Plains GP Touts Asset Sale in Q2 Results

Plains GP Holdings(NASDAQ:PAGP) reported second-quarter 2025 adjusted EBITDA of $672 million and announced a $3.75 billion divestiture of its NGL business to Keyera, with closing expected in 2026. Management reaffirmed full-year 2025 adjusted EBITDA guidance of $2.8 billion to $2.95 billion and highlighted increased financial flexibility for capital allocation. The following insights detail the quarter’s most significant strategic actions and their investment implications.

NGL divestiture sharpens Plains GP focus

In June 2025, management announced the sale of nearly all Natural Gas Liquids (NGL) assets to Keyera for $3.75 billion, with net proceeds of approximately $3 billion after taxes and adjustments. This move follows prior portfolio optimization and aligns with the company’s historical 80%-85% crude oil operational focus.

"In June, we announced the execution of definitive agreements to sell substantially all of our NGL business to Keyera for approximately $3.75 billion, with an expected close in 2026. Initial investor feedback has been positive, and we view this as a win-win transaction for both parties. Plains will exit the Canadian NGL market at an attractive valuation while Keyera will receive highly complementary critical infrastructure in a strategic market. From a Plains perspective and as highlighted on slide four, this transaction will result in a streamlined crude oil midstream entity. With less commodity exposure, a more durable and steady cash flow stream, and substantial financial flexibility to further execute on our capital allocation framework. With approximately $3 billion of net proceeds from the sale, we expect to continue focusing on disciplined bolt-on M&A to extend and expand our crude oil-focused portfolio as well as opportunities to optimize our capital structure, including potential repurchases of Series A and B preferred units, along with opportunistic common unit repurchases."
— Willie Chiang, Chairman and CEO and President

This divestiture strengthens the balance sheet, increases cash flow durability, and positions Plains GP to redeploy capital into higher-return crude oil operations and targeted M&A.

Bolt-on acquisitions expand Plains GP portfolio

Year-to-date in 2025, management closed five bolt-on deals totaling approximately $800 million, including a $100 million investment that raised its BridgeTex Pipeline Co. LLC interest to 40%. The company increased its 2025 growth capital guidance to $475 million, reflecting new Permian and Eagle Ford projects and operational opportunities not included in original plans.

"Building upon the foundation of our disciplined capital allocation framework, we announced a bolt-on acquisition of an additional 20% interest in BridgeTex Pipeline Company LLC for an aggregate cash consideration of $100 million net to Plains. This brings our overall interest in the joint venture to 40%. … Year to date, we've completed five bolt-on transactions totaling approximately $800 million, and we've consistently maintained the view that there is a runway of opportunities for Plains to advance its bolt-on strategy. … The financial flexibility that'll be created by our recent NGL announcement further enhances our commitment and capacity to pursue these and other opportunities, provided they offer attractive returns."
— Willie Chiang, Chairman and CEO and President

These disciplined acquisitions and increased growth capital spending demonstrate management’s commitment to expanding the crude oil-focused portfolio while maintaining strict return criteria.

Guidance highlights Plains GP earnings resilience

The crude oil segment delivered adjusted EBITDA of $580 million in Q2 2025, benefiting from Permian volume growth and recent bolt-on deals. Management noted that expected second-half contract roll-offs on the Cactus I, Cactus II, and Sunrise pipelines will be offset by FERC escalators (regulated tariff increases) and new upstream production volumes.

"Just remember, we have the contract roll-offs of Cactus II, Cactus I, and Sunrise in the second half of the year, all consistent with guidance. So those roll off of the contract rates, all those volumes have been recontracted. It's a function of rate being lower. So you had those contributions in the first half. You're gonna have the growing production, the FERC escalator, and other pieces contributing to backfill that. So while it may look flat, you backfilled some of the roll-off of the contracts with growth."
— Jeremy Goebel, EVP & Chief Commercial Officer

Efficient recontracting at lower rates, combined with Permian growth and cost escalators, demonstrates Plains GP’s ability to mitigate contract expirations and sustain its full-year adjusted EBITDA guidance.

Looking Ahead

Management reiterated full-year 2025 adjusted EBITDA guidance of $2.8 billion to $2.95 billion, with performance now expected toward the lower half of that range. Adjusted free cash flow (excluding balance sheet changes) is forecast at approximately $870 million for 2025, and growth capital is guided at $475 million, primarily for Permian and South Texas projects. Plains GP expects to close the Keyera NGL sale in 2026, after which NGL maintenance capital expenditures are expected to decline and capital deployment flexibility will further expand.

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This article was created using Large Language Models (LLMs) based on The Motley Fool's insights and investing approach. It has been reviewed by our AI quality control systems. Since LLMs cannot (currently) own stocks, it has no positions in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.