaningful, we would have had to have disclosed the hedge position at the beginning of the year, which we have not historically done.

So what I would say is that the first quarter performance and the nine months of our guide are very minimally impacted by actual PLA pricing.

Jeremy L. Goebel: Brandon, good morning. We are excited about the opportunities around our entire long-haul portfolio and are having constructive dialogue with existing customers and new customers looking for secure supply from the United States. That results in some spot activity, but longer term, the expectation is to contract at higher rates than before with potentially new counterparties. That would apply to recontracting the existing pipeline capacity and expansions as well. We are looking at all of the above and hope to have updates in the coming quarters on how that looks.

Operator: Our next question comes from Gabriel Philip Moreen with Mizuho. Your line is open.

Gabriel Philip Moreen: Hey, good morning, everyone. Maybe I will just ask the Permian macro question, Willie, in terms of your best outlook. I think previous years you had talked about roughly 200,000 barrels a day year-over-year growth. Best venture at this point—do you think that goes significantly higher from here, 400,000, 500,000 in 2027? I am just curious what your latest thoughts are there. And then, can you talk about the sustainability of some of the marketing opportunities you are currently seeing—spreads, the value of dock space, whether you are debating terming some of those out at higher prices—and how the steepness of the curve and backwardation are impacting your storage?

Willie Chiang: Gabe, the U.S. producers have remained very disciplined as far as capital allocation, and they are looking at the back end of the curve to see where it goes. WTI is roughly $70, and our view is when you start getting into $75 and above, increased activity happens. There are also some other short-term operating constraints limiting production a bit. The Permian has some natural gas takeaway constraints. There are new lines being built and being commissioned as early as later this year, so the thought is that alleviates itself. Our assumption for the Permian this year was flat, and if there is some upside, obviously, we benefit from it.

We are not giving a formal guide, but we would expect growth going forward and probably some momentum of volumes behind that which is going to increase production here, maybe with a little bit of a flush later this year. So I think it really depends on the back end of the curve, but the systems are ready to go.

Jeremy L. Goebel: Gabe, without getting into specific strategies—time, location, quality spreads and volatility—we benefit from all of those because we have the assets, the supply position, and the trading function to capture those opportunities. While it is hard to forecast those, when they arrive we can take advantage by, for example, selling a barrel now and buying it back later by emptying a tank, or capturing differences in grades between Canada and the United States and across Gulf Coast grades. We are excited about those opportunities. What we have put in the forecast has been substantially captured.

It is a very volatile time period; we have only been in this 60 to 70 days, so it is hard to forecast that to continue. But if it continues, we would expect to capture more opportunities going forward. We also estimate there is close to 200,000 to 300,000 barrels per day of oil behind pipe in the Permian Basin. That flush production is substantial, and a lot of that is in the more constrained areas of the Delaware Basin, where we have a broader footprint, including New Mexico and other places. If you look at the Waha spread, flat price in Waha has been largely negative since last September; that is what is accumulating all of this behind pipe.

As gas prices recover, productive capacity is already there to add. As you add more, that puts more pressure on potentially long-haul spreads and the ability to term up contracts at greater rates. We are seeing more demand from new customers, and we are seeing potentially flushed production. Those should all help convert short-term opportunities into longer-term opportunities.

Willie Chiang: If you look at our numbers, long haul has increased and the margins on that have also improved. I think we are moving to a more structurally full-pipe situation as we go forward, which should be constructive for us.

Operator: Our next question comes from Manav Gupta with UBS.

Manav Gupta: Good morning. I just wanted to focus a little bit on the weather impact. I think it was about $49 million quarter over quarter. I am trying to understand the timing of minimum volume commitments. Is there a possibility some of this can be reversed in 2Q—some of what you lost in the current quarter comes back into the second quarter? And if you could also talk about the very strong NGL segment in the first quarter versus the last quarter—some of the drivers that helped you deliver much stronger earnings in that segment quarter over quarter?

Al Swanson: Yes, Manav. Those are two different things. First, with regard to weather, weather is just production shut in for a period. You cannot make that back, but the flush production does come back. With regard to the timing of MVCs, that is continuous in our process. If you look at some of the earnings calls from others about their dock performance or other things in the first quarter, freight was really expensive and margins did not have people moving, so long-haul volumes were down across the industry. But that has completely reversed in timing, so you would absolutely expect that to be recovered. It is just a question of those MVCs accrued versus when they are paid.

All the pipelines are full again, and the MVCs are being reversed. If you are referring to slide five, there are a bunch of one-time events in that negative $49 million that will not occur again as we go forward.

Jeremy L. Goebel: On the NGL segment, higher border flows than expected drove stronger results. You had very full storage in Canada and continued production, which required volumes to be exported. Those were exported through our Empress asset, so higher border flows led to more straddle production, and that would all be unhedged and impact results. We also saw higher frac spreads toward the end of the first quarter. Those two factors continued into the second quarter, which is reflected in the increase in guidance for the NGL business through closing.

Operator: Our next question comes from Michael Jacob Blum with Wells Fargo.

Michael Jacob Blum: Thanks. Good morning, everyone. My question is on the guidance for the crude segment. It sounds like most of the increase is optimization that you have already locked in, and then maybe the rest is PLA. Is that right? And if prices stay elevated for the balance of the year, would there be upside to the crude segment guide, or is that already baked into the numbers?

Willie Chiang: Michael, great question. Our assumptions are that the numbers in there are what we have captured that roll off through the year that we will actualize on optimization efforts. You are correct. If we have a stronger macro environment and higher prices, there definitely is upside.

Michael Jacob Blum: Great. Thank you.

Operator: Our next question comes from Jeremy Tonet with JPMorgan Securities. Your line is open.

Jeremy Tonet: Hi. Good morning. What are you seeing locally, ear to the ground, as far as producer activity—rigs being picked up by the independents or larger drillers—and what would need to be seen across the strip to gain the comfort to do that? How do you think production could uptick here, and what do you see? And how do you think that impacts basis over time and what it could mean for future egress expansion?

Jeremy L. Goebel: Jeremy, good morning. Since this started, you have already seen about 15 rigs added back, and we would expect some to continue. But as Willie mentioned, there is a bit of a throttle right now: you cannot add more natural gas to the system and flaring is not allowed. Productive capacity is there; rigs being added now would impact 2027. There is a bit of confusion in the market in that the products market and the physical crude market are substantially tighter than the financial markets would indicate, which means the back end of the curve has to come up.

It is very difficult, even if you opened the Strait of Hormuz tomorrow, to get everything back in order the way it was. It will take a while for shipping to start; you have to empty tanks before you start back up production. Products markets are empty in some places. There is real dislocation that will take time. Some integrators have stated it is roughly three days to get back up for every day it is down, so it is potential for months to get out of this even if it were resolved today. Producers likely need more assurance on the back end of the curve before bringing rigs on.

Service companies have stacked equipment; it takes capital and commitments to bring that back in. The longer this goes, the more likely that will occur, but the current dislocation on the back end of the curve is causing some hesitancy, and that prolongs the problem. On basis and egress, it is constructive for basis—more production and more demand on the water. Specifically to the Corpus market and some of the efficient docks on the water, you are seeing higher pricing relative to the screen. On a prolonged basis, that suggests new buyers coming to America and vessels re-pointed to the United States for a while.

You are seeing that on the NGL side; you will see it on LNG and on crude. More buyers and more demand are generally constructive for spreads, and we would expect to match either our supply or our customers with that and hopefully offer service at a higher rate.

Willie Chiang: On Cactus III, we have expansion capacity. As we have always said, we will pace that with market demand and commercial contracts. As we have gotten to know the project and assessed it, we have the ability to do that in a phased approach. It is fairly flexible for us to get additional volumes; it is not a binary big expansion. There are ways to do it in phases which should match customer demand. Generally speaking, in a higher price environment, there are more opportunities because there is a pull on the whole system. In that kind of market, market and optimization opportunities become more prevalent versus a lower price environment where less is moving and there are fewer opportunities.

Operator: Our next question comes from Analyst with Goldman Sachs. Your line is open.

Analyst: Hi, good morning. Thank you so much for the time. First, could you comment on the progress of your cost reduction initiatives? Are these on track with expectations at this point, and is there any potential for upside capture here? When should we expect Plains GP Holdings, L.P. to realize more significant efficiencies through the year? And then shifting to capital allocation—with debt reduction as a near-term focus, particularly following the pending NGL sale—when do we expect a shift from debt paydown to a larger focus on potential buybacks or preferred paydowns?

Christopher R. Chandler: Good morning. We are on track to capture the efficiencies—$50 million by 2026 and an additional $50 million in 2027. We have already made a number of changes, some unrelated to the NGL transaction and some in anticipation of the NGL transaction. We feel confident in the number. There is always upside; we are always looking for additional opportunities and we will certainly pursue any that we find. We are not prepared at this time to change the $100 million target we have through 2027, but we are on track and things are going well.

Al Swanson: On capital allocation, with the proceeds from NGL, we anticipate paying down a little over $3 billion of debt, which would be the term loan, the outstanding CP we have, and a $750 million note that matures later this year. Post that, we expect to be right at the midpoint of our leverage range, about 3.5x, and expect that to migrate down toward the low end, which will put us back where we were for several years prior to the EPIC acquisition—leverage toward the low end of our range.

Our capital allocation priorities remain: maintaining distribution growth; funding investments, whether organic or M&A-related; taking out preferreds should leverage remain at or below the bottom end of the range; and opportunistic share repurchases. So once we get through the NGL sale and deploy the proceeds, we return to the framework we have been operating under for the last several years.

Operator: Thank you. I am showing no further questions at this time. I would like to turn the call back over to Willie Chiang, President, CEO and Chairman, for closing remarks.

Willie Chiang: Michelle, thanks. We appreciate everyone’s support and attention, and we look forward to seeing you on the roads. Stay safe. Thank you very much.

Operator: Thank you for your participation. You may now disconnect. Everyone, have a great day.

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